CERNER CORP /MO/, S-3, 1995-07-26

CERNER CORP /MO/
S-3, 1995-07-26
COMPUTER INTEGRATED SYSTEMS DESIGN

Previous: MUNICIPAL INVT TR FD INSURED SERIES 224 DEFINED ASSET FUNDS, 487, 1995-07-26

Next: GUNDLE ENVIRONMENTAL SYSTEMS INC, 10-Q, 1995-07-26

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1995.

REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CERNER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-1196944
(STATE OR OTHER JURISDICTIONOF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2800 ROCKCREEK PARKWAY, SUITE 601
KANSAS CITY, MISSOURI 64117
(816) 221-1024
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CLIFFORD W. ILLIG, PRESIDENT
2800 ROCKCREEK PARKWAY, SUITE 601
KANSAS CITY, MISSOURI 64117
(816) 221-1024
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
PATRICK A. POHLEN, ESQ. RICHARD G. SWANSON, ESQ.
STINSON, MAG & FIZZELL, P.C. DORSEY & WHITNEY P.L.L.P.
1201 WALNUT STREET 220 SOUTH SIXTH STREET
KANSAS CITY, MISSOURI 64106 MINNEAPOLIS, MINNESOTA 55402
(816) 842-8600 (612) 340-2600
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (2) PER UNIT (3) PRICE (3) FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value (1) 3,956,000 $31.3125 $123,872,250 $42,715
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Adjusted to give effect to the Company's 2-for-1 stock split in the form
of a 100% stock dividend to be distributed on August 4, 1995 to
stockholders of record on July 24, 1995.
(2) Includes a maximum of 516,000 shares which may be purchased by the
Underwriters to cover over-allotments, if any.
(3) Pursuant to Rule 457(c) of the Securities Act of 1933, as amended, and
solely for the purpose of calculating the amount of the registration fee,
the proposed maximum offering price per unit and proposed maximum
aggregate offering price are based on the average of the high and low
prices of the Common Stock on July 21, 1995 in the over-the-counter market
as quoted on the Nasdaq National Market System.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JULY 26, 1995

3,440,000 Shares
LOGO
Common Stock

--------

Of the 3,440,000 shares of Common Stock offered hereby, 3,200,000 shares are
being sold by Cerner Corporation ("Cerner" or the "Company") and 240,000 shares
are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Selling Stockholders." The Company will not receive any of
the proceeds from the sale of shares by the Selling Stockholders. The share
numbers give effect to the Company's 2-for-1 stock split in the form of a 100%
stock dividend to be distributed on August 4, 1995 to stockholders of record on
July 24, 1995.

The Common Stock of the Company is traded on the Nasdaq National Market under
the symbol "CERN." On July 24, 1995, the last reported sale price for the
Company's Common Stock on the Nasdaq National Market was $63.125 per share
($31.5625 after taking into account the stock split).

--------

FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK
FACTORS" APPEARING ON PAGES 6 AND 7.

--------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS PROCEEDS TO
TO COMMISSIONS TO SELLING
PUBLIC (1) COMPANY (2) STOCKHOLDERS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
- --------------------------------------------------------------------------------------------
Total (3)........................ $ $ $ $
- --------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $400,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
516,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

--------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
August , 1995.

Alex. Brown & Sons
INCORPORATED
Donaldson, Lufkin & Jenrette
SECURITIES CORPORATION
Smith Barney Inc.

THE DATE OF THIS PROSPECTUS IS AUGUST , 1995
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information concerning the Company may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Common Stock is included for quotation on the Nasdaq
National Market, and such reports, proxy statements and other information
should be available for inspection and copying at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.

The Company has filed with the Commission a registration statement on Form S-
3 (herein, together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Statements made in this Prospectus
as to the content of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed or incorporated by reference as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1994; (ii) the Company's
Quarterly Reports on Form 10-Q for the quarters ended April 1, 1995 and July 1,
1995; (iii) the Company's Reports on Form 8-K dated January 5, 1995, July 17,
1995 and July 18, 1995; and (iv) the description of the Common Stock contained
in the Company's Registration Statement on Form 8-A (File No. 0-15386),
including any amendments or reports filed for the purpose of updating such
description.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents, except that in no event shall any information
included in any such document in response to Item 402(i), (k) or (l) of
Regulation S-K be deemed to constitute a part of this Prospectus. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document which is deemed to be incorporated by reference
herein, modifies or supersedes such earlier statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any or all of the documents incorporated by reference herein (other
than exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Company's
principal office: Cerner Corporation, 2800 Rockcreek Parkway, Suite 601, Kansas
City, Missouri 64117, Attention: Kim Stevens, (816) 221-1024.

--------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ
NATIONAL MARKET SYSTEM IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

PathNet, RadNet, PharmNet, MSmeds, ProNet, ProNet II, CareNet, MedNet,
SurgiNet, MRNet, PowerChart, Power-Vision and Discern Expert are trademarks of
the Company.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and the notes thereto appearing elsewhere
in this Prospectus or incorporated herein by reference. Except as otherwise
noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option and gives effect to the Company's 2-for-1
stock split in the form of a 100% stock dividend to be distributed on August 4,
1995 to stockholders of record on July 24, 1995. Unless the context requires
otherwise, references herein to Cerner or the Company include Cerner
Corporation and its subsidiaries.

THE COMPANY

Cerner designs, develops, markets, installs and supports member/patient-
focused clinical and management information systems that are capable of being
implemented on an individual, combined or enterprise-wide basis. Cerner systems
are designed to automate the process of healthcare by accumulating data on care
provided to members/patients, maintaining such data in a member/patient
database repository and providing access to such data for users of clinical
information across a healthcare system. Cerner's systems are designed and
developed using Health Network Architecture ("HNA"), a single architecture. HNA
is a unified system for combining clinical and management information
applications. HNA allows each participating facility within an integrated
healthcare enterprise to access an individual's clinical record at the point of
care, to organize it for the specific needs of the physician, nurse, laboratory
technician or other care provider on a real-time basis, and to use the
information in management decisions to improve the efficiency and productivity
of the location and the entire enterprise.

The Company's products include: (i) process-based systems, which automate
clinical care processes throughout and between entities, (ii) repository
systems, which capture, sort, present and analyze clinical and process related
data and (iii) clinical domain systems, which automate complex clinical
processes within specific departments or domains. Cerner markets over 200
product options that complement Cerner's major information systems. At July 1,
1995, the Company had 1,041 system placements with 731 clients, principally for
clinical laboratory, blood bank, radiology, pharmacy, internal medicine and
other clinical and management applications. Of these clients, 39 had contracted
for the use of two or more clinical or management applications in conjunction
with ProNet, the Company's proprietary orders management application. It is
through the use of ProNet that a client achieves the full benefits of the HNA
architecture.

The cornerstone of Cerner's information systems strategy is HNA, the single
architecture around which each of Cerner's products is developed. This highly
scalable architecture allows Cerner to meet the clinical and management
information requirements of a healthcare delivery system across the continuum
of care from the physician practice to the community-wide, integrated
healthcare system by allowing its applications to work together as one system.
The value of HNA is the creation of systems that "intrarelate" as opposed to
being integrated. With "intrarelated" systems, all caregivers can be kept
apprised of a patient's condition, allowing the activities of the care team to
be more carefully and efficiently orchestrated in an effort to deliver the
highest possible quality of care. Cerner's approach to system design is to
first understand the intricate processes of providing care and then to design
systems that support and streamline those processes.

The Company's business strategy is (i) to penetrate the integrated healthcare
market by providing systems that decrease costs, utilize fewer resources per
patient/member encounter, decrease the amount of care required by focusing on
preventive measures and increase member populations by attracting additional
members through better quality healthcare and services, (ii) to penetrate the
physician market by providing systems that can provide the member/patient data
repositories and

3
<PAGE>

clinical management tools that are required by physicians in the changing
healthcare marketplace, (iii) to expand its core business through increased
demand from existing clients and providers looking to restructure and
reengineer high cost centers, (iv) to remain committed to the Cerner vision of
the unified architecture and (v) to expand products and services either through
internal development, acquisitions or joint ventures.

Cerner is a Delaware corporation and was organized in 1980. The Company's
principal executive offices are located at 2800 Rockcreek Parkway, Kansas City,
Missouri 64117, and its telephone number is (816) 221-1024.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the
Company........................... 3,200,000 shares
Common Stock offered by the Selling
Stockholders...................... 240,000 shares
Common Stock to be outstanding
after the offering................ 31,625,458 shares(1)
Use of proceeds.................... For general corporate purposes, including
expansion of the Company's client base and
product offerings through continued
internal development, acquisitions or joint
ventures.
Nasdaq National Market symbol...... CERN
</TABLE>
- --------
(1) Based upon the number of shares outstanding as of July 1, 1995, excluding
2,648,632 shares reserved as of such date for issuance upon the exercise of
outstanding options.

4
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND STATISTICAL DATA
(IN THOUSANDS, EXCEPT PER SHARE, CLIENTS, SYSTEM PLACEMENTS AND ASSOCIATE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------------------ -----------------------
JUNE 30, JULY 1,
1990 1991 1992 1993 1994 1994 1995(1)
------- ------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Revenues............... $57,110 $77,240 $101,145 $120,572 $155,917 $ 70,309 $ 92,158
Operating earnings..... 4,296 8,068 16,587 24,330 33,779 13,395 19,049
Earnings before income
taxes................. 4,185 7,552 16,293 24,120 32,451 12,977 18,088
Net earnings........... 2,636 4,688 9,932 14,558 19,501 7,905 10,725
Primary earnings per
share................. $ .10 $ .17 $ .35 $ .50 $ .66 $ .27 $ .36
Primary weighted
average shares
outstanding........... 27,632 26,873 28,681 29,158 29,762 29,699 29,920
<CAPTION>
JULY 1, 1995
-----------------------
AS
ACTUAL ADJUSTED(2)
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................... $ 59,206 $155,009
Total assets...................................................... 179,010 274,813
Long-term debt, net of current installments....................... 32,781 32,781
Stockholders' equity.............................................. 97,113 192,916
<CAPTION>
DECEMBER 31,
------------------------------------------ JUNE 30, JULY 1,
1990 1991 1992 1993 1994 1994 1995(1)
------- ------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATISTICAL DATA(3):
Revenue Backlog:
Contract(4).......... $11,957 $30,158 $ 36,194 $ 42,183 $ 57,547 $ 46,935 $ 58,806(5)
Support and
maintenance(6)...... 24,649 32,909 43,149 57,341 77,223 69,070 90,819
------- ------- -------- -------- -------- -------- --------
Total................ $36,606 $63,067 $ 79,343 $ 99,524 $134,770 $116,005 $149,625
======= ======= ======== ======== ======== ======== ========
Clients:
HNA(7)............... 1 6 11 22 31 25 39
Total(8)............. 227 269 322 649 711 690 731
System Placements(9):
Process-based
systems............. 2 11 14 30 52 37 67
Repository systems... 0 3 6 21 42 28 59
Clinical domain
systems(8).......... 254 305 387 764 879 836 915
------- ------- -------- -------- -------- -------- --------
Total................ 256 319 407 815 973 901 1,041
======= ======= ======== ======== ======== ======== ========
Number of
associates(10)........ 428 505 653 918 1,091 1,038 1,200
</TABLE>
- --------
(1) Effective January 1, 1995, the Company changed its fiscal year from a
fiscal year ending December 31 of each year to a fiscal year ending on the
Saturday nearest to December 31 of each year and changed its fiscal
quarters from fiscal quarters ending on the last day of March, June,
September and December of each year to fiscal quarters ending on the
Saturday nearest to the last day of March, June, September and December of
each year.
(2) Adjusted to give effect to the issuance and sale of 3,200 shares of Common
Stock offered by the Company hereby at an assumed public offering price of
$31.5625 per share and the application of the net proceeds thereof. See
"Use of Proceeds."
(3) All statistical data is unaudited and, except for revenue backlog and
number of associates, is reported on a cumulative basis.
(4) Represents system sales from signed contracts, which have not yet been
recognized as revenue.
(5) At July 1, 1995, $31,320 (53%) of contract backlog of $58,806 related to
sales of HNA systems.
(6) Represents contracted software support and hardware maintenance services
for a period of twelve months.
(7) An HNA client is a client that has contracted for the Company's ProNet
Order Management product and at least two other clinical systems.
(8) Includes clients of Megasource, Inc. from November 1, 1993, the date on
which the Company acquired Megasource, Inc.
(9) Includes systems for which the Company has a signed contract.
(10) Associates is the term used by the Company for its employees.

5
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.

