December 6, 2006

VIA EDGAR AND FACSIMILE

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

Re:	Cerner Corporation
	Form 10-K for Fiscal Year Ended December 31, 2005
	Filed March 16, 2006
	Form 8-K Filed on February 2, 2006
	Form 8-K Filed on April 30, 2006
	File No. 000-15386

Dear Ms. Collins:

     We are in receipt of the letter dated November 9, 2006 (the “Third Staff Letter”), whereby the Staff of the Securities and Exchange Commission (the “Commission”) responded to our letter dated September 11, 2006 and submitted additional comments with respect to certain disclosures contained in the Annual Report on Form 10-K for the year ended December 31, 2005, the Current Report on Form 8-K filed on February 2, 2006 and the Current Report on Form 8-K filed on April 30, 2006 of Cerner Corporation (the “Company”). On behalf of the Company, set forth below are the Company’s responses to the additional comments identified in your Third Staff Letter. For your convenience, we have repeated each of the comments set forth in the Third Staff Letter and followed each comment with the Company’s response.

1. We note your response to our prior comment no. 1 in which you acknowledge that prior to fiscal 2006 your practice was to delay the start of amortization of capitalized software development costs to the beginning of the next fiscal year following release of the product or enhancement. We further note your statement that the impact on fiscal 2005 was not material. Provide us your analysis under SAB 99 for each of the years covered by this annual report supporting your concluding that the impact of misapplying the guidance in paragraph 8 was not material. Your analysis should also include your consideration of the impact of this error in combination with other identified errors and unrecorded adjustments as discussed in our prior comment no. 5. In this regard, provide us a comprehensive analysis of the impact of all identified misstatements and unrecorded adjustments on each line item impacted in your annual and quarterly financial statement for fiscal 2003, 2004 and 2005.

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 2

Company Response:

In response to your comment, we have provided a comprehensive analysis of the impact of all identified misstatements and unrecorded adjustments for all annual and quarterly periods for fiscal 2003, 2004 and 2005 as presented in Appendix B. We also have provided an updated SAB 99 assessment presented in Appendix A. We would like to call your attention to a few changes to our previous response and analysis that have occurred.

First, in our September 11, 2006 Response to Comment 1.h. we indicated that we estimated that if the Company had been strictly following the guidance in paragraph 8 of SFAS 86 for amortizing software costs previously capitalized, net income before tax would have been $1.7 million higher in 2005. We have subsequently uncovered an error in the mechanics of our previous calculation that has now been corrected. As a result, the impact of utilizing the method in SFAS 86 versus our policy would have decreased pretax net income by $1.9 million.

Secondly, the schedules that were provided in our previous responses related to our SAB 99 assessment with respect to the Zynx tax benefit misstatement were prepared at the time the misstatement was detected in the third quarter of 2005 and did not reflect the uncorrected misstatements that arose in conjunction with our 2005 audit. Furthermore, although we historically had recognized that our capitalized software amortization policy was not strictly in accordance with SFAS 86 and we monitored the materiality of this policy from a high level, the difference historically was not quantified and reflected as an uncorrected misstatement in the summary of uncorrected misstatements prior to 2005.

Our updated materiality assessment for 2003 through 2005 as presented in Appendix B is complete and includes the impact of our software amortization policy and the audit differences that arose in conjunction with our 2005 audit. One audit difference that arose in the 2005 audit related to the incorrect recording of deferred taxes in conjunction with prior business combinations. This difference also had an impact in 2004 and 2003. We have updated the 2004 analysis previously submitted and reflected the impacts for all years in our materiality analysis. We do not believe that these changes as outlined above have a significant impact on our materiality analysis.

Based on our updated SAB 99 analysis presented in Appendix A, we continue to believe that the impact of all identified errors and unrecorded adjustments, both individually and in the aggregate, including the impact of Cerner’s previous policy concerning amortization of capitalized software, are immaterial to our consolidated financial statements for the 2003, 2004 and 2005 fiscal years. As noted in the analysis, the biggest impact from our unrecorded adjustments is the result of the tax entry for Zynx that was corrected in 2005. We have previously provided the staff our SAB 99 memo as it specifically relates to this error and have further clarification in response to Comment 8 herein.

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 3

2. We note your response to our prior comment no. 1. Tell us how you considered the guidance in questions 23 and 24 of the FASB Staff Implementation Guide to SFAS 86 regarding product enhancements.

