UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2002
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ______________
Commission file number 0-15386
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Cerner Corporation Foundations Retirement Plan
2800 Rockcreek Parkway
Kansas City, MO 64117
B. Name of issue of the securities held pursuant to the plan and
the address of its principal executive office:
REQUIRED INFORMATION
Report of Independent Auditors' 3
Financial Statements and Schedule
Financial Statements:
Statements of Net Assets Available for Participants
at December 31, 2002 and 2001 4
Statements of Changes in Net Assets Available for Participants
for the Years ended December 31, 2002 and 2001 5
Notes to Financial Statements 6
Supplemental Schedule:
Schedule I - Schedule of Assets Held for Investment Purposes
at December 31, 2002 11
Schedule II - Schedule of Reportable Transactions
at December 31, 2002 12
Exhibit
Exhibit 23 - Consent of Independent Auditors'
SIGNATURE
The plan, pursuant to the requirements of the securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
FOUNDATIONS RETIREMENT PLAN
Dated: June 27, 2003 By: /s/ Marc G. Naughton
------------- --------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cerner Corporation:
We have audited the accompanying statements of net assets available for
participants of the Cerner Corporation Foundations Retirement Plan (the Plan) as
of December 31, 2002 and 2001, and the related statements of changes in net
assets available for participants for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the net assets available for participants of the Cerner
Corporation Foundations Retirement Plan as of December 31, 2002, and 2001, and
the changes in net assets available for participants for the years then ended,
in conformity with accounting principles generally accepted in the United States
of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
are the responsibility of the Plan's management. The supplemental schedules have
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
Kansas City, Missouri
March 14, 2003
3
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Statements of Net Assets Available for Participants
December 31, 2002 and 2001
2002 2001
--------------- ---------------
Assets:
Investments at fair value (note 6) $ 116,750,233 135,394,774
Employer contribution receivable -- 297,500
Cash 29,121 5,211
--------------- ---------------
Net assets available for participants $ 116,779,354 135,697,485
=============== ===============
See accompanying notes to financial statements
4
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Statements of Changes in Net Assets Available for Participants
Years ended December 31, 2002 and 2001
2002 2001
------------- -------------
Additions to net assets attributed to:
Net depreciation in fair value of investments (note 6) $ (45,956,973) (135,571)
Interest and dividends 609,085 407,961
Employer contributions (note 2) 8,454,440 2,704,968
Associates contributions (note 2) 22,277,392 18,112,043
------------- -------------
Total additions (14,616,056) 21,089,401
------------- -------------
Deductions from net assets attributed to:
Distributions to associates (note 3) (4,195,759) (5,634,655)
Investment expenses (106,316) (9,732)
------------- -------------
Total deductions (4,302,075) (5,644,387)
------------- -------------
Net increase (decrease) (18,918,131) 15,445,014
Net assets available for participants:
Balance at beginning of year 135,697,485 120,252,471
------------- -------------
Balance at end of year $ 116,779,354 135,697,485
============= =============
See accompanying notes to financial statements.
5
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The following brief description of the Cerner Corporation Foundations
Retirement Plan (the Plan) is provided for general information purposes
only. Participants should refer to the Summary Plan Document for more
complete information.
The Plan was adopted by the board of directors of Cerner Corporation
(the Company or Employer) effective November 1, 1987. The Plan has most
recently been amended in 2002 to comply with certain changes in the
law. The Plan is administered by a third-party administrator. All
associates of the Company are eligible for participation in the Plan
upon attaining age 18 except for:
o Associates whose employment is governed by a collective
bargaining agreement under which retirement benefits were the
subject of good faith bargaining, unless such agreement
expressly provides for participation in the Plan;
o Certain nonresident aliens who have no earned income from
sources within the United States of America;
o Leased associates; or
o Associates who were previously not treated as associates of
the Employer but who are reclassified as being associates.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis in conformity with accounting principles generally accepted in
the United States of America, and present the Plan's net assets
available for participants and changes in those net assets.
EXPENSES
Substantially all costs and expenses incurred in administering the Plan
were paid in cash by the Company during 2001. In 2002, such fees were
paid using forfeited plan assets. Expenses related to issuance of loans
to participants are charged to the participant obtaining the loan.
INVESTMENTS
The Plan's investments and earnings thereon are held in a bank trust
account. The fair values of investments are based principally on
quotations from national securities exchanges. Purchases and sales of
securities are recorded on a trade-date basis.