Variability of Quarterly Operating Results; Seasonality. Based on healthcare
industry trends, the Company believes that, in the future, a greater percentage
of its revenues may be generated by the sale and installation of larger, more
complex, costlier systems. These systems are installed over time periods
ranging from approximately six months to three years. The Company recognizes
revenue upon the completion of standard milestone conditions. Delays in meeting
these milestone conditions or modification of the contracts relating to one or
more of these systems could result in a shift of revenue recognition from one
quarter to another and could have a material adverse effect on the Company's
results of operations for a particular quarter. In addition, the Company's
quarterly operating results could be adversely affected by the timing of new
product and service introductions and product upgrade releases during a
particular quarter. The Company's revenues from system sales historically have
been lower in the first quarter of the year and greater in the fourth quarter
of the year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Changes in the Healthcare Industry. The healthcare industry is currently
undergoing significant changes, including consolidation of healthcare providers
to form larger healthcare delivery enterprises as well as market-driven or
government initiatives to reform healthcare. The increased bargaining power of
these combined enterprises may lead to a reduction in the gross margins of the
Company's products, which could have a material adverse effect on the Company's
business, financial condition or results of operations. As the number of
healthcare delivery enterprises decreases due to further industry
consolidation, each sale becomes more significant and competition for such sale
is greater. The Company's business, financial condition or results of
operations may be materially and adversely affected in the event that the
Company is unable to make sales of its systems to healthcare providers that are
combining, or replacing or substantially modifying their healthcare information
systems. In addition, numerous proposals relating to healthcare reform have
been, and additional proposals may be, introduced in the United States Congress
and state legislatures. Although the effects of federal and state initiatives
for healthcare reform are unknown, the Company believes that competitive
factors in the healthcare industry will continue to drive reform of healthcare
delivery. The Company cannot predict with any certainty what impact, if any,
such market or government initiatives might have on its business, financial
condition or results of operations.

Competition. The market for healthcare information systems is intensely
competitive and rapidly changing. The Company believes that the principal
competitive factors in this market include the breadth and quality of system
and product offerings, the stability of the information systems provider, the
features and capabilities of the information systems, the ongoing support for
the system, the potential for enhancements and future compatible products, and
technical resources. Many of the Company's competitors have greater financial,
technical, product development and marketing resources than the Company, and
some of these competitors offer products, such as financial, billing and
collection systems, not offered by the Company. In addition, other companies
with significant technological and other resources may enter the market in
which the Company competes. There can be no assurance that future competition
will not have a material adverse effect on the Company's business, financial
condition or results of operations.

Rapid Technological Change. The Company's market is characterized by rapidly
changing technology and the frequent introduction of new products and product
enhancements. The Company's continued success will, therefore, depend upon its
ability to keep pace with technological change and to introduce, on a timely
and cost-effective basis, new and enhanced products that satisfy changing
customer requirements and achieve market acceptance. There can be no assurance
that the Company will be able to respond effectively to changes in technology
or customer demands.

6
<PAGE>

Moreover, there can be no assurance that the Company's competitors will not
develop competitive products, or that any such products will not have an
adverse effect upon the Company's business, financial condition or results of
operations.

Dependence on Proprietary Technology; Intellectual Property Rights. The
Company relies upon a combination of trade secret, copyright and trademark
laws, license agreements, confidentiality procedures, employee nondisclosure
agreements and technical measures to maintain the trade secrecy of its
proprietary information. The Company has not filed any patent applications or
copyrights covering its software technology. Due to the nature of the software,
the Company believes that patent, trade secret and copyright protection are
less significant than the Company's ability to further develop, enhance and
modify its products. There can be no assurance, however, that the Company will
be able to prevent misappropriation of the Company's proprietary information.

Dependence on Key Personnel. The Company depends to a significant extent on
key management and technical personnel. The Company's growth and future success
will depend in large part on its ability to attract, motivate and retain highly
qualified personnel, particularly trained and experienced professionals capable
of developing, selling and installing complex healthcare information systems.
Competition for such personnel is intense and there can be no assurance that
the Company will be successful in hiring, motivating or retaining such
qualified personnel. The loss of key personnel or the inability to hire or
retain qualified personnel could have a material adverse effect on the
Company's business, financial condition or results of operations.

Government Regulation. The healthcare industry is subject to extensive
federal and state regulation governing, among other things, the addition of new
services, certain capital expenditures and reimbursement. The effect of future
legislation and regulation upon prospective clients may, in certain
circumstances, have an adverse effect upon the Company's business, financial
condition or results of operations. In addition, the United States Food and
Drug Administration (the "FDA") has declared that software products that are
intended for the maintenance of data used in making decisions regarding the
suitability of blood donors and the release of blood or blood components for
transfusion are medical devices under the 1976 Medical Device Amendments to the
federal Food, Drug and Cosmetic Act and the Safe Medical Devices Act of 1990.
As a consequence, the Company is subject to extensive regulation by the FDA
with regard to its blood bank software. To the extent that other Company
products are deemed by the FDA to be medical devices, the Company could be
subject, depending on the product, to extensive requirements governing pre- and
post-marketing conditions, such as device investigation, approval, labeling and
manufacturing.

Product Liability. Certain of the Company's products provide data for use by
healthcare providers in providing care to patients. The Company does not
maintain insurance with respect to potential claims associated with the use of
its products. Although no such claims have been brought against the Company to
date, there can be no assurance that such claims will not be made in the
future. A successful claim brought against the Company could have a material
adverse effect on the Company's business, financial condition or results of
operations.

Possible Volatility of Stock Price. Companies engaged in software, healthcare
and high technology businesses frequently experience volatility in the market
price of their stocks. The market for the Company's Common Stock may experience
significant price and volume fluctuations in response to factors such as
variations in quarterly results of operations, announcements of technological
innovations or new products by the Company or its competitors, governmental
regulatory action, healthcare reform measures, acquisitions, disputes with
respect to proprietary rights, general trends in the industry and overall
market conditions.

7
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,200,000 shares of
Common Stock offered by the Company are estimated to be $95,803,000
($111,315,000 if the Underwriters' over-allotment option is exercised in full)
assuming a public offering price of $31.5625 per share. The Company will use
the proceeds from the sale of the shares of Common Stock offered hereby for
general corporate purposes, including expansion of the Company's client base
and product offerings through continued internal development, acquisitions or
joint ventures. The Company currently has no commitments or agreements with
respect to any future acquisitions. Pending such uses, the net proceeds may be
used to reduce amounts outstanding under the Company's revolving credit
facility or be invested in short-term, interest-bearing securities or money
market funds. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

8
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data which
have been derived from the consolidated financial statements of Cerner
Corporation and its subsidiaries as of and for the years ended December 31,
1990 through 1994. The financial statements as of and for the years ended
December 31, 1990 through 1994 have been audited by KPMG Peat Marwick LLP. The
financial statements as of and for the six-month periods ended June 30, 1994
and July 1, 1995 are unaudited. The Company's Statement of Earnings Data for
each of the years in the three-year period ended December 31, 1994 and the
Balance Sheet Data as of December 31, 1993 and 1994 should be read in
conjunction with and are qualified in their entirety by the Consolidated
Financial Statements and related notes included elsewhere and incorporated by
reference in this Prospectus. The amounts presented below give effect to the
Company's 2-for-1 stock split in the form of a 100% stock dividend to be
distributed on August 4, 1995 to stockholders of record on July 24, 1995.

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- JULY 1,
1990 1991 1992 1993 1994 1995(1)
------- ------- ------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Working capital......... $19,461 $22,588 $30,522 $ 42,603 $ 52,370 $ 59,206
Total assets............ 44,175 56,155 66,667 104,910 156,410 179,010
Long-term debt, net of
current installments... 7,729 7,982 8,310 10,354 30,235 32,781
Stockholders' equity.... 22,728 27,517 38,643 64,230 85,777 97,113
</TABLE>
- --------
(1) Effective January 1, 1995, the Company changed its fiscal year from a
fiscal year ending December 31 of each year to a fiscal year ending on the
Saturday nearest to December 31 of each year and changed its fiscal
quarters from fiscal quarters ending on the last day of March, June,
September and December of each year to fiscal quarters ending on the
Saturday nearest to the last day of March, June, September and December of
each year.

9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table shows the percentage of total revenues represented by
various expense categories reflected in the Company's Consolidated Statement of
Earnings.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
------------------- --------------
JULY
JUNE 30, 1,
1992 1993 1994 1994 1995
----- ----- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Total revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenues......................... 44.4 36.4 29.7 30.8 28.6
Sales and client service................. 19.8 23.4 25.6 27.1 26.0
Software development..................... 12.8 13.3 14.6 14.9 16.3
General and administrative............... 6.6 6.7 8.4 8.2 8.4
----- ----- ----- ----- -----
Total costs and expenses............... 83.6 79.8 78.3 81.0 79.3
----- ----- ----- ----- -----
Operating earnings......................... 16.4 20.2 21.7 19.0 20.7
Interest expense, net...................... 0.3 0.2 0.9 0.6 1.1
----- ----- ----- ----- -----
Earnings before income taxes............... 16.1 20.0 20.8 18.4 19.6
Income taxes............................... 6.3 7.9 8.3 7.2 8.0
----- ----- ----- ----- -----
Net earnings............................... 9.8% 12.1% 12.5% 11.2% 11.6%
===== ===== ===== ===== =====
</TABLE>

Six Months Ended July 1, 1995 Compared to Six Months Ended June 30, 1994

The Company's revenues increased 31% from $70,309,000 for the six-month
period ended June 30, 1994 to $92,158,000 for the six-month period ended July
1, 1995. Net earnings increased 36% from $7,905,000 in the 1994 period to
$10,725,000 for the 1995 period.

In the 1995 period, revenues increased due to an increase in system sales and
support of installed systems. System sales increased 35% from $48,376,000 for
the six-month period ended June 30, 1994 to $65,322,000 for the corresponding
period in 1995. This increase in system sales resulted principally from an
increase in installations under HNA contracts and additional hardware and
software sales to the Company's existing client base. HNA contracts comprised
44% of total system sales in the first six months of 1995 compared to 33% for
the same period in 1994. An HNA contract is an initial contract that includes
the Company's ProNet Order Management product and at least two other clinical
systems, or a contract that brings an existing client to this level. ProNet
Order Management gives clients the ability to access the full
"intrarelationship" of the Company's HNA products. The sale of additional
hardware and software products to the installed client base increased 58% in
the first six months of 1995 over the same period in 1994.

At July 1, 1995, the Company had $58,806,000 in contract backlog and
$90,819,000 in support backlog, compared to $46,935,000 in contract backlog and
$69,070,000 in support and maintenance backlog at June 30, 1994. The HNA
contracts signed in 1994 and in the first six months of 1995 will contribute
significantly to future revenues and margin due to the relatively large amount
of revenue generated by such contracts, which is recognized over a longer time
period for HNA contracts than for other products offered by the Company.

10
<PAGE>

Support and maintenance revenues increased 18% from $19,765,000 during the
first six months of 1994 to $23,362,000 during the same period in 1995. This
increase was due primarily to the increase in the Company's installed and
converted client base. The number of clients converted and paying monthly
software support fees was 570 at July 1, 1995, compared to 530 at June 30,
1994. The number of clients paying monthly hardware maintenance fees was 297 at
July 1, 1995, compared to 268 at June 30, 1994.

Other revenues increased 60% from $2,168,000 in the first half of 1994 to
$3,474,000 in the same period of 1995. This increase was due primarily to real
estate lease revenues from the rental to outside tenants of space in the
Company's headquarters complex not currently being utilized by the Company.

The cost of revenues includes the cost of computer hardware and sublicensed
software purchased from computer and software manufacturers for delivery to
clients. It also includes the cost of hardware maintenance and sublicensed
software support subcontracted to manufacturers. The cost of revenue was 29% of
total revenues in the first six months of 1995 and 31% of total revenues in the
comparable period in 1994. Such costs, as a percent of revenues, typically have
varied as the mix of revenue (software, hardware, and support) components
carrying different margin rates changes from period to period. The decrease in
the cost of revenue as a percent of total revenues resulted principally from an
increase in multi-product projects which carry a lower cost of revenue
percentage.

Sales and client service expenses include salaries of client service
personnel, communications expenses and travel expenses. Also included are sales
and marketing salaries, trade show costs and advertising costs. These expenses
as a percent of total revenues were 26% and 27% in the first half of 1995 and
1994, respectively. The increase in total sales and client service expenses
from $19,073,000 in 1994 to $23,991,000 in 1995 was attributable to the cost of
a larger regional field sales and service organization, marketing of new
products and international marketing initiatives.

Software development expenses include salaries, documentation and other
direct expenses incurred in product development, as well as amortization of
software development costs previously capitalized. Total expenditures for
software development, including both capitalized and noncapitalized portions,
for the first half of 1995 and 1994 were $16,717,000 and $12,575,000,
respectively. These amounts exclude amortization of previously capitalized
expenditures. Capitalized software costs were $4,633,000 and $3,918,000 for the
first six months of 1995 and 1994, respectively. The increase in aggregate
expenditures for software development in 1995 was due to development of
clinical information system products to complement the Company's existing
product line.

General and administrative expenses include salaries for corporate,
financial, and administrative staffs, utilities, communications expenses, and
professional fees. These expenses as a percent of total revenues were 8% in the
first six months of both 1995 and 1994.

Net interest expense was 130% higher in the first half of 1995 than in the
same period in 1994. This increase in interest expense was due to interest
costs associated with the $30,000,000 principal amount of 8.30% Senior Notes
issued by the Company in July 1994 to refinance the purchase of the Company's
headquarters complex and to finance capital improvements to the complex. The
higher interest expense was offset by a reduction in the Company's rent expense
and an increase in lease revenues from the rental to outside tenants of space
in the Company's headquarters complex not currently being utilized by the
Company.

The Company's effective tax rates were 41% and 39% for the first six months
of 1995 and 1994, respectively.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

The Company's revenues increased 29% from $120,572,000 in 1993 to
$155,917,000 in 1994. Net earnings increased 34% from $14,558,000 in 1993 to
$19,501,000 in 1994.

11
<PAGE>

In 1994, revenues increased due to an increase in system sales and support
of installed systems. System sales increased 29% from $84,024,000 in 1993 to
$108,322,000 in 1994. The sale of additional hardware and software products to
the installed client base increased 40% in 1994 compared to 1993.