Company Response:

Cerner expenses development costs incurred for product enhancements prior to reaching technological feasibility and capitalizes development costs from that point until the enhancements are available for general release. Cerner’s enhancements entail new features and/or functionality for existing software products, which are fully incorporated into the new version of the software as released and licensed to new clients.

We continually make enhancements to our products and we believe that the enhancements continually extend the useful life of our products.

Question 23 to the FASB Staff Implementation Guide to SFAS 86 states that “If the original product will no longer be marketed, any unamortized cost of the original product should be included with the cost of the enhancement for purposes of applying the net realizable value test and amortization provisions.” According to this guidance, the unamortized costs of the previous versions are added to the costs of the enhancement for subsequent calculations of amortization, and the estimated life of the new total gets reset. Typically, the estimated life is the same as used prior to the enhancement. Mathematically, this method can result in the cost of prior versions never being completely amortized as long as the product is continually enhanced. In order to avoid what we believe would be an inappropriate extension of the amortization period for the original product development costs beyond the useful life, we utilize a vintage account approach to amortizing our products and enhancements.

Under the vintage account approach, we amortize the capitalized costs related to our original product over the original product’s useful life (5 years), and amortize the capitalized costs associated with the enhancements over 5 years from the time the enhancement is completed and available for general release. We believe the vintage approach better reflects the amortization of costs over the useful life of both the original product and enhancements in our particular fact pattern involving the continuous enhancement of our products. We also believe the vintage account approach has been viewed as an acceptable amortization policy in practice for companies that have similar facts to ours, as discussed in the book entitled “Software Industry Accounting” by Joseph Morris and others, as well as the Ernst & Young publication entitled “Accounting for Software Costs: Practice Under FASB Statement No. 86.”

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 4

With regard to applying the net realizable value test, Cerner combines the unamortized cost of the original product with the cost of the enhancement for purposes of applying the test.

3. We note your response to our prior comment number 2 a. where you indicate that you believe that the hardware element qualifies for separate accounting under EITF 00-21. Tell us how you considered paragraph 14 of EITF 00-21 in reaching this conclusion. In this regard, explain how you determined that the sale of the hardware element is not contingent upon the delivery of other elements in the arrangement. Also tell us the authoritative literature the Company is following to recognize hardware revenue.

Company Response:

As noted in our prior responses, we do not believe the hardware is a software-related element, and we believe we meet the criteria for separation of the hardware deliverable from the remainder of the deliverables pursuant to EITF 00-21. The Company does not believe that paragraph 14 of EITF 00-21 is applicable based on the fact that the fee allocated to the hardware elements is not contingent upon delivery of any other elements in the arrangement or upon meeting other specified performance conditions. The Company follows the guidance of SEC Staff Accounting Bulletin 104 to recognize hardware revenue.

4. We note your response to our prior comment number 2 d. and that the Company allocates revenue to the service element using the hourly service rates outer limit of the range nearest to the stated price. Tell us whether you use the outer limit of the range to establish VSOE when the stated contractual rate exceeds the upper limit and if so, your basis for not using the stated contractual rate.

Company Response:

The Company uses the stated contractual rate for services revenue allocation when the stated contractual rate exceeds the VSOE upper limit, as we do not believe the excess revenue (the revenue represented by the difference between the contractual rate and the upper limit of the range used to establish VSOE) is eligible for recognition until the service is provided.

5. We note your response to our prior comment number 2 e. and that the Company establishes VSOE for hardware maintenance based on renewal rates. Tell us the authoritative literature the Company is applying in accounting for hardware maintenance revenues. In this regard the reference

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 5

to VSOE in your response implies that the Company is applying the guidance in SOP 97-2.

Company Response:

The Company applies the guidance of FASB Technical Bulletin 90-1 (Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts) for hardware maintenance revenues. FTB 90-1 states that revenues from separately priced extended product maintenance contracts should be recognized on a straight-line basis over the contract period except when the services provided are performed in a manner other than straight-line basis. We have referred to the renewal rates used to defer revenue for these arrangements as VSOE, however, this amount is the same as the ‘separately priced’ amount of the maintenance contract pursuant to FTB 90-1.