LOANS TO PARTICIPANTS
At the discretion of the Company, loans may be made to participants in
an amount that is the lesser of (1) 50% of the participant's vested
account balance at the time the loan is initially requested, or (2)
$50,000 minus the excess of the participant's highest outstanding loan
balance during the 12-month period ending on the date the loan is
initially requested over the outstanding loan balance. Generally, the
6 (Continued)
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
loan period may not exceed five years and the interest rate is prime
plus 1%. Loans may not be taken from a participant's Employer matching
contribution account.
USE OF ESTIMATES
The Plan utilizes a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in the United
States of America. Actual results could differ from those estimates.
(2) CONTRIBUTIONS
Participating associates may elect to make pretax contributions from 1%
to 80% of their compensation to the Plan, subject to annual limits
imposed by the Internal Revenue Service. Participants may direct
contributions into 10 different investment funds. These funds include
investments in the Company common stock, the American Century Ultra
Fund, the American Century Growth Fund, the American Century Select
Fund, the American Century Balanced Fund, the American Century Value
Fund, the American Century International Growth Fund, the American
Century Small Capital Value Fund, the American Century Stable Asset
Fund, and the Charles B. Schwab Personal Choice Account. The Company
generally will make matching contributions in an amount equal to 33% of
the participant's annual contribution, not to exceed 6% of the
participant's annual compensation. All Company contributions are
directed to the Company common stock fund.
During 2002, the Company made an additional matching voluntary
contribution of $4,006,533, which represented 2.00% of eligible
associate's compensation based on the Company's 2001 financial
performance. During 2001, the Company made a similar contribution in
the amount of $1,077,560 based on the Company's 2000 financial
performance. In 2002, the Company funded $855,781 of contributions
related to 2003 matching contributions.
(3) DISTRIBUTIONS AND TRANSFERS
Upon normal retirement, retirement for permanent disability, or death,
a participant is entitled to the full value of the assets attributable
to his or her contributions and Company contributions made on his or
her behalf. Upon termination for any other reason, a participant is
entitled to 100% of his or her contributions and the vested portion of
Company contributions. Company contributions vest 20% after one year of
service and 20% for each additional year of service until a participant
is 100% vested upon completing five years of service. Forfeitures of
nonvested contributions are used first to reduce the Plan's ordinary
and necessary administrative expenses and, to the extent any
forfeitures remain, to offset any Employer matching contributions.
To the extent a participant's account balance is invested in Company
common stock, participants receive distributions of such stock in
shares of the Company's common stock, except that cash is distributed
for fractional shares. Participants may also elect to receive cash for
distributions with a value less than $1,000. During the years ended
December 31, 2002 and 2001, 52,727 and 48,843 shares, respectively, of
the Company's common stock were distributed to withdrawing
participants. Participants receive distributions from all other funds
in cash.
7 (Continued)
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
Prior to August 1, 2002, associate contributions invested in Company
stock were allowed to be transferred out once per quarter. Each
transfer was limited to 25% of the associate's current Cerner stock
balance from associate contributions at the time of the transfer.
Transfer elections were restricted for six months until the next option
to transfer. Effective August 1, 2002, associates are able to make up
to 12 transfers out of Company stock per calendar year with no limit to
the amount of stock an associate can move in any one transfer. These
transfer provisions relate to Company stock held in a participant's
account relating to associate contributions. Transfers out of Company
stock held in a participant's account relating to Company contributions
are prohibited, except in the event of termination of employment with
the Company.
(4) TAX STATUS
The Plan received a favorable determination letter, dated February 25,
2003, from the Internal Revenue Service confirming the tax-exempt
status of the Plan under Section 401(a) of the Internal Revenue Code.
The Company is not aware of any activity or transactions that may
adversely affect the qualified status of the Plan.
(5) PLAN PARTICIPANTS
The following summarizes the number of participants by fund as of
December 31:
2002 2001
-------------- --------------
Company common stock 4,179 3,803
American Century Mutual Funds:
Ultra 2,588 2,341
Growth 2,367 2,122
Select 1,668 1,491
Balanced 1,293 959
Value 1,444 859
International Growth 1,364 1,032
Small Cap Value 737 --
Stable Asset 1,228 819
Charles B. Schwab Personal Choice Account 86 65
Because associates may invest in more than one fund, the number of
associate participants above exceeds the total number of associate
participants.