The Company has experienced a significant increase in the number of clients
that have purchased two or more clinical system units in their initial
contract, or clients from the installed base that purchase one or more system
units subsequent to their initial contract. Total sales to the installed base
in 1994, including new systems, incremental hardware and software and
recurring and discrete services, were 73% of total revenues in 1994 compared
to 63% in 1993.

A significant amount of the 1994 and 1993 system sales revenue was in
backlog at the beginning of the respective year, including portions of HNA
contracts that had been signed in prior years. At the end of 1994, the Company
had $57,547,000 in contract backlog and $77,223,000 in support and maintenance
backlog, compared to $42,183,000 in contract backlog and $57,341,000 in
support and maintenance backlog at the end of 1993.

Support and maintenance revenues increased 24% from $33,200,000 during 1993
to $41,322,000 during 1994. These revenues represented 27% of 1994 total
revenues compared to 28% of 1993 total revenues. The number of clients
converted and paying monthly software support fees was 581 at the end of 1994
compared to 527 at the end of 1993. These numbers include clients of
Megasource, Inc., which the Company acquired on November 1, 1993. The average
support fee for the Megasource clients is significantly lower than the average
support fee for the Company's other clients. The number of clients installed
and paying monthly hardware maintenance fees was 290 at the end of 1994,
compared to 275 at the end of 1993.

Other revenues increased 87% from $3,348,000 in 1993 to $6,273,000 in 1994.
This increase was due primarily to real estate lease revenues from the rental
to outside tenants of space in the Company's headquarters complex not
currently being utilized by the Company and certain international activities.

The cost of revenues was 30% of total revenues in 1994 compared to 36% of
total revenues in 1993. This percentage for 1994 was affected positively by
three factors. First, system sales reflected an increase of multi-product
projects, which carry a lower cost percentage. Second, the cost of support and
maintenance decreased as more systems were converted and the client began
paying support. Third, the incremental hardware and software sold to existing
clients had a larger software component.

Sales and client service expenses as a percent of total revenues were 26% in
1994 compared to 23% in 1993. The increase in total sales and client service
expenses from $28,248,000 in 1993 to $39,857,000 in 1994 was attributable to
the cost of a larger regional field sales and services organization, marketing
of new products and international marketing initiatives.

Total expenditures for software development, including both capitalized and
noncapitalized portions, for 1994 were $26,897,000 compared to $19,432,000 for
1993. These amounts exclude amortization of previously capitalized
expenditures. Capitalized software costs were $8,131,000 for 1994 compared to
$6,181,000 for 1993. This increase in aggregate expenditures for software
development in 1994 was due to the development of more clinical information
system products to complement the Company's existing product line.

General and administrative expenses as a percent of total revenues were 8%
for 1994 compared to 7% for 1993.

Net interest expense was considerably higher in 1994 than in 1993. This
increase in interest expense was due to financing the purchase of the
Company's headquarters complex. This higher

12
<PAGE>

interest expense was offset by a reduction in the Company's rent expense and an
increase in lease revenues from the rental to outside tenants of space in the
Company's headquarters complex not currently being utilized by the Company.

The Company's effective tax rate was 40% for both 1994 and 1993.

Year Ended December 31, 1993 Compared to Year Ended December 31, 1992

The Company's revenues increased 19% from $101,145,000 in 1992 to
$120,572,000 in 1993. Net earnings increased 47% from $9,932,000 in 1992 to
$14,558,000 in 1993.

In 1993, revenues increased 17% due to an increase in system sales and
support of installed systems. System sales increased from $71,586,000 in 1992
to $84,024,000 in 1993. The increase in 1993 was due primarily to the
relatively larger software component of the 1993 sales. A significant amount of
the 1993 and 1992 system sales revenue was in the backlog at the beginning of
the respective years. The sale of additional hardware and software products to
the installed client base increased by 9% in 1993 compared to 1992.

Total sales to the installed base in 1993, including new systems, incremental
hardware and software, and recurring and discrete services, were 63% of total
revenues in 1993 compared to 51% in 1992.

At the end of 1993, the Company had $42,183,000 in contract backlog and
$57,341,000 in support and maintenance backlog compared to $36,194,000 in
contract backlog and $43,149,000 in support and maintenance backlog at the end
of 1992.

Support and maintenance revenues increased 25% from $26,664,000 in 1992 to
$33,200,000 in 1993. These revenues represented 28% of 1993 total revenues and
26% of 1992 total revenues. The number of clients converted and paying monthly
software support fees was 527 at the end of 1993 compared to 264 at the end of
1992. The numbers for 1993 include clients of Megasource, Inc., which the
Company acquired on November 1, 1993. The number of clients installed and
paying monthly hardware maintenance fees was 275 at the end of 1993 and 234 at
the end of 1992.

Other revenues increased 16% from $2,895,000 in 1992 to $3,348,000 in 1993.
This increase was due primarily to international activities.

The cost of revenues was 36% of total revenues in 1993 and 44% in 1992. The
percentage for 1993 was affected positively by three factors. First, system
sales reflected an increase of multi-product projects, which carry a lower cost
percentage. Second, the cost of support and maintenance decreased as more
systems were converted and the client began paying support. Third, the
incremental hardware and software sold to existing clients had a larger
software component.

Sales and client service expenses as a percent of total revenues were 23% and
20% in 1993 and 1992, respectively. This increase in total sales and client
service expenses from $20,067,000 in 1992 to $28,248,000 in 1993 was
attributable to the cost of a larger field sales and service organization,
marketing of new products and international marketing initiatives.

Total expenditures for software development, including both capitalized and
noncapitalized portions, for 1993 and 1992 were $19,432,000 and $14,522,000,
respectively. These amounts exclude

13
<PAGE>

amortization of previously capitalized expenditures. Capitalized software costs
were $6,181,000 and $4,098,000 for 1993 and 1992, respectively. This increase
in aggregate expenditures for software development in 1993 was due to
development of more clinical information system products to complement the
Company's existing product line.

General and administrative expenses as a percent of total revenues were 7%
for both 1993 and 1992.

The Company's effective tax rates were 40% and 39% for 1993 and 1992,
respectively.

Quarterly Results of Operations

The following table sets forth certain unaudited quarterly financial data for
1993 and 1994 and the first two quarters of fiscal 1995. In the opinion of the
Company, this unaudited information has been prepared on the same basis as the
audited information and includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for the
period set forth. The results for any quarter are not necessarily indicative of
results for any future period.

<TABLE>
<CAPTION>
1993 1994 1995
QUARTER ENDED QUARTER ENDED QUARTER ENDED
--------------------------------- --------------------------------- ---------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 APRIL 1 JULY 1
-------- ------- -------- ------- -------- ------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $24,137 $29,834 $32,334 $34,267 $30,515 $39,795 $40,933 $44,674 $43,192 $48,967
Operating earnings...... 4,370 5,594 6,901 7,466 4,808 8,587 8,796 11,589 8,285 10,764
Earnings before income
taxes.................. 4,320 5,568 6,809 7,423 4,724 8,253 8,387 11,087 7,817 10,271
Net earnings............ 2,560 3,314 4,072 4,612 3,002 4,903 5,069 6,527 4,541 6,184
Primary earnings per
share.................. $ .09 $ .11 $ .14 $ .16 $ .10 $ .17 $ .17 $ .22 $ .15 $ .21
Primary weighted average
shares outstanding..... 29,008 28,920 29,100 29,528 29,732 29,648 29,714 29,864 29,892 29,942
</TABLE>

The Company's quarterly revenues and net earnings historically have been
variable and cyclical. This variability is attributable primarily to new client
contracts signed and the number and size of project milestone conditions
satisfied in any fiscal quarter. The Company believes that this cyclicality
results primarily from increased client commitments in the fourth quarter
resulting from clients' spending their remaining budget allocations at year-end
and to decreased client commitments in the first quarter as clients' budget
allocations are being developed. The Company expects the fluctuation in
quarterly financial results to continue.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity position remains strong, with total cash and cash
equivalents of $18,531,000 and working capital of $59,206,000 at July 1, 1995,
compared to cash and cash equivalents of $15,305,000 and working capital of
$52,370,000, at December 31, 1994. The Company historically has financed its
capital expenditures (other than the purchase of its headquarters complex and
anticipated related capital improvements), and working capital needs from
internally generated funds and bank borrowings.

The Company generated cash of $13,564,000 and $8,820,000 from operations in
the first six months of 1995 and 1994, respectively. The Company has
$18,000,000 of long-term, revolving credit from banks. At July 1, 1995, the
Company had $15,390,000 available under its line of credit.

14
<PAGE>

Revenues provided under the Company's support and maintenance agreements
represent recurring cash flows. The Company's revenue backlog at July 1, 1995
includes $90,819,000 representing twelve months of equipment maintenance and
software support associated with signed contracts.

In April 1994, the Company purchased its headquarters complex. The purchase
was financed initially by a term loan for $17,425,000, with the remainder
provided by additional borrowing under the Company's revolving line of credit.
In July 1994, the Company issued $30,000,000 in Senior Notes bearing an
interest rate of 8.30% maturing on August 1, 2004. The proceeds of the Senior
Notes were used to repay the term loan and reduce the outstanding borrowings
under the revolving line of credit. The remaining proceeds will be used for
capital improvements to the headquarters complex.

The Company believes its present cash and cash equivalent position, together
with cash generated from operations and available under its current bank
borrowing facility, will be sufficient to meet anticipated cash requirements
during the next 12 months.

15
<PAGE>

BUSINESS

GENERAL

Cerner designs, develops, markets, installs and supports member/patient-
focused clinical and management information systems that are capable of being
implemented on an individual, combined or enterprise-wide basis. Cerner systems
are designed to automate the process of healthcare by accumulating data on care
provided to members/patients, maintaining such data in a member/patient
database repository and providing access to such data for users of clinical
information across a healthcare system. Cerner's systems are designed and
developed using the Health Network Architecture ("HNA"), a single architecture.
HNA is a unified system for combining clinical and management information
applications. HNA allows each participating facility within an integrated
healthcare enterprise to access an individual's clinical record at the point of
care, to organize it for the specific needs of the physician, nurse, laboratory
technician or other care provider on a real-time basis, and to use the
information in management decisions to improve the efficiency and productivity
of the location and the entire enterprise.

HEALTHCARE INDUSTRY

The dramatic increase in healthcare costs in the United States, which
historically were based on a fee-for-service model, has caused significant
changes in the healthcare industry. Managed care organizations and other payers
have developed alternative payment models to control costs, including
procedure-based cost limits, contractually approved providers and capitation (a
fixed monthly fee per member in payment for all required services). The result
has been a continuing shift of financial risk from the payer to both the
physician provider and the institutional provider (hospitals, clinics, long-
term care, subacute providers and rehabilitative care centers). In response,
institutional providers are aligning with one another and with physician groups
to form Integrated Delivery Systems ("IDSs"), and IDSs are aligning with payer
organizations to form Integrated Health Organizations ("IHOs"), in each case in
an effort to compete more effectively in the changing healthcare environment.

The changes occurring in the healthcare industry have resulted in changes in
the needs for clinical and management information systems by hospitals,
physicians, managed care organizations and integrated delivery systems.
Hospitals' information requirements have become more complex as cost
containment pressures have driven the needs for efficiency and process
automation while the increasing number of relationships they have with other
providers requires additional sophistication. As physicians combine into a
variety of provider configurations, management structures and incentive plans,
they are increasingly utilizing member/patient focused information systems to
improve quality and efficiency for their growing practices and physician
networks, to develop the data necessary to compete for contracts with payers
and to be able to share the financial risks of healthcare delivery. Managed
care organizations are increasingly recognizing the value of process-oriented
and clinically-driven information as it relates to understanding and improving
the health of their members. Information system requirements for IDSs and IHOs
encompass many of the same needs as hospitals, physicians and managed care
organizations. Many IDSs and IHOs are becoming aggressively involved with
institutional providers and physicians in various relationships where
information sharing and process automation are paramount. Many of these larger,
more complex organizations are seeking closer relationships with suppliers that
can provide comprehensive information systems solutions. Information system
requirements for IDSs and IHOs include integrated process-based systems for
clinical domains, data repositories and applications for physicians and
management teams.

HEALTHCARE INFORMATION SYSTEMS INDUSTRY

Healthcare information systems are evolving to meet the needs of a changing
marketplace. Initially, computer systems developed for use in healthcare were
financially oriented, with a focus on the ability to capture charges and
generate patient bills. Beginning in the mid-1960s, institutional provider
organizations began to use clinical information systems, which automate the
activities within clinical departments, such as laboratory, pharmacy, radiology
and surgery departments, to improve

16
<PAGE>

the productivity of resources and automate the production and use of
significant amounts of clinical information. Individual departments selected
systems based upon specific features on a "best of breed" basis resulting in
disparate information systems within the institutional provider.

More recently, there has been a shift from the purchase of disparate clinical
systems on a "best of breed" basis to systems which are able to integrate
communication effectively throughout the healthcare enterprise. The two
principal approaches to meet this need are a common architecture, in which
systems communicate through inherent design, and point-to-point interfaces, in
which systems with different architectures communicate through interface
linkages. This infrastructure trend also affects the relationship between the
health system and the suppliers of information technology. The approach of
interfacing disparate systems typically involves multiple system suppliers and
the health system must act as the intermediary and integrator. The common
architecture approach relies more on a strategic relationship with one or very
few suppliers dedicated to implementing a shared vision for the role of
information in the operation of the health system.