6. We note your response to our prior comment number 3 a. and that the Company believes the renewal rates in hosting arrangements are substantive and appropriately establish VSOE for the hosting service. Considering the wide disparity in renewal rates presented in your response (38% and 139%) it is not evident how the Company has determined that these rates are substantively similar for establishing VSOE of fair value for these services. In this regard please expand on your response and explain how the Company [h]as determined that renewal rates are substantively similar (narrow range) in determining VSOE has been established.

Company Response:

The Company would like to clarify our prior response regarding how we conclude that the renewal provisions in our hosting arrangements are substantive and, thus, appropriately establish VSOE for the hosting services. If you note in our September 11, 2006 Response to Comment 3, we have a column in the chart entitled, “Annual Renewal rate Variable Element per CPU.” In that column of the chart for the two example hosting arrangements presented, you can see that the variable amount per CPU for each hosting arrangement is comparable. We further note in Footnote A to the chart how we price our hosting arrangements based on a fixed component designed to cover the cost of the hardware, and a variable component based on the projected CPU usage.

We do not believe that a comparison of the hosting fee as a percentage of the license fee is a relevant metric for purposes of assessing whether hosting arrangements are substantively similar. The pricing for our licensed software varies by client, type of software solution and other unique metrics that do not have a direct correlation to CPU requirements that determine the pricing of hosting. Rather, we believe that the relevant metric to determine that our hosting arrangements are substantively similar is a

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 6

comparison of the hosting renewal fees from arrangement to arrangement based on the variable price per projected CPU inherent in those arrangements. In addition, we further evaluate the price per projected CPU compared to the price per projected CPU earned in stand alone hosting arrangements. Stand alone hosting arrangements are those in which a client previously licensed our software and hosted it themselves, and subsequently negotiated a hosting arrangement with us on a stand alone basis. The table below illustrates the correlation of a random sample of bundled hosting arrangements and stand alone hosting arrangements, which demonstrates that our bundled hosting renewal rates are within a sufficiently narrow range when compared to other bundled hosting and stand alone hosting arrangements on this basis:

7. We note form information presented in Appendix E relating to revenue recognition for licensed software and installation services. In the column headed “Revenue Recognition Timing” you indicate that SOP 81-1 is applied using output milestones. You further indicate that 30% of the amount is recognized upon delivery of the software due to the labor effort expended upon completion of the milestone. It is not apparent from the information presented in Appendix E whether the Company is utilizing output measures or input measures (labor effort) in applying SOP 81-1. If the Company is utilizing output measures explain why the labor effort to deliver software is utilized in determining the amount of revenue to be recognized.

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 7

Company Response:

The Company utilizes output measures based on expected work effort through the achievement of milestones in the installation of the licensed software. The percentage of revenue assigned to each output measure is determined based on the Company’s historical analysis of labor effort expended through the achievement of each milestone until the completion of the licensed software installation.

8. We note your response to our prior comment number 5 relating to your SAB 99 analysis. Provide/explain the following items as they relate to your response/analysis:

• Why the Company believes the “nature” of a misstatement is more significant than the quantitative amount of the misstatement in determining whether an item is material.

Company Response:

Cerner does not believe that the “nature” of a misstatement is more significant than the quantitative amount of the misstatement in determining whether an item is material. If that impression was given in our last response, then we would like to clarify our previous response. As noted in our previous response, we are not aware of a bright line test that would indicate that the Zynx error that occurred in 2004 or the impacts of correcting it in 2005 are quantitatively material. We were trying to explain that we considered the nature of the error in evaluating whether the error was quantitatively material and, in our judgment, could not conclude that the error was quantitatively material. We believe it is appropriate to consider all relevant quantitative and qualitative aspects of a misstatement when assessing materiality, not just the shear quantitative amount of the misstatement.

Our guiding principle in this assessment was based on the Concepts Statement No. 2 definition of materiality, “the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement.” As SAB 99 states “But quantifying, in percentage terms, the magnitude of a misstatement is only the beginning of an analysis of materiality; it cannot be used as a substitute for a full analysis of all relevant considerations.” Further SAB 99 cites Concept Statement No. 2, and states “Magnitude by itself, without regard to the nature of the item and the circumstances in which the judgment has to be made, will not generally be a sufficient basis for a materiality judgment.”

We have updated our overall SAB 99 analysis as part of the response to Comment 1 herein, which is presented in Appendix A. Please see our response to Comment 1 for

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 8

clarification of the changes made and reflected in Appendix B from that previously submitted.