8 (Continued)
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(6) INVESTMENTS
The following presents investments that represent 5% or more of the
Plan's net assets:
2002 2001
-------------- --------------
Company common stock $ 60,125,900 85,039,764
American Century:
Ultra Fund 15,314,285 16,271,494
Growth Fund 11,308,380 12,082,300
Select Fund 6,590,655 6,924,310
Stable Asset Fund 6,283,770 3,579,025
Other 17,127,243 11,497,881
-------------- --------------
$ 116,750,233 135,394,774
============== ==============
During 2002 and 2001, the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value as follows:
2002 2001
-------------- --------------
Mutual funds $ (11,582,278) (6,660,373)
Company common stock (34,374,695) 6,524,802
-------------- --------------
$ (45,956,973) (135,571)
============== ==============
(7) NONPARTICIPANT DIRECTED INVESTMENT
As described in note 2, Company contributions are invested exclusively
in Company common stock. Information about the net assets and
significant components of the changes in net assets relating to the
nonparticipant directed investment at December 31, 2002 and 2001 is as
follows:
2002 2001
-------------- --------------
Net assets available for participants:
Company common stock $ 60,125,900 85,039,764
Changes in net assets available for participants:
Contributions 13,127,457 8,162,494
Dividends 74,182 6,120
Transfers out (1,181,270) (244,478)
Net appreciation (depreciation) (34,374,695) 6,524,802
Distributions (2,559,538) (2,865,036)
-------------- --------------
$ (24,913,864) 11,583,902
============== ==============
9 (Continued)
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(8) TRANSACTIONS WITH PARTIES-IN-INTEREST
Transactions with parties-in-interest during the years ended December
31, 2002 and 2001 were as follows:
DESCRIPTION OF TRANSACTION COST
--------------------------------------------------- ------------------
2002:
Purchased 435,329 shares of
Company common stock $ 18,932,349
2001:
Purchased 280,854 shares of
Company common stock $ 13,162,128
10
SCHEDULE 1
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Schedule of Assets Held for Investment Purposes
December 31, 2002
FAIR
ASSET DESCRIPTION COST VALUE
---------------------- --------------------------------------------------------- ------------ -------------
Cerner Corporation* 1,923,405 shares of common stock $ 45,186,701 60,125,900
American Century* Ultra Investors Mutual Fund, 723,054 shares (1) 15,314,285
American Century* Growth Investors Mutual Fund, 784,215 shares (1) 11,308,380
American Century* Select Investors Mutual Fund, 231,251 shares (1) 6,590,655
American Century* Balanced Investors Mutual Fund, 366,062 shares (1) 4,773,444
American Century* Value Mutual Fund, 736,800 shares (1) 4,383,959
American Century* International Growth Mutual Fund, 458,904 shares (1) 2,927,808
American Century* Small Capital Value Mutual Fund, 239,566 (1) 1,626,654
American Century* Stable Asset Fund, 6,283,770 units of participation (1) 6,283,770
Charles B. Schwab Schwab Personal Choice Account, 1,389,638 shares (1) 1,389,638
Loans to participants* Loans to participants (bearing interest from 5.25% to 10.5%) (1) 2,025,740
-------------
$ 116,750,233
=============
(1) In accordance with instructions to the Form 5500, the Plan is no longer
required to disclose the cost component of participant directed
investments.
* Party-in-interest.
See accompanying independent auditors' report.
11
SCHEDULE 2
CERNER CORPORATION FOUNDATIONS
RETIREMENT PLAN
Schedule of Reportable Transactions
Year ended December 31, 2002
IDENTITY OF PARTY DESCRIPTION PURCHASE SELLING ORIGINAL NET GAIN
INVOLVED OF ASSET PRICE PRICE COST (LOSS)
------------------------ ----------------- ---------------- -------------- -------------- --------------
Cerner Corporation Common stock $ 18,932,349 -- 18,932,349 --
Notes:
A reportable transaction is defined by the Department of Labor as:
o A single transaction in excess of 5% of the fair value of plan
assets.
o A series of transactions with or in conjunction with the same
person, involving property other than securities, which
amounts in the aggregate to more than 5% of the fair value of
the plan assets.
o A series of transactions with respect to securities of the
same issue, which amounts in the aggregate to more than 5% of
the fair value of the total plan assets.
o Any transaction with or in conjunction with a person if a
prior or subsequent single transaction has occurred with
respect to securities with or in conjunction with the same
person in an amount in excess of 5% of the fair value of plan
assets.
A reportable transaction is identified by comparing the fair value of
the transaction at the transaction date with the fair value of the plan
assets at the beginning of the year ended December 31, 2002.
See accompanying independent auditors' report.
12