The same forces that are causing other healthcare providers to join together
are causing physicians to combine into larger organizations, including
Independent Practice Associations ("IPAs") and Preferred Provider Organizations
("PPOs"). In some cases, such organizations align with IDSs and IHOs. Cerner
believes that such physician groups require clinical and management information
systems that allow them to participate in the community-wide clinical and
management information systems employed by the IDSs and IHOs.

THE CERNER VISION

As a result of the rapid transformation of the healthcare industry, Cerner
believes that a new center of healthcare will emerge--the IHO, which is a
combination of payers, physicians and providers, into a single organization to
service a community or defined member population. IHOs have the capacity to
contract with both the government and employers to provide healthcare services
to member/patients. The focus of the IHO is to be accountable for the health
status of a defined population, with strong financial incentives to manage
health on a preventive or wellness basis and reduce costs.

Cerner believes that many large IHOs will emerge in the United States in the
next decade. The creation of IHOs results from the combination of existing
payers, physicians and institutional providers. These IHOs will need to
implement information systems that manage the delivery of care across its
entire community while simultaneously managing the business side of health
management. Only through automating the core process of healthcare delivery
from member enrollment through the ordering and delivery of care will IHOs be
able to actually manage and measure care. Process automation will enable
healthcare systems interactively to affect the care that is delivered
throughout the entire system at each point of delivery. Cerner believes that
managing these integrated healthcare systems will require the accumulation and
refining of enormous amounts of process-related data in order to monitor
performance against projected plan and to make informed business decisions.
This process-oriented approach will also provide the information basis to
measure health system performance, in values known as outcomes, from clinical,
functional, process, member satisfaction and economic perspectives. When all of
the complex clinical processes that comprise care delivery in IHOs are
automated using fully integrated information systems, it becomes possible to
extend automation to the management processes of healthcare.

CERNER'S HNA APPROACH

17
<PAGE>

that "intrarelate" as opposed to being integrated. Most healthcare
organizations are using some form of information technology to manage their
clinical, financial and administrative operations. Typically, a multitude of
systems, operating on differing technology platforms from various suppliers,
are used within a single organization. These systems rely on a series of
interfaces to transmit information to one another which may inhibit real-time
access to comprehensive patient information. In addition, the data collected by
disparate systems is usually maintained in a variety of formats, and is indexed
or codified using different approaches, which dilutes the data's usefulness.

Cerner's approach to system design is to first understand the intricate
processes of providing care and then to design systems that support and
streamline those processes. Cerner's system architecture allows its
applications to work together as one system. Cerner's systems are
"intrarelated", which means that they are designed around a single architecture
that automatically organizes and presents information in a manner relevant to a
clinician's decision process. With "intrarelated" systems, all caregivers are
kept apprised of each patient's condition, allowing the activities of the care
team to be more carefully and efficiently orchestrated in an effort to deliver
the highest possible quality of care.

STRATEGY

Key elements of the Company's business strategy include:

To penetrate the integrated healthcare market. The transformation of
healthcare delivery must deal with the changing financial model from fee-
for-service to fixed or controlled fee payments for services provided. In
order to accomplish the transition, integrated healthcare systems must
decrease costs generally, utilize fewer resources per patient or member
encounter, decrease the amount of care required by focusing on preventative
measures and increase member populations by attracting additional members
through better quality healthcare and services. Cerner's process-based,
repository and clinical systems provide the technology to enable an
integrated system to manage healthcare to significantly reduce costs,
improve the efficiency of healthcare delivery and maintain and improve the
quality of healthcare.

To penetrate the physician market. As physicians combine to form
organizations such as IPAs and PPOs, they require clinical and process-
based systems to manage the member/patient care processes within their own
practices. As such groups align with IDSs and IHOs, they further require
clinical and management information systems that allow them to share
clinical and management processes with these community-wide systems.
Cerner's systems provide the member/patient data repositories and clinical
and management tools required by physicians in order for them to
participate effectively in the changing healthcare marketplace.

To expand its core business. Cerner expects continued growth in core
business areas, including clinical domain systems such as PathNet, RadNet
and PharmNet, as institutional providers look to restructure and reengineer
these high cost centers within their IDSs and IHOs. The Company also
intends to market aggressively additional Cerner clinical and management
information systems and services, such as RadNet, PharmNet and ProNet, to
its existing client base.

To remain committed to a unified 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 fully "intrarelated" health
information and management systems. This platform enables Cerner's process-
based HNA system to be scalable on a linear basis, using either Cerner
compatible modules for process-oriented applications or competitive systems
interfaced using open system protocols. In addition, the HNA system can be
accessed throughout the enterprise at the point of

18
<PAGE>

care, which improves data integrity, allows for coordination of procedures
at multiple locations and enables reliable communication without delay.

To expand its products and services. Using its HNA platform, Cerner
intends to expand the range of products and services offered to providers,
including IDSs and IHOs, either through internal development or by
acquisitions or joint ventures. These new products and services will
complement the systems currently offered, address the emerging information
needs of clients or employ technological advances. Cerner believes that
major opportunities exist as IHOs begin to include service organizations
and on-line services to the home, particularly because the member/patient
focus of Cerner's architecture provides the basis for individual electronic
medical records which can be used throughout a member-focused health
system. In addition, Cerner recognizes the value of the aggregate database
being developed by its broad client base as a potential means to enable
comparative or normative procedure evaluations as a powerful new tool in
the healthcare industry.

PRODUCTS

The Company's products include: (i) process-based systems, which automate
clinical care processes throughout and between entities; (ii) repository
systems, which capture, sort, present and analyze clinical and process related
data; and (iii) clinical domain systems, which automate complex clinical
processes within specific departments or domains. These systems can be
acquired individually or as a fully intrarelated health information system.
The individual systems perform together even if installed at different times.
Cerner also markets over 200 product options that complement Cerner's major
information systems.

PROCESS-BASED SYSTEMS

ProNet Patient Management, Orders Management and Schedule Management
Information Systems address the needs of care providers and medical staff in
the areas of member/patient identification and registration, order entry,
order review and/or validation, interdepartmental/ interfacility communication
order result inquiry and reporting and enterprise-wide resource and patient
scheduling. Management and use of the system is driven by a comprehensive
security matrix. Orders can be placed for any ancillary department by
healthcare personnel, depending on their security level and appropriate
interfaces with non-Cerner departmental systems. Order and result inquiries
are secured in the same manner. ProNet also gives care providers and medical
staff access to patient demographic, admission, transfer and discharge
information. These data are retained on-line for extended periods of time,
making them easy to update. Access to patient management functions is
determined by user-defined security levels, based on personnel credentials.
ProNet also provides functionality to help clinicians and medical staff track
patients through the health organization and to establish and maintain patient
appointment schedules for locations within an institution.

CareNet Nursing Information System automates documentation and planning
related to nursing care delivery. All information that nursing staff members
enter into CareNet is automatically transcribed to all appropriate locations
in the patient's computer-based health record. This includes information
obtained from the delivery of nursing care (vital signs, assessments,
medication administration and data automatically captured from bedside
equipment and monitoring devices). CareNet enables nurses to have more time
for patient care and greater job satisfaction. CareNet also facilitates
nursing staff activities for patient care. It can be used to plan and
organize patient care activities from admission to discharge.

Discern Expert is an event-driven, rule-based, decision support software
application integrated with other Cerner HNA clinical and management
information systems. This tool allows users to define clinical and management
rules that are applied to events accessing data that is captured or generated

19
<PAGE>

by other HNA applications. Discern Expert accomplishes a variety of tasks,
including cost reduction, resource utilization, quality-assurance and risk
management. The users can define the action to be taken by the system ranging
broadly from sending an alert to the appropriate care giver to creation,
cancellation or suspension of an active clinical order.

ProNet II Provider Network System applications extend Cerner's process
automation and information to community-based users. ProNet II Communication
Management applications control connections and enforce access privileges to
functional services throughout the IDS and the IHO. It performs translation
and routing functions for data feeds from external systems and provides
electronic mail and multifacility-wide calendar capabilities.

REPOSITORY SYSTEMS

Open Clinical Foundation Data Repository ("OCF") is a structured repository
of clinical information of members/patients. OCF forms the foundation of
Cerner's computer-based patient record functionality. This information can
originate from numerous sources and is maintained in an easily accessible,
standardized format. OCF can be used on a stand-alone basis, but is
significantly more effective when used as part of the comprehensive HNA
solution. For most enterprises in which the various laboratories and
ancillaries cooperatively share data over the entire enterprise, OCF provides a
means of sorting and retrieving data. With OCF, the amount of on-line clinical
data that are retained in departmental systems can be significantly reduced.
Furthermore, health enterprises can scale OCF for a particular clinical area's
use and integrate it into an environment containing products from different
suppliers, including competitors. The interface specifications to OCF are
available for use by suppliers who comply with the interface requirements.

PowerChart is a PC-workstation-based product that enables care providers to
electronically view, organize, annotate and amend a patient record so that it
is presented in a manner that allows them to navigate through the chart using
patient-provider and encounter relationships. PowerChart gives healthcare
providers structured access to the clinical information contained
electronically in OCF. The format of the on-line patient chart consists of
pages displayed from a patient's computer-based patient record and information
electronically transmitted from connected systems. Clinicians are able to
browse through pages much the same as with printed documents. Clinicians can
access documents through tables of contents or search for terms in the document
text. The scope of documents available is limited only by the system interfaces
to OCF.

Open Management Foundation Data Repository ("OMF") is a structured repository
for process- and activity-related information useful for management of a
healthcare institution. Information can originate from numerous sources and can
be maintained in an easily accessible, standardized format. OMF can be scaled
for a particular department's use and can be integrated into an architecture
containing products from different suppliers.

PowerVision is a comprehensive, PC-based health management information system
used to view information in OMF in much the same manner as PowerChart is used
with OCF. This management access tool presents summary information through a
graphical user interface, making key information available to all levels of
management. PowerVision is equipped with features that allow the user to pursue
"what if " and other investigatory information paths. This enables an executive
to determine the status of the institution in many critical areas, as well as
provides managers with a quick, up-to-the-minute view of leading business
management indicators regarding the performance of a department, care area or
facility.

Open Engine Application Gateway System facilitates the exchange of data and
assists in the management of point-to-point interfaces between foreign systems
and serves as a toolkit to help clients write interface code.

20
<PAGE>

CLINICAL DOMAIN SYSTEMS

PathNet Laboratory Information System addresses the information management
needs of five clinical areas: general laboratory, microbiology, blood bank
transfusion services, blood bank donor services and anatomic pathology.
PathNet automates the ordering and reporting of procedures, the production of
accurate and timely reports and the maintenance of accessible clinical
records. PathNet can be interfaced with automated instruments and databases,
allowing for efficient and accurate transfer of information. PathNet
communicates laboratory information to patient care areas and other
information systems. Cerner attributes PathNet's acceptance to its functional
capability, ease of use and event-level cost accounting, which allows
healthcare managers to better control costs and assess profitability.

MedNet Internal Medicine Information System is a family of software products
that addresses the clinical information needs of various internal medicine
areas within the health organization. Introduced as a pulmonary information
system in 1987, MedNet's functionality now serves the disciplines of
cardiology, neuro-diagnostics, rehabilitation services and nutritional
services, as well as many ancillary areas. Like PathNet, MedNet automates
procedure requests, patient and therapist scheduling and the processing,
validation and presentation of results. The system provides reports on
clinical activity, workload and billing charges by drawing from the
departmental databases.

RadNet Radiology Information System addresses the operational and management
requirements of diagnostic radiation and radiation oncology departments. It
allows a department to replace its manual, paper-based system of record-
keeping with an efficient computer-based system. RadNet is designed to adapt
easily to the department's existing operations. In addition, the system
addresses such tasks as scheduling patients, modifying orders, tracking
patients, locating films, transcribing reports, upgrading the quality and
content of reports and reporting on productivity.

PharmNet Pharmacy Information System provides intrarelation in an HNA
environment for rapid pharmacy order entry and support of the clinical
pharmacy in either an inpatient or outpatient setting. PharmNet streamlines
medication order entry, enabling the pharmacist or technician to place all
types of pharmaceutical orders on one easy-to-use screen. Dispensing functions
also are fully automated. Medication, intravenous fill lists and medication
administration records are produced automatically or on demand. Charges are
automatically captured at the time the fill list is generated. Patient
profiles and pharmaceutical inventories are maintained without the
intervention of the pharmacist, saving significant time and resources.
Features are designed to address the special needs of the clinical pharmacy,
including on-line order entry screening for drug-drug interactions, drug-food
and drug-lab interferences, drug-disease states, intravenous
incompatibilities, dose range and therapeutic treatment duplication. Clinical
notes can be recorded on-line and sent to other clinicians for comment or
follow-up.

MSmeds Pharmacy Information System focuses on automating the pharmacy
department. MSmeds was developed by a company acquired by Cerner in 1993.
MSmeds is sold on a stand-alone basis, but can be interfaced to the Company's
HNA products. Designed to meet the specialized and individual needs of the
pharmacy department, MSmeds incorporates windows, on-line help, menu and
table-driven entry, a built-in system customization tool, and an application
generator. The order entry application gives the pharmacist fast order entry
capabilities with a high level of quality control. Safeguards that ensure the
integrity of patient therapy include: dose level checking by 36 parameters,
drug warnings, drug-drug interaction checking and pharmacokinetics. The system
generates a number of reports to assure the appropriateness of drug therapy,
including drug interaction, patients on specific drugs, drug utilization by
therapeutic category and dose checking. On-line storage on removable disks
provides full patient detail for a period of up to ten years. MSmeds offers
the availability of full detail patient information for drug utilization
evaluation, as well as labor and cost efficiencies. Admission, discharge and
transfer, billing, results display and order entry interfaces are contained
within the system.