• Are there any qualitative reasons, in addition to the ones discussed in your response (no impact on earnings trends, significant growth, etc.) that the Company considered in assessing whether the misstatements were material?

Company Response:

As noted in Cerner’s original materiality memorandum dated October 31, 2005 (attached as Appendix II in the July 12, 2006 response), we considered the following qualitative reasons in assessing whether the misstatements were material:

1.	Impact on earnings trends (none)
2.	Classification of item (tax related)
3.	Frequency (misstatement related to sale of a subsidiary which was the only time in the past 20 years that Cerner has sold a company)
4.	Reaction of Wall Street Analysts (excluded the adjustment from their analyses)
5.	Impact on Cerner’s stock price due to reaction of investors (no change in stock price upon correction in 2005 with full disclosure of impact of misstatement on 2004)
6.	Treatment of the item as it related to management bonuses (misstatement did not impact bonuses)
7.	Compliance with debt covenants (had no impact)
8.	Compliance with regulatory requirements (no impact)
9.	Was the item capable of precise measurement (yes)
10.	Segment impact (non core business sold)

We did not consider any other qualitative reasons in making our assessment.

• Explain why the amount disclosed in Note 4 of your October 1, 2005 Form 10-Q for the impact of correcting the misstatement is $.12 per diluted share and the amount presented in Appendix H to your response is $.06 per diluted share (as reported — $.33 vs. as adjusted — $27).

Company Response:

Appendix H of Cerner’s September 11, 2006 Response adjusted EPS figures for the prior periods to reflect the 2 for 1 stock split of January 2006 while the Form 10Q for the third

Ms. Kathleen Collins
Accounting Branch Chief
Securities and Exchange Commission
December 6, 2006
Page 9

quarter of 2005 was prior to this event. There was no change in the total amount of the misstatement.

• Provide an analysis of the impact of the misstatement on the specific financial statement line items: provision for income taxes, accrued income taxes, deferred income taxes, prepaid income taxes, etc.

Company Response:

The misstatement related to the Zynx tax item impacted only the provision for income taxes and net income lines on the income statement and accrued income taxes and retained earnings on the balance sheet.

Cerner did not present accrued income taxes as a separate line item on its balance sheet and instead includes this amount within either “Other accrued expenses” if an amount is owed or “Prepaid expenses and other” if a refund is expected. See attached Appendix C which provides the requested analysis.

*          *          *          *          *

     If you have any questions concerning this letter or if you would like any additional information, please do not hesitate to call me at (816) 201-1989.

Sincerely,

/s/ Marc G. Naughton

Marc G. Naughton, Senior Vice President and Chief Financial Officer

Attachment A

MEMORANDUM

FOR:	Marc Naughton	FROM:	Scott Siemers
DATE:	November 21, 2006

SUBJECT: MATERIALITY ASSESSMENT FOR IDENTIFIED ERRORS AND UNRECORDED ADJUSTMENTS FOR FISCAL YEARS 2003-2005

Background:

Under SAB 99, Cerner must quantify the impact of all identified errors and unrecorded adjustments including its previous policy to begin amortization of capitalized software beginning on the first day of the year following capitalization. Cerner has prepared this analysis for our annual periods from 2003 through 2005.

As it relates to amortization of capitalized software costs as a result of the non-GAAP policy, Cerner’s net income was over/(under) stated by the amounts shown below.

Income Stmt

2003		($850K	)
2004	$	931K
2005	$	1,216K

In addition, Cerner had other identified errors and unrecorded adjustments impacting the income statements in 2003, 2004 and 2005. Combining the other identified errors and unrecorded adjustments with the errors in our non-GAAP policy for the amortization of capitalized software development costs for 2003, 2004 and 2005 results in the following increase/(decrease) to net income respectively:

Income Stmt

2003	$	1,526K
2004	$	7,052K
2005	$	(5,988K	)

Issue: In 2003, 2004 and 2005, are the identified errors and unrecorded adjustments either individually or in the aggregate material to Cerner’s consolidated financial statements taken as a whole?

Analysis:

The Company considered the quantitative and qualitative factors noted in Staff Accounting Bulletin (SAB) 99, Materiality in assessing the issues.