21
<PAGE>

SurgiNet Surgery Information System and MRNet Medical Record Department
Information System are scheduled for commercial release in the first half of
1996. SurgiNet is intended to address the needs of the surgical department,
including automating the functions of resource and equipment scheduling,
inventory management and operating room management. MRNet is intended to help
meet the operations management needs of the medical records department and
includes functionality for the various chart tracking and completion tasks
commonly associated with maintaining medical records.

SOFTWARE DEVELOPMENT

Cerner commits significant resources to developing new health information
system products. As of July 1, 1995, 542 associates were engaged full-time in
product development activities. Total expenditures for the development and
enhancement of the Company's products were approximately $14,522,000,
$19,432,000 and $26,897,000 in 1992, 1993 and 1994, respectively. These figures
include the amounts capitalized and exclude amounts amortized for financial
reporting purposes.

The Company expects to continue investment and development efforts for its
current and future product offerings. As new clinical and management
information needs emerge, Cerner intends to enhance its current HNA-based
product lines with new versions released to clients on a periodic basis. In
addition, Cerner plans to expand its current product lines by developing
additional information systems for use in clinical departments and to support
simultaneous use of Cerner's HNA products across multiple facilities. All
Cerner systems are developed under HNA using a proprietary systems development
methodology. This methodology defines and controls each task throughout the
product development cycle and ensures that current and future products can be
fully intrarelated.

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, OCF and OMF product lines.

Cerner is developing a new version (referred to as V500) of its software,
which will incorporate a client-server architecture, a comprehensive graphical
user interface and open systems concepts for relational databases, operating
systems, networks and hardware platforms. Development of V500 began in the
summer of 1993. The Company is committed to maintaining open attributes in its
V500 system architecture. Cerner expects its V500 applications to run on
multiple operating systems, networks, databases and hardware platforms and to
co-exist with disparate applications developed and supported by other
companies.

SALES AND MARKETING

The market for Cerner's information system products includes IDSs, physician
groups and networks, managed care organizations, hospitals, free-standing
reference laboratories, blood banks, imaging centers and pharmacies. To date, a
substantial portion of system sales have been in clinical applications in
hospital-based provider organizations. Cerner's architecture is highly
scalable, with applications 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
current HNA systems are designed to operate on computers manufactured by
Digital Equipment Corporation ("Digital"). In addition, Open Engine, PathNet,
RadNet and MSmeds are available on IBM's RISC System/6000 AIX (UNIX) platform.
Over time, all HNA applications will be available on both the Digital and IBM
platforms, 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 fifteen months,
from the time of initial contact to the signing of a contract.

22
<PAGE>

The Company's executive marketing management is located in its Kansas City,
Missouri, headquarters, while its account representatives are deployed through
regional offices across the United States. The Company, through subsidiaries,
has offices and sales staff in the United Kingdom, Australia and Germany and
has a joint venture in Saudi Arabia. The Company supports its sales force with
technical personnel who perform demonstrations of Cerner's products and assist
clients in determining the proper hardware and software configurations. The
Company has developed a demonstration and presentation facility at its
headquarters in Kansas City, Missouri, called the Cerner Vision Center. This
facility enables the Company to actually demonstrate the processes automated
through HNA and adapt the presentations to the clients' environments. The
Company's primary direct marketing strategy is to generate sales contacts from
its existing client base and through presentations at industry seminars and
trade shows. Cerner attends a number of major trade shows each year and has
begun to sponsor executive conferences, which feature industry experts who
address the information system needs of large healthcare organizations.
Consolidated revenues include foreign sales of $10,018,000, $8,417,000 and
$13,274,000 for the years ended December 31, 1992, 1993 and 1994, respectively.

CLIENT SERVICES

Cerner uses a regional strategy to provide the full range of product and
service capabilities to its clients from eight locations throughout the United
States and four international locations. Each regional center reflects Cerner's
corporate culture and interfaces with the Company's clients on a regular and
highly accessible basis. In this way, Cerner can provide on-site personnel for
the development and management of systems projects, learn the evolving
information needs of clients based on geographical trends in the healthcare
industry, work with clients in the development of new products and services and
share with clients Cerner's vision of the changing healthcare delivery market
and the role of information systems in that transformation. The Company has
regional offices in Atlanta, Boston, Dallas, Detroit, Kansas City, Los Angeles,
Seattle and Washington, D.C. and international offices in Luton, England;
Munich, Germany; Riyadh, Saudi Arabia; and Sydney, Australia. Each regional
office is focused on long-term marketplace development, product marketing,
client project management, long-term client service and client satisfaction for
a group of clients within a specific geographical region.

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 these clients the use
of new releases of the Cerner products covered by these agreements. Each client
has 24-hour access to the client support staff located at Cerner's corporate
headquarters. 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.

BACKLOG

At July 1, 1995 Cerner had contract backlog of $58,806,000. Such backlog
represents system sales from signed contracts which have not yet been
recognized as revenue. The Company recognizes revenue on a percent of
completion basis, based on certain milestone conditions, for its software
products. At July 1, 1995, the Company had $39,471,000 of contracts receivable,
which represents revenues recognized under the percent of completion method but
not yet billable under the terms of the contract. At July 1, 1995, Cerner had a
software support and maintenance backlog of $90,819,000. Such backlog
represents contracted software support and hardware maintenance services for a
period of twelve months.

23
<PAGE>

MANAGEMENT

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<C> <C> <S>
Neal L. Patterson (1) 45 Chairman of the Board of Directors and Chief
Executive Officer
Clifford W. Illig (1) 44 President, Chief Operating Officer and Director
Charles S. Runnion, III (1) 47 Executive Vice President, Area General Manager
and Director
David M. Margulies, M.D. 43 Executive Vice President of Product Engineering
and Director
Jeffrey C. Reene 40 Executive Vice President and Area General
Manager
P. Michael Breedlove 50 Group Vice President and Area General Manager
Alan D. Dietrich 32 Group Vice President and Area General Manager
Charles O. Whitcraft 43 Group Vice President of Product Engineering
Gary W. Willett 50 Group Vice President and Chief Operating Officer
of Cerner International
Maureen M. Evans 39 Treasurer
Gerald E. Bisbee, Jr. (2)(3)(4) 52 Director
Michael E. Herman (3)(4) 54 Director
Thomas C. Tinstman, M.D. (3)(4) 50 Director
David J. Hart (2)(3)(4) 58 Director
</TABLE>
- --------
(1) Member of Executive Committee.
(2) Member of Stock Option Committee.
(3) Member of Audit Committee.
(4) Member of Compensation Committee.

Mr. Patterson was President, Chairman of the Board of Directors and Chief
Executive Officer of the Company from its incorporation to May 1987. Since May
1987 he has been Chairman of the Board of Directors and Chief Executive Officer
of the Company. Mr. Patterson has served as a director of LabOne, Inc. since
August 1988.

Mr. Illig was Executive Vice President, Secretary, Treasurer and Chief
Financial Officer and a Director of the Company from its incorporation to May
1987. From May 1987 to May 1993, he was a Director, President, Chief Operating
Officer and Chief Financial Officer of the Company. Since May 1993, he has been
a Director, President and Chief Operating Officer of the Company.

Mr. Runnion joined the Company in July 1989 and since that date has been an
Executive Vice President and Director of the Company. Prior to joining the
Company, he spent fourteen years with the IBM Corporation in a variety of
marketing and management positions.

Dr. Margulies joined the Company in February 1991 and since that date has
been an Executive Vice President of the Company. Prior to joining the Company,
for four years, he was Vice President in charge of information systems at
Children's Hospital, a healthcare institution located in Boston, Massachusetts.
During this time, Dr. Margulies also was the Director of the Program in Medical
Information Sciences at Harvard Medical School. Dr. Margulies has served as a
Director of the Company since May 1991.

24
<PAGE>

Mr. Reene joined the Company in September 1991 as Group Vice President of
Client Services. He was promoted to Executive Vice President in June 1994.
Prior to joining the Company, he was with Andersen Consulting from July 1978 to
August 1991, having been a Partner with Andersen Consulting since September
1988.

Mr. Breedlove joined the Company as National Sales Manager in May 1984 and
has held various executive positions with the Company since then.

Mr. Dietrich joined the Company in 1990 as Director of Business, Planning and
Development. Prior to joining the Company, he spent seven years with IBM
Corporation.

Mr. Whitcraft joined the Company as Vice President of Technology in January
1984. Since that time he has served in several executive positions dealing with
technology and engineering.

Mr. Willett joined the Company in April 1990 as Group Vice President of
Client Services and has served in various executive capacities. Prior to
joining the Company, he spent twenty-one years with IBM Corporation in a
variety of marketing and management positions.

Ms. Evans joined the Company in 1983 and has held various positions with the
Company dealing with finance and accounting since then.

Mr. Bisbee has been a Director of the Company since February 1988. He has
been Chairman of the Board of Directors and Chief Executive Officer of Apache
Medical Systems, Inc. since December 1989. Apache Medical Systems, Inc.
implements and analyzes healthcare support systems for intensive care units.
Mr. Bisbee has served as a director of Geriatric and Medical Centers, Inc.
since 1988 and has served as a director of Yamarchi Capital Funds since 1989.

Mr. Herman has been a Director of the Company since May 1995. He is President
of the Kansas City Royals Baseball Team, Chairman of the Finance Committee of
the Ewing-Marion Kauffman Foundation (President from 1985 to 1990) and was the
Executive Vice President and Chief Financial Officer of Marion Laboratories,
Inc. from 1974 to 1990. Mr. Herman is a director of LabOne, Inc., Janus Capital
Corporation, Seafield Capital Corporation and Agouron Pharmaceuticals, Inc.

Dr. Tinstman has been a Director of the Company since May 1989. Since
February 1994, Dr. Tinstman has been Director of Medical Informatics with the
University of Texas Medical Branch in Galveston, Texas. Prior to that he was a
physician in private practice with Internal Medicine Associates, P.C. in Omaha,
Nebraska. From 1977 to January 1994, Dr. Tinstman served as Associate Medical
Director of Pulmonary Medical Services at Bishop Clarkson Memorial Hospital and
as Medical Director of the Respiratory Therapy Department of Midland Hospital,
both in Omaha, Nebraska. Dr. Tinstman has served as a director of Smith-Haynes
Trust, Inc. since 1988.

Mr. Hart has been a Director of the Company since May 1991. He was the
President and Chief Executive Officer of The General Hospital (Grey Nuns) of
Edmonton, a hospital with 1100 beds located in Edmonton, Canada, from 1981
until his retirement in December 1991.

25
<PAGE>

SELLING STOCKHOLDERS

The table below sets forth information regarding the beneficial ownership of
Common Stock, as of July 1, 1995, by the Selling Stockholders, both before and
after giving effect to this offering.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
THE OFFERING SHARES TO BE OFFERING
-------------------- SOLD IN THE -----------------
SELLING STOCKHOLDERS NUMBER PERCENT OFFERING NUMBER PERCENT
- -------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Neal L. Patterson........... 3,383,692(1) 11.9 120,000 3,263,692 10.3
Clifford W. Illig........... 3,500,088(2) 12.3 120,000 3,380,088 10.7
</TABLE>
- --------
(1) Includes 100,000 shares which Mr. Patterson gifted to a charitable
foundation, of which he has shared voting and dispositive power, some of
which may be sold in the offering.
(2) Includes 100,000 shares which Mr. Illig gifted to a charitable foundation,
of which he has shared voting and dispositive power, some of which may be
sold in the offering.

26
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation and Smith Barney Inc., have severally agreed to purchase from the
Company and the Selling Stockholders the following respective numbers of shares
of Common Stock at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.................................
Donaldson, Lufkin & Jenrette Securities Corporation.............
Smith Barney Inc................................................
---------
Total ...................................................... 3,440,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the public offering, the offering price and other
selling terms may be changed by the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 516,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 3,440,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3,440,000 shares are being offered.

In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq Stock Market may engage in passive market making on
Nasdaq in accordance with Rule 10b-6A under the Exchange Act during the two
business day period before the commencement of the offers or sales of the
Common Stock. The passive market making transactions must comply with
applicable volume and price limits and be identified as such. In general, a
passive market maker may display its bid at a price not in excess of the
highest independent bid for such security; if all independent bids are lowered
before the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

27
<PAGE>

The Company and certain of its directors and executive officers have agreed,
subject to certain limited exceptions, not to offer, sell or otherwise dispose
of any Common Stock for a period of 90 days after the date of this Prospectus
without the prior consent of the Representatives of the Underwriters.

Alex. Brown & Sons Incorporated served as placement agent for the Company's
8.30% Senior Notes, due in 2004, issued in July 1994. Alex. Brown & Sons
Incorporated was paid customary fees in connection with this transaction. Each
of the Representatives of the Underwriters makes a market in the Company's
Common Stock.

LEGAL MATTERS

Certain legal matters relating to the validity of the shares of Common Stock
offered hereby will be passed upon for the Company and the Selling Stockholders
by John V. Donner, Corporate Counsel, and by Stinson, Mag & Fizzell, P.C.,
counsel to the Company. Mr. Donner is of counsel to Stinson, Mag & Fizzell,
P.C. with respect to a particular client of such law firm, which is not the
Company. As of July 27, 1995, attorneys of such law firm, including Mr. Donner,
owned in the aggregate 90,392 shares of Common Stock. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by
Dorsey & Whitney P.L.L.P.