Quantitatively, Cerner considered the quantitative impacts of error corrections in relation to full year, which review is supported by paragraph 29 of Accounting Principles Board Opinion No. 28, Interim Financial Reporting, which states the following, “In determining materiality for the purpose of reporting the cumulative effect of an accounting change or correction of an error, amounts should be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings. Changes that are material with respect to an interim period but not material with respect to the

Attachment A

estimated income for the full fiscal year or to the trend of earnings should be separately disclosed in the interim period.”

Individual Misstatement Consideration:

Amortization of Capitalized Software Costs

In 2003, 2004 and 2005 Cerner reported net income of $42,791K, $64,648K and $86,251K respectively. Therefore increasing/(decreasing) net income by the impact of the prior software amortization policy ($850K, ($931K) and ($1,216K) respectively for 2003, 2004, and 2005) on a rollover basis results in an increase/(decrease) to net income of 2.0%, (1.4%) and (1.4%) for each of the years. Cerner has concluded that the difference related to the software capitalization is individually immaterial in each of the years from a quantitative aspect to users of its financial statements. Further qualitative factors considered are noted below.

Vacation Pay Accrual

The vacation pay error was an accumulation of insignificant amounts over a number of years that resulted in an out-of-period correcting entry for all years of $3,346K ($2,066K after-tax) in 2004 or 3.2% of net income for that year. The impact of this out-of-period correcting entry was fully disclosed in our third quarter 2004 Form 10-Q and 2004 Annual Report filed on Form 10-K. We did not observe any significant market reaction as a result of this correction. Further qualitative factors considered are noted below.

Zynx Tax Benefit

The correcting tax entry related to Zynx recorded in 2005 has been analyzed in a separate SAB 99 memo and provided in a previous response to comments by the Staff. The impact of this misstatement and the out-of-period correcting entry was fully disclosed in our third quarter 2005 Form 10-Q and 2005 Annual Report filed on Form 10-K. We did not observe any significant market reaction as a result of this correction. Further qualitative factors considered are noted below.

Aggregate Consideration:

When considering the cumulative impact of all unrecorded adjustments, the resulting impact is to increase/(decrease) net income by 3.6% for 2003, 10.9% for 2004 and (6.9%) for 2005.

The unrecorded adjustment for 2003 were considered quantitatively immaterial. However, we also considered other qualitative factors as noted below.

For 2004, the items having the greatest impact on the aggregate difference of $7,062K is composed of the Zynx tax impact of $4,812K (see separate materiality memo on this item) and the out-of-period vacation accrual impact of $2,066K. The correction of the vacation accrual misstatement was disclosed and recorded in 2004 and had a 3.2% impact individually on net income for 2004. Upon disclosure of the correction of this misstatement in 2004, there was no apparent market reaction to this adjustment. The correction of the Zynx tax misstatement was disclosed and recorded in 2005. The sale of Zynx and the resulting gain on the sale for which the tax benefit error resulted occurred in 2004. At the time the misstatement was discovered in 2005, we had the benefit of hindsight to see how the analysts and investors reacted to the gain itself when it was recorded. This one time gain was basically ignored by the analyst community and investors and there was no apparent market reaction to the transaction itself. There also was no apparent market reaction to the discloser of the correction in 2005. However, we also considered other qualitative factors as noted below.

Attachment A

For 2005, the item having the greatest impact on 2005 was the correction of the Zynx tax benefit misstatement discussed with respect to 2004 above. However, we also considered other qualitative factors as noted below.

Quantitatively the balance sheet impact of these changes is insignificant. At December 31, 2005, Cerner had total assets of $1,304M, current assets of $652M, and equity of $761M.

Cerner also considered the qualitative aspects of the misstatements noted in SAB 99.

The misstatements arise from items capable of precise measurement as the software amortization misstatement has been calculated for each year and the other items are discrete in nature. The misstatements do not change a loss into income or vise versa. They do not concern a segment or other portion of Cerner’s business that has been identified as playing a significant role in Cerner’s operations or profitability, but rather relate to the business as a whole. They also do not affect any compliance with regulatory requirements. These errors do not involve the concealment of an unlawful transaction.

The misstatements do not mask or otherwise hide any earnings trend as Cerner’s earnings have grown over the past three years. It is Cerner’s contention that additional disclosure of the misstatements in excess of what has already been discussed in our financial filings will not impact the stock price and that they will be viewed by all users of Cerner’s financial information as immaterial. The largest misstatement (Zynx tax benefit) does not impact the core business. As the software amortization is a non cash item, it also does not change Cerner’s working capital or liquidity position.