EXPERTS

The financial statements and schedules of Cerner Corporation as of December
31, 1993 and 1994 and for each of the years in the three-year period ended
December 31, 1994, included herein and incorporated by reference herein and
elsewhere in the Registration Statement, have been included herein and
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included and incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.

Documents incorporated by reference herein in the future will include
financial statements, related schedules (if required) and auditors' reports,
which financial statements and schedules will have been examined to the extent
and for the periods set forth in such reports by the firm or firms providing
such reports, and will be incorporated by reference herein in reliance upon
such reports given upon the authority of such firms as experts in accounting
and auditing.

28
<PAGE>

CERNER CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF CERNER CORPORATION:
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Earnings...................................... F-4
Consolidated Statements of Stockholders' Equity.......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Cerner Corporation:

We have audited the accompanying consolidated balance sheets of Cerner
Corporation and subsidiaries as of December 31, 1993 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cerner
Corporation and subsidiaries as of December 31, 1993 and 1994, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1994, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP
Kansas City, Missouri
February 10, 1995, except as to
note 15 which is as of July 17,
1995

F-2
<PAGE>

CERNER CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JULY 1,
1993 1994 1995
--------- -------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................... $ 16,784 $ 15,305 $ 18,531
Receivables................................. 46,435 65,148 75,128
Inventory................................... 1,024 2,218 2,539
Prepaid expenses and other.................. 2,926 979 1,342
--------- -------- --------
Total current assets.................... 67,169 83,650 97,540
Property and equipment, net................. 13,818 41,129 47,068
Software development costs, net............... 14,571 18,784 20,786
Intangible assets, net........................ 8,564 6,390 6,062
Noncurrent receivables........................ -- 4,508 5,523
Other assets.................................. 788 1,949 2,031
--------- -------- --------
$ 104,910 $156,410 $179,010
========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................ $ 11,516 $ 13,485 $ 13,901
Notes payable............................... 975 -- --
Current installments of long-term debt...... 511 160 125
Advanced billings........................... 4,178 3,737 4,799
Deferred income taxes....................... 1,993 6,652 11,913
Accrued payroll and tax withholdings........ 3,812 4,689 4,506
Other accrued expenses...................... 1,581 2,557 3,090
--------- -------- --------
Total current liabilities............... 24,566 31,280 38,334
Long-term debt, net........................... 10,354 30,235 32,781
Deferred income taxes......................... 5,760 9,118 10,782
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000
shares authorized, 27,729,640 shares issued
in 1993, 28,508,614 in 1994 and 28,938,476
shares in 1995............................. 277 285 289
Additional paid-in capital.................. 28,803 30,807 31,514
Retained earnings........................... 40,852 60,353 71,078
Treasury stock, at cost (513,018 shares in
1993, 1994 and 1995)....................... (5,693) (5,693) (5,693)
Foreign currency translation adjustment..... (9) 25 (75)
--------- -------- --------
Total stockholders' equity................ 64,230 85,777 97,113
--------- -------- --------
Commitments (Note 11)
$ 104,910 $156,410 $179,010
========= ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

CERNER CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
-------------------------- --------------------------
1992 1993 1994 JUNE 30, 1994 JULY 1, 1995
-------- -------- -------- ------------- ------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
System sales........... $ 71,586 $ 84,024 $108,322 $48,376 $65,322
Support and
maintenance........... 26,664 33,200 41,322 19,765 23,362
Other.................. 2,895 3,348 6,273 2,168 3,474
-------- -------- -------- ------- -------
Total revenues....... 101,145 120,572 155,917 70,309 92,158
-------- -------- -------- ------- -------
Costs and expenses:
Cost of revenues....... 44,818 43,921 46,426 21,600 26,286
Sales and client
service............... 20,067 28,248 39,857 19,073 23,991
Software development... 12,962 16,000 22,688 10,477 15,053
General and
administrative........ 6,711 8,073 13,167 5,764 7,779
-------- -------- -------- ------- -------
Total costs and
expenses............ 84,558 96,242 122,138 56,914 73,109
-------- -------- -------- ------- -------
Operating earnings....... 16,587 24,330 33,779 13,395 19,049
Interest expense, net.... 294 210 1,328 418 961
-------- -------- -------- ------- -------
Earnings before income
taxes................... 16,293 24,120 32,451 12,977 18,088
Income taxes............. 6,361 9,562 12,950 5,072 7,363
-------- -------- -------- ------- -------
Net earnings............. $ 9,932 $ 14,558 $ 19,501 $ 7,905 $10,725
======== ======== ======== ======= =======
Primary earnings per
share................... $ .35 $ .50 $ .66 $ .27 $ .36
======== ======== ======== ======= =======
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

CERNER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL TREASURY CURRENCY
------------- PAID-IN RETAINED STOCK TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS AMOUNT ADJUSTMENT TOTAL
------ ------ ---------- -------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1991................... 25,783 $257 $16,623 $16,362 $(5,693) $(32) $27,517
Exercise of options.... 389 4 324 -- -- -- 328
Issuance of stock
grants................ -- -- 5 -- -- -- 5
Tax benefit from
disqualifying
dispositions of stock
options............... -- -- 896 -- -- -- 896
Foreign currency
translation
adjustment............ -- -- -- -- -- (35) (35)
Net earnings........... -- -- -- 9,932 -- -- 9,932
------ ---- ------- ------- ------- ---- -------
Balance at December 31,
1992................... 26,172 261 17,848 26,294 (5,693) (67) 38,643
------ ---- ------- ------- ------- ---- -------
Exercise of options.... 1,038 11 979 -- -- -- 990
Issuance of stock
grants................ -- -- 8 -- -- -- 8
Issuance of stock for
acquisition........... 520 5 6,768 -- -- -- 6,773
Tax benefit from
disqualifying
dispositions of stock
options............... -- -- 3,200 -- -- -- 3,200
Foreign currency
translation
adjustment............ -- -- -- -- -- 58 58
Net earnings........... -- -- -- 14,558 -- -- 14,558
------ ---- ------- ------- ------- ---- -------
Balance at December 31,
1993................... 27,730 277 28,803 40,852 (5,693) (9) 64,230
------ ---- ------- ------- ------- ---- -------
Exercise of options.... 778 7 980 -- -- -- 987
Issuance of stock
grants................ 1 1 24 -- -- -- 25
Tax benefit from
disqualifying
dispositions of stock
options............... -- -- 1,000 -- -- -- 1,000
Foreign currency
translation
adjustment............ -- -- -- -- -- 34 34
Net earnings........... -- -- -- 19,501 -- -- 19,501
------ ---- ------- ------- ------- ---- -------
Balance at December 31,
1994................... 28,509 285 30,807 60,353 (5,693) 25 85,777
------ ---- ------- ------- ------- ---- -------
Exercise of options.... 429 4 702 -- -- -- 706
Issue of stock grants.. -- -- 5 -- -- -- 5
Foreign currency
translation
adjustment............ -- -- -- -- -- (100) (100)
Net earnings........... -- -- -- 10,725 -- -- 10,725
------ ---- ------- ------- ------- ---- -------
Balance at July 1, 1995
(unaudited)............ 28,938 $289 $31,514 $71,078 $(5,693) $(75) $97,113
====== ==== ======= ======= ======= ==== =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

CERNER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------- ----------------------
JUNE 30, JULY 1,
1992 1993 1994 1994 1995
------- ------- ------- ---------- ----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings.............. $ 9,932 $14,558 $19,501 $ 7,905 $10,725
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization........... 5,293 6,434 10,062 4,609 6,148
Issuance of stock as
compensation........... 5 8 25 19 5
Provision for deferred
income taxes........... 536 7,500 8,017 2,712 4,925
Tax benefit from
disqualifying
dispositions of stock
options................ 896 3,200 1,000 -- --
Loss on disposal of
capital equipment...... -- -- 165 -- 10
Changes in assets and
liabilities:
Receivables............. (60) (13,426) (23,221) (11,249) (10,995)
Inventory............... (359) 821 (1,194) (747) (321)
Prepaid expenses and
other.................. (519) 391 1,213 1,323 (761)
Accounts payable........ (2,995) 2,901 1,969 2,934 416
Accrued income taxes.... (1,218) (5,791) -- 1,750 2,000
Other accrued
liabilities............ 2,364 (740) 1,412 (436) 1,412
------- ------- ------- ------- -------
Total adjustments.......... 3,943 1,298 (552) 915 2,839
------- ------- ------- ------- -------
Net cash provided by
operating activities...... 13,875 15,856 18,949 8,820 13,564
------- ------- ------- ------- -------
Cash flows from investing
activities:
Purchase of capital
equipment................ (4,615) (7,078) (11,291) (3,971) (5,110)
Purchase of land, building
and improvements......... -- -- (20,939) (20,145) (3,712)
Proceeds on disposal of
capital equipment........ -- -- 21 -- --
Capitalized software
development costs........ (4,098) (6,181) (8,131) (3,918) (4,633)
Acquisition of business... -- (585) -- -- --
------- ------- ------- ------- -------
Net cash used in investing
activities................ (8,713) (13,844) (40,340) (28,034) (13,455)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Net borrowings (payments)
under short-term notes
payable.................. -- 388 (639) (485) --
Proceeds from issuance of
long-term debt........... 6,281 109 50,273 19,845 3,626
Repayment of long-term
debt..................... (6,692) (511) (30,743) (269) (1,115)
Proceeds from exercise of
options.................. 328 990 987 602 706
------- ------- ------- ------- -------
Net cash provided by (used
in) financing activities.. (83) 976 19,878 19,693 3,217
------- ------- ------- ------- -------
Foreign currency
translation adjustment.... (35) 58 34 16 (100)
------- ------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents. 5,044 3,046 (1,479) 495 3,226
------- ------- ------- ------- -------
Cash and cash equivalents
at beginning of period.... 8,694 13,738 16,784 16,784 15,305
------- ------- ------- ------- -------
Cash and cash equivalents
at end of period.......... $13,738 $16,784 $15,305 $17,279 $18,531
======= ======= ======= ======= =======
Supplemental disclosures of
cash flow information:
Cash paid for:
Interest.................. $ 636 $ 686 $ 1,110 $ 628 $ 1,282
Income taxes, net of
refund................... 6,171 4,499 3,574 216 194
Noncash investing and
financing activities:
Acquisition of business.... $ -- $ 6,773 $ -- $ -- $ --
Acquisition of equipment
through capital leases.... 840 139 386 -- --
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation--The consolidated financial statements
include the accounts of Cerner Corporation and its wholly owned subsidiaries.
All significant intercompany transactions and balances have been eliminated in
consolidation.

(b) Revenue Recognition--Revenues are derived primarily from the sale of
clinical information systems. In addition, revenue is generated from servicing
installed clinical information systems, which generally includes support of
software and maintenance of hardware. The Company also derives revenue from
the sale of computer hardware.

Clinical information system sales contracts are negotiated separately and
generally include the licensing of the Company's clinical information system
software and the sale of computer hardware. Clinical information system sales
contracts are noncancelable and provide for a right of return only in the
event the system fails to meet the performance criteria set forth in the
contracts. The Company recognizes revenue from sales of clinical information
systems using a percentage-of-completion method based on meeting key milestone
events over the term of the contracts in accordance with Statement of Position
91-1, "Software Revenue Recognition."

Revenue from the licensing of additional software is recognized upon
installation at the client's site. Revenue from the sale of computer hardware
is recognized upon shipment. Revenue from ongoing software support and
equipment maintenance is recognized as the services are rendered.

(c) Software Development Costs--Costs incurred internally in creating
computer software products are expensed until technological feasibility has
been established upon completion of a detail program design. Thereafter, all
software development costs are capitalized and subsequently reported at the
lower of amortized cost or net realizable value. Capitalized costs are
amortized based on current and future revenue for each product with minimum
annual amortization equal to the straight-line amortization over the estimated
economic life of the product. The Company is amortizing capitalized costs on a
straight-line basis over five years. During the years ended December 31, 1992,
1993, and 1994, the Company capitalized $4,098,000, $6,181,000 and $8,131,000,
respectively, of total software development costs of $14,522,000, $19,432,000
and $26,897,000, respectively. Amortization expense of capitalized software
development costs for the years ended December 31, 1992, 1993 and 1994, was
$2,538,000, $2,652,000 and $3,918,000, respectively, and accumulated
amortization was $7,284,000, $9,936,000 and $13,854,000, respectively.

(d) Inventory--Inventory consists primarily of computer hardware held for
resale and is recorded at the lower of cost (first-in, first-out) or market.

(e) Property and Equipment--Property, equipment and leasehold improvements
are stated at cost. Depreciation of property and equipment is computed using
the straight-line method over periods of 5 to 39 years. Amortization of
leasehold improvements is computed using a straight-line method over the lease
terms, which range from periods of two to five years.

(f) Earnings Per Share--Earnings per share is based on the weighted average
number of common shares and common share equivalents outstanding. Common share
equivalents consist of shares issuable upon exercise of stock options using
the treasury stock method. The computation of fully diluted earnings per share
reflects additional dilution under the treasury stock method when the
Company's stock price at the end of a reporting period exceeds the average
price. Fully diluted earnings per share is not materially different from
primary earnings per share. Weighted average shares

F-7
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
outstanding utilized in the computation of primary earnings per share were
28,680,816, 29,158,356 and 29,762,208, and fully diluted earnings per share
were 29,013,916, 29,285,798 and 29,807,504, for the years ended December 31,
1992, 1993 and 1994, respectively.

(g) Foreign Currency--Assets and liabilities in foreign currencies are
translated into dollars at rates prevailing at the balance sheet date.
Revenues and expenses are translated at average rates for the year. The net
exchange differences resulting from these translations are reported in
stockholders' equity. Gains and losses resulting from foreign currency
transactions are included in the consolidated statements of earnings. The net
gain (loss) resulting from foreign currency transactions was ($180,000),
($83,000), and $107,000, in 1992, 1993 and 1994, respectively.

(h) Income Taxes--The Company accounts for income taxes using the asset and
liability method pursuant to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.

(i) Goodwill--Excess of cost over net assets acquired (goodwill) is being
amortized on a straight-line basis over eight years. Accumulated amortization
was $151,000 at December 31, 1993 and $916,000 at December 31, 1994.

(j) Reclassifications--Certain prior year amounts have been reclassified to
conform with current year presentation.

2. ACQUISITION

On November 1, 1993, the Company completed the acquisition of Megasource,
Inc. through the merger of Megasource, Inc. into a new wholly owned subsidiary
of the Company. The Company issued 519,540 shares of common stock, valued at
approximately $6,773,000, in the merger. Megasource, Inc. was engaged in the
design, sale and support of several clinical information systems, the most
significant of which was its pharmacy system. The acquisition has been
accounted for as a purchase with the operating results of Megasource, Inc.
included in the Company's consolidated statement of earnings from November 1,
1993. The Company has determined that the consolidated results of operations
as if the acquisition had occurred at the beginning of 1992 and 1993 would
have had no material effect on the overall results of the Company.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Cash and overnight repurchase agreements................... $ 4,721 6,643
Commercial paper........................................... 7,967 3,982
Variable rate securities................................... 500 500
Fixed rate securities...................................... 2,746 3,330
Certificates of deposit.................................... 850 850
------- ------
Total cash and cash equivalents.......................... $16,784 15,305
======= ======
</TABLE>

F-8
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Cash equivalents are
carried at cost, which approximates market. The carrying value of cash and cash
equivalents approximates fair value due to the short maturity of those
instruments.

4. RECEIVABLES

Receivables consist of accounts receivable and contracts receivable. Accounts
receivable represent recorded revenues that have been billed. Contracts
receivable represent recorded revenues that are billable by the Company at
future dates under the terms of a contract with a client. Contract receivables
that are not expected to be collected within one year are classified as
noncurrent. Billings on contracts in excess of related revenues recognized
under the percentage of completion method are recorded as advanced billings. A
summary of current receivables is as follows:

<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Current receivables:
Accounts receivable...................................... $28,251 37,019
Contracts receivable..................................... 18,184 28,129
------- ------
Total current receivables.............................. $46,435 65,148
======= ======
</TABLE>

Substantially all receivables are derived from sales and related support and
maintenance of the Company's clinical information systems to healthcare
providers located throughout the United States and in certain foreign
countries. Included in receivables at December 31, 1993 and 1994, are amounts
due from healthcare providers located in foreign countries of $4,108,000 and
$3,777,000, respectively. Consolidated revenues include foreign sales of
$10,018,000, $8,417,000 and $13,274,000, for the years ended December 31, 1992,
1993 and 1994, respectively.

The Company provides an allowance for estimated uncollectible accounts based
upon historical experience and management's judgment. The fair value of the
Company's noncurrent receivables at December 31, 1994 is estimated to be
$4,155,000, based on current interest rates offered to the Company for debt of
the same maturities.

5. PROPERTY AND EQUIPMENT

A summary of property, equipment and leasehold improvements stated at cost,
less accumulated depreciation and amortization, is as follows:

<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures..................................... $ 7,041 9,942
Computer equipment......................................... 12,796 18,163
Marketing equipment........................................ 280 913
Communications equipment................................... 1,178 1,612
Leasehold improvements..................................... 2,782 4,319
Capital lease equipment.................................... 1,770 1,055
Land, building and improvements............................ -- 20,939
------- ------
25,847 56,943
Less accumulated depreciation and amortization............. 12,029 15,814
------- ------
Total property and equipment, net........................ $13,818 41,129
======= ======
</TABLE>

F-9
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. INDEBTEDNESS

At December 31, 1993, the Company had a loan agreement with a bank that
provided for a term loan, a line of credit for financing contract receivables,
and a long-term, revolving line of credit for working capital purposes. The
lines of credit were secured by eligible receivables, inventory, property and
equipment, and bore interest at the bank's prime rate. At December 31, 1993,
the Company had borrowings of $481,000 under the contract receivables line of
credit and $10,251,000 under the long-term, revolving line of credit.

On April 19, 1994, the Company entered into a loan agreement with two banks
that provided for a long-term revolving line of credit for working capital
purposes. The long-term revolving line of credit is unsecured and requires
monthly payments of interest only. Interest is payable at the Company's option
at a rate based on prime (8.5% at December 31, 1994) or LIBOR plus 1.75% (7.75%
at December 31, 1994). The interest rate may be reduced by up to .5% if certain
net worth ratios are maintained. At December 31, 1994, the Company had no
outstanding borrowings under this agreement and had $18,000,000 available for
working capital purposes. The agreement contains certain net worth, current
ratio and fixed charge coverage covenants and provides certain restrictions on
the Company's ability to borrow, incur liens, sell assets and pay dividends. A
commitment fee of 3/16% is payable quarterly on the unused portion of the
revolving line of credit.

On April 19, 1994, the Company entered into a loan agreement with two banks
that provided for a term loan of $17,425,000 to fund the $20,000,000 purchase
of its Kansas City headquarters complex. On July 29, 1994, the Company issued
$30,000,000 of Senior Notes. The note proceeds were used to repay the term
loan, which then terminated, and to reduce the outstanding borrowings under the
revolving line of credit.

The Senior Notes are payable in five equal annual installments beginning in
August 2000. Interest is payable on February 1 and August 1 at a rate of 8.3%.
The note agreement contains certain net worth, current ratio and fixed charge
coverage covenants and provides certain restrictions on the Company's ability
to borrow, incur liens, sell assets and pay dividends.

The fair value of the Company's Senior Notes is estimated to be $28,716,000,
based on the quoted market prices for similar issues offered to the Company for
debt of the same remaining maturities. Although the fair value of the long-term
debt is less than the carrying amount, settlement at the reported fair value
does not include potential taxes and other expenses that would be incurred in
an actual settlement. The Company estimates that the fair value of the long-
term portion of capital leases approximates the carrying value.

Long-term debt is as follows:

<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit, interest payable monthly at prime (8.5%
at December 31, 1994), secured by receivables, inventory and all
property and equipment.......................................... $10,251 --
Senior Notes, 8.3% due 2004...................................... -- 30,000
Obligation under capital lease agreements, interest at 6-10%
payable in monthly installments through August 1997, secured by
equipment....................................................... 614 395
------- ------
10,865 30,395
Less current installments........................................ 511 160
------- ------
Long-term debt, excluding current installments................. $10,354 30,235
======= ======
</TABLE>

F-10
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Scheduled maturities of long-term debt (in thousands) at December 31, 1994,
are as follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31
------------
<S> <C>
1995.......................... $ 160
1996.......................... 130
1997.......................... 105
2000 and thereafter........... 30,000
-------
$30,395
=======
</TABLE>

7. INTEREST INCOME AND EXPENSE

A summary of interest income and expense is as follows:

<TABLE>
<CAPTION>
1992 1993 1994
----- ---- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income...................................... $ 403 438 542
Interest expense..................................... (697) (648) (1,870)
----- ---- ------
Interest expense, net.............................. $(294) (210) (1,328)
===== ==== ======
</TABLE>

8. STOCK OPTIONS

The Company has three incentive stock option plans and a nonqualified stock
option plan. Stock Option Plan A (Plan A) was approved by the Board of
Directors on September 20, 1983, and expired on September 20, 1993. Stock
Option Plan B (Plan B) was approved by the Board of Directors on November 30,
1983, and expired on November 30, 1993. Stock Option Plan C (Plan C) was
approved by the Board of Directors on May 18, 1993. The NonQualified Stock
Option Plan was approved by the Board of Directors on February 19, 1991.

All associate stock options authorized under Plan A were granted prior to
December 31, 1983. Options granted under Plan A were exercisable through
September 20, 1993, at $.19 per share (fair market value on the date of grant)
and contained restrictions as to transferability and exercisability after
termination of employment. Transactions for associate stock options under Plan
A are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE SHARES
UNDER OPTION PRICE EXERCISABLE
---------------- -------- -----------
<S> <C> <C> <C>
Outstanding, December 31, 1991..... 358,400 $.19 358,400
Exercised........................ (120,000) .19
--------
Outstanding, December 31, 1992..... 238,400 .19 238,400
Exercised........................ (238,400) .19
--------
Outstanding, December 31, 1993 and
1994.............................. -- $-- --
========
</TABLE>

Under Plan B, the Company could grant to associates options to purchase
shares of common stock through November 30, 1993. The options are exercisable
at the fair market value on the date of grant for a period determined by the
Board of Directors (not more than ten years from the date granted).

F-11
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The options contain restrictions as to transferability and exercisability after
termination of employment. Transactions for associate stock options under Plan
B are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE SHARES
UNDER OPTION PRICE EXERCISABLE
---------------- ----------- -----------
<S> <C> <C> <C>
Outstanding, December 31,
1991..................... 3,138,104 $ .50- 2.50 1,409,200
Granted................. 88,000 1.84-12.06
Canceled................ (62,624) 1.19- 1.52
Exercised............... (267,704) .50- 2.50
---------
Outstanding, December 31,
1992..................... 2,895,776 .50-12.06 1,634,408
Granted................. 142,000 8.63-17.56
Canceled................ (49,200) 1.34-10.69
Exercised............... (719,162) .50- 2.25
---------
Outstanding, December 31,
1993..................... 2,269,414 .50-17.56 1,469,334
Canceled................ (36,800) 1.34
Exercised............... (697,560) .50- 4.47
---------
Outstanding, December 31,
1994..................... 1,535,054 $ .50-17.56 1,129,454
=========
</TABLE>

Under Plan C, the Company may grant to associates options to purchase shares
of common stock through May 18, 2003. The options are exercisable at the fair
market value on the date of grant for a period determined by the Board of
Directors (not more than ten years from the date granted). The options contain
restrictions as to transferability and exercisability after termination of
employment. Transactions for associate stock options under Plan C are
summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE SHARES
UNDER OPTION PRICE EXERCISABLE
---------------- ------------ -----------
<S> <C> <C> <C>
Outstanding, December 31,
1993......................... -- $ -- --
Granted..................... 95,000 12.56-18.88
Canceled.................... (600) 14.13
------
Outstanding, December 31,
1994......................... 94,400 $12.56-18.88 --
======
</TABLE>

Under the NonQualified Stock Option Plan, the Company may grant to
associates, consultants, or advisors options to purchase shares of common stock
through January 1, 2000. The options are exercisable at a price and during a
period determined by the Stock Option Committee.

Transactions under the NonQualified Stock Option Plan and other nonqualified
stock option agreements are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE SHARES
UNDER OPTION PRICE EXERCISABLE
---------------- ------------ -----------
<S> <C> <C> <C>
Outstanding, December 31,
1991......................... 584,000 $ 1.25- 1.53 144,000
Granted..................... -- --
-------
Outstanding, December 31,
1992......................... 584,000 1.25- 1.53 228,000
Exercised................... (80,000) 1.34- 1.53
-------
Outstanding, December 31,
1993......................... 504,000 1.25- 1.53 212,000
Granted..................... 315,832 12.56-18.88
Exercised................... (80,000) 1.34
-------
Outstanding, December 31,
1994......................... 739,832 $ 1.25-18.88 244,000
=======
</TABLE>

F-12
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES

Income taxes for the years ended December 31, 1992, 1993, and 1994, consist
of the following:

<TABLE>
<CAPTION>
1992 1993 1994
------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................... $5,001 1,767 3,740
State............................................. 768 333 692
Foreign........................................... 56 (38) 501
------ ----- ------
Total current................................... 5,825 2,062 4,933
------ ----- ------
Deferred:
Federal........................................... 295 6,531 7,043
State............................................. 241 969 919
Foreign........................................... -- -- 55
------ ----- ------
Total deferred.................................. 536 7,500 8,017
------ ----- ------
Total income tax expense...................... $6,361 9,562 12,950
====== ===== ======
</TABLE>

Included in 1993 deferred income tax expense is approximately $88,000
resulting from the increase in the statutory tax rate.

Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
deferred income taxes at December 31, 1993 and 1994, relate to the following:

<TABLE>
<CAPTION>
1993 1994
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Software development costs................................ $5,401 6,776
Contract and service revenues and costs................... -- 1,704
Depreciation and amortization............................. 594 789
Operating leases.......................................... (235) (151)
------ ------
Noncurrent deferred income tax liability................ 5,760 9,118
------ ------
Contract and service revenues and costs................... 2,669 8,136
Other..................................................... (676) (1,484)
------ ------
Current deferred income tax liability................... 1,993 6,652
------ ------
Net deferred income taxes............................... $7,753 15,770
====== ======
</TABLE>

At December 31, 1993, deferred tax liabilities were $11,113,000 and deferred
tax assets were $3,360,000. Net deferred income taxes at December 31, 1994, are
composed of deferred tax liabilities of $17,758,000 and deferred tax assets of
$1,988,000. There was no valuation allowance provided for deferred tax assets
at December 31, 1993 or 1994.

F-13
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The effective income tax rates for 1992, 1993, and 1994 were 39%, 40%, and
40%, respectively. These effective rates differ from the federal statutory rate
of 34% in 1992 and 35% in 1993 and 1994 as follows:

<TABLE>
<CAPTION>
1992 1993 1994
------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense at statutory rates........................ $5,540 8,442 11,358
State income tax, net of federal benefit.............. 666 846 1,047
Other, net............................................ 155 274 545
------ ----- ------
Total income tax expense............................ $6,361 9,562 12,950
====== ===== ======
</TABLE>

Income taxes payable at December 31, 1992, 1993, and 1994, are reduced by the
tax benefit resulting from disqualifying dispositions of stock acquired under
the Company's stock option plans. The 1992, 1993, and 1994 benefits of
$896,000, $3,200,000, and $1,000,000, respectively, are treated as increases to
additional paid-in capital.

10. ASSOCIATE STOCK PURCHASE RETIREMENT PLAN

The Company established the Cerner Corporation Associate Stock Purchase
Retirement Plan (the Plan) under Section 401(k) of the Internal Revenue Code.
All full-time associates are eligible to participate. Participants may elect to
make pre-tax contributions from 1% to 15% of compensation to the Plan, subject
to annual limitations determined by the Internal Revenue Service. Participants
may direct contributions into mutual funds, a money market fund, or a Company
stock fund. The Company makes matching contributions to the Plan, on behalf of
participants, in an amount equal to 20% of the participant's contribution,
limited to a maximum of $600 per participant. The Company's expense for the
plan amounted to $154,000, $275,000, and $316,000 for 1992, 1993, and 1994,
respectively.

11. COMMITMENTS

The Company is committed under operating leases for office space through
December 1999 and for computer equipment through March 1995. Rent expense for
office and warehouse space for the Company's regional and international offices
for 1992, 1993, and 1994 was $1,604,000, $2,195,000, and $1,721,000,
respectively. Lease expense for computer equipment was $315,000, $323,000, and
$328,000, in 1992, 1993, and 1994, respectively. Aggregate minimum future
payments (in thousands) under these noncancelable leases are as follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31
------------
<S> <C>
1995............................. $1,253
1996............................. 1,243
1997............................. 1,253
1998............................. 1,047
1999............................. 319
</TABLE>

At December 31, 1994, the Company was committed to spending $3,332,000 under
a construction contract for a new building at its Kansas City headquarters
complex. The completed cost of the new building is estimated to be $6,000,000
to $8,000,000.

F-14
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. REAL ESTATE LEASE REVENUE

The Company leases space to unrelated parties in its Kansas City headquarters
complex under noncancelable operating leases. Rental income from April 19, 1994
(the date of the Company's purchase of its headquarters complex), to December
31, 1994, was $1,843,000. Future minimum lease revenues (in thousands) under
these noncancelable operating leases expiring in 1999 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31
------------
<S> <C>
1995............................. $2,099
1996............................. 2,023
1997............................. 1,752
1998............................. 1,333
1999............................. 1,016
</TABLE>

13. STOCKHOLDERS' EQUITY

At December 31, 1993 and 1994, the Company had 1,000,000 shares of authorized
but unissued preferred stock, $.01 par value.

14. QUARTERLY RESULTS (UNAUDITED)

Selected quarterly financial data for 1993 and 1994 is set forth below:

<TABLE>
<CAPTION>
EARNINGS
BEFORE PRIMARY
INCOME NET EARNINGS
REVENUES TAXES EARNINGS PER SHARE
-------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1993 Quarterly Results:
March 31........................... $ 24,137 4,320 2,560 .09
June 30............................ 29,834 5,568 3,314 .11
September 30....................... 32,334 6,809 4,072 .14
December 31........................ 34,267 7,423 4,612 .16
-------- ------ ------ ---
Total............................ $120,572 24,120 14,558 .50
======== ====== ====== ===
1994 Quarterly Results:
March 31........................... $ 30,515 4,724 3,002 .10
June 30............................ 39,795 8,253 4,903 .17
September 30....................... 40,933 8,387 5,069 .17
December 31........................ 44,674 11,087 6,527 .22
-------- ------ ------ ---
Total............................ $155,917 32,451 19,501 .66
======== ====== ====== ===
</TABLE>

15. SUBSEQUENT EVENT

On July 17, 1995, the Company's Board of Directors announced a two-for-one
stock split payable on August 4, 1995, in the form of a one hundred percent
(100%) stock dividend to stockholders of record on July 24, 1995. All share and
per share data have been restated for all periods presented herein to reflect
the stock split.

F-15
<PAGE>

CERNER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

16. UNAUDITED INTERIM FINANCIAL INFORMATION

The consolidated balance sheet of Cerner Corporation and subsidiaries as of
July 1, 1995 and the related consolidated statements of earnings, stockholders'
equity and cash flows for the six months ending June 30, 1994 and July 1, 1995
and related footnote disclosures have been prepared by Cerner Corporation (the
"Company") in accordance with generally accepted accounting principles for
interim financial reporting and in accordance with Rule 10-01 of Regulation S-X
and are unaudited. In the opinion of the Company, the interim financial
information includes all adjustments consisting of only normal recurring
adjustments, necessary for a fair presentation of the results of the interim
periods. The results for the six-month periods may not be indicative of
operating results for the entire year.

F-16
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 8
Selected Consolidated Financial Data...................................... 9
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 10
Business.................................................................. 16
Management................................................................ 24
Selling Stockholders...................................................... 26
Underwriting.............................................................. 27
Legal Matters............................................................. 28
Experts................................................................... 28
Index to Financial Statements............................................. F-1
</TABLE>

-----------

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,440,000 Shares

LOGO

Common Stock

-----------

PROSPECTUS

-----------

Alex. Brown & Sons
INCORPORATED

Donaldson, Lufkin & Jenrette
SECURITIES CORPORATION

Smith Barney Inc.

August , 1995

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses to be paid in connection with the issuance and distribution of
the securities being registered hereunder, other than underwriting discounts
and commissions, estimated for purposes of this filing, will be substantially
as follows:

<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC Registration Fee............................................ $ 42,715
NASD Filing Fee................................................. $ 12,888
Blue Sky Fees and Expenses...................................... $ 10,000
Accounting Fees and Expenses.................................... $ 60,000
Legal Fees and Expenses......................................... $125,000
Printing........................................................ $125,000
Stock Certificates.............................................. $ 4,000
Nasdaq Fee...................................................... $ 17,500
Miscellaneous Expenses.......................................... $ 2,897
--------
Total......................................................... $400,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

(a) The Delaware General Corporation Law ("DGCL") (Section 145) gives
Delaware corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers, subject to specified
conditions and exclusions, gives a director or officer who successfully defends
an action the right to be so indemnified and authorizes the Registrant to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-laws, agreement, vote of stockholders or otherwise.

(b) The Company's Bylaws provide that the Company shall indemnify officers
and directors to the extent provided therein. The Bylaws also permit the Board
of Directors to authorize the Company to purchase and maintain insurance
against any liability asserted against any director, officer, employee or agent
of the Company arising out of his capacity as such.

(c) In accordance with Section 102(b)(7) of the DGCL, the Registrant's
Certificate of Incorporation provides that directors shall not be personally
liable for monetary damages for breaches of their fiduciary duty as directors
except for (1) breaches of their duty of loyalty to the Registrant or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (3) under Section 174 of
the DGCL (unlawful payment of dividends) or (4) transactions from which a
director derives an improper personal benefit.

(d) The Company has entered into Indemnification Agreements with the
Company's directors, Clifford W. Illig, Neal L. Patterson, Charles S. Runnion,
III, David J. Hart, Gerald E. Bisbee, Jr., Thomas C. Tinstman, M.D. and David
M. Margulies, M.D., which provide for indemnification of such persons in
certain circumstances.

II-1
<PAGE>

(e) The Company has obtained directors and officers liability insurance for
each of its directors and executive officers which (subject to certain limits
and deductibles) (i) insures such persons against loss arising from certain
claims made against them by reason of such persons being directors or officers
and (ii) insures the Company against loss which it may be required or permitted
to pay as indemnification due such persons for certain claims. Such insurance
may provide coverage for certain matters as to which the Company may not be
permitted by law to provide indemnification.

ITEM 16. EXHIBITS.

A list of the exhibits included as part of this Registration Statement is set
forth in the Exhibit Index, which immediately precedes such exhibits and is
incorporated by reference herein.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF KANSAS CITY, STATE OF MISSOURI, ON JULY 25, 1995.

CERNER CORPORATION

/s/ Clifford W. Illig
By: _________________________________
Clifford W. Illig
President

POWER OF ATTORNEY

EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY CONSTITUTES AND APPOINTS
CLIFFORD W. ILLIG THE TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT OF THE
UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR AND IN THE
NAME, PLACE AND STEAD OF THE UNDERSIGNED, IN ANY AND ALL CAPABILITIES, TO SIGN
ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH) WITH THE SECURITIES AND EXCHANGE COMMISSION,
AND HEREBY GRANTS TO SUCH ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY
TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE
DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS THE UNDERSIGNED MIGHT OR COULD DO
IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND
AGENT OR HIS SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ Neal L. Patterson Chairman of the Board and July 25, 1995
____________________________________ Director (Principal
Neal L. Patterson Executive Officer)

/s/ Clifford W. Illig President and Director July 25, 1995
____________________________________
Clifford W. Illig

/s/ Maureen M. Evans (Principal Financial and July 25, 1995
____________________________________ Accounting Officer)
Maureen M. Evans

/s/ Gerald E. Bisbee, Jr. Director July 25, 1995
____________________________________
Gerald E. Bisbee, Jr.

/s/ Michael E. Herman Director July 25, 1995
____________________________________
Michael E. Herman

/s/ Charles S. Runnion, III Director July 25, 1995
____________________________________
Charles S. Runnion, III

/s/ Thomas C. Tinstman, M.D. Director July 25, 1995
____________________________________
Thomas C. Tinstman, M.D.

/s/ David M. Margulies, M.D. Director July 25, 1995
____________________________________
David M. Margulies, M.D.

/s/ David J. Hart Director July 25, 1995
____________________________________
David J. Hart

</TABLE>

II-3
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
NUMBER DESCRIPTION NO.
------ ----------- ----
<C> <S> <C>
1 Proposed Form of Underwriting Agreement.*
4(a)(i) Restated Certificate of Incorporation, as amended through De-
cember 31, 1993 (filed as Exhibit 3(a) to Registrant's An-
nual Report on Form 10-K for the year ended December 31,
1994 and hereby incorporated by reference).
4(a)(ii) Amendment to the Restated Certificate of Incorporation (filed
as Exhibit 3(a) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993, and hereby incorpo-
rated by reference).
4(b) Amended Bylaws (filed as Exhibit 3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 1, 1995 and
hereby incorporated by reference).
4(c) Specimen stock certificate (filed as Exhibit 4(a) to Regis-
trant's Registration Statement on Form S-8 (File No. 33-
15156) and hereby incorporated herein by reference).
5 Opinion of Stinson, Mag & Fizzell, P.C., Counsel for the Reg-
istrant, with respect to the legality of the Common Stock of
the Registrant registered hereby.
23(a) Consent of Registrant's Independent Accountants.
23(b) Consent of Registrant's Counsel (contained in the Opinion of
Counsel filed as Exhibit 5).
24(a) Power of Attorney (included on the signature page of this
Registration Statement).
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

[LETTERHEAD OF STINSON, MAG & FIZZELL, P.C.]

July 25, 1995

Cerner Corporation
2800 Rockcreek Parkway
Suite 601
Kansas City, Missouri 64117

Ladies and Gentlemen:

We refer to the Registration Statement on Form S-3 of Cerner Corporation, a
Delaware corporation (the "Company"), filed with the Securities and Exchange
Commission (File No. ________) (the "Registration Statement") for the purpose
of registering under the Securities Act of 1933, as amended, 3,200,000 shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock"), to
be offered by the Company, 240,000 shares of Common Stock to be offered by
certain Selling Stockholders of the Company and 516,000 shares of Common Stock
which may be offered by the Company pursuant to an over-allotment option granted
to the underwriters for the offering.

We have examined the Certificate of Incorporation, the Bylaws of the
Company, as currently in effect, minutes of the applicable meetings of the board
of directors and stockholders of the Company, together with such other corporate
records, certificates of public officials and other documents as we have deemed
relevant to this opinion.

Based upon the foregoing, it is our opinion that:

1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.

2. All necessary corporate action has been taken to authorize the
issuance and sale by the Company of 3,716,000 shares of Common Stock, par value
$.01 per share, for the consideration set forth in the Registration Statement,
and, upon the issuance and sale of such shares for such consideration, such
shares will be duly and legally issued, fully paid and nonassessable.

We hereby consent to the reference to our firm under the heading "Legal
Matters" in the Prospectus which constitutes a part of such Registration
Statement. We also consent to the inclusion of this opinion in the Registration
Statement as an exhibit thereto.

Very truly yours,

STINSON, MAG & FIZZELL, P.C.

<PAGE>

The Board of Directors
Cerner Corporation:

We consent to the use of our reports included herein and incorporated herein by
reference and to the references to our firm under the headings "Experts" and
"Selected Consolidated Financial Data" in the prospectus.

KPMG Peat Marwick LLP

Kansas City, Missouri
July 25, 1995