A portion of Cerner’s bonuses to executives is computed on EPS. Cerner’s performance plan document states:

“The Earnings Per Share Target shall be expressed as a specific target earnings per share for such year for the Company’s common stock on a fully diluted basis, before the after-tax effect of any extraordinary items, the cumulative effect of accounting changes, or other nonrecurring items of income or expense including restructuring charges.”

Cerner did not adjust its earnings to reflect the software amortization adjustment in calculating management’s bonuses.

Cerner has previously discussed all unrecorded adjustments with its Audit Committee. The Committee has reviewed the background information and supporting documentation and discussed these items with Cerner’s external auditors. The Audit Committee was comfortable that these items were immaterial from both a quantitative and qualitative standpoint.

Conclusion:

After giving consideration to the quantitative and qualitative factors noted in SAB 99, Cerner believes that the 2003, 2004 and 2005 identified errors and unrecorded adjustments, both individually and in the aggregate, are immaterial to its consolidated financial statements taken as a whole.

Attachment B

				Q103									Q203									Q303									Q403									YTD 2003
	Q103 As			Unrecorded			Q103 If			Q203 As			Unrecorded			Q203 If			Q303 As			Unrecorded			Q303 If			Q403 As			Unrecorded			Q403 If			YTD2003 As			Unrecorded			YTD 2003
In thousands, except per share data	Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			If Adjusted
Revenues:
System sales		78,594			—			78,594			82,742			—			82,742			80,193			—			80,193			90,820			—			90,820			332,349			—			332,349
Support, maintenance and services		112,932			—			112,932			116,240			—			116,240			118,774			—			118,774			128,849			—			128,849			476,795			—			476,795
Reimbursed travel		6,665			—			6,665			8,713			—			8,713			7,325			—			7,325			7,740			—			7,740			30,443			—			30,443
Total revenues		198,191			—			198,191			207,695			—			207,695			206,292			—			206,292			227,409			—			227,409			839,587			—			839,587
Costs and expenses:
Cost of revenues		48,252			—			48,252			53,096			—			53,096			45,435			—			45,435			47,507			—			47,507			194,290			—			194,290
Cost of system sales
Cost of support, maintenance and services
Cost of reimbursed travel
Sales and client service		88,091			—			88,091			86,646			—			86,646			84,794			—			84,794			93,197			—			93,197			352,728			—			352,728
Software development		37,458			(780	)		36,678			38,457			(355	)		38,102			39,255			(648	)		38,607			41,066			406			41,472			156,236			(1,377	)		154,859
General and administrative		13,142			—			13,142			13,149			—			13,149			15,083			—			15,083			16,862			—			16,862			58,236			—			58,236
Write off of in-process research and development		—			—			—						—			—						—			—						—			—			—			—			—
Total costs and expenses		186,943			(780	)		186,163			191,348			(355	)		190,993			184,567			(648	)		183,919			198,632			406			199,038			761,490			(1,377	)		760,113
Operating earnings		11,248			780			12,028			16,347			355			16,702			21,725			648			22,373			28,777			(406	)		28,371			78,097			1,377			79,474
Other income (expense):
Interest expense, net		(1,846	)		—			(1,846	)		(1,603	)		—			(1,603	)		(1,703	)		—			(1,703	)		(1,865	)		—			(1,865	)		(7,017	)		—			(7,017	)
Other income		16			—			16			127			—			127			24			—			24			(25	)		—			(25	)		142			—			142
Total other income (expense), net		(1,830	)		—			(1,830	)		(1,476	)		—			(1,476	)		(1,679	)		—			(1,679	)		(1,890	)		—			(1,890	)		(6,875	)		—			(6,875	)
Earnings before income taxes		9,418			780			10,198			14,871			355			15,226			20,046			648			20,694			26,887			(406	)		26,481			71,222			1,377			72,599
Income taxes		(3,825	)		(129	)		(3,954	)		(5,928	)		33			(5,895	)		(7,999	)		(79	)		(8,078	)		(10,679	)		324			(10,355	)		(28,431	)		149			(28,282	)
Net earnings		5,593			651			6,244			8,943			388			9,331			12,047			569			12,616			16,208			(82	)		16,126			42,791			1,526			44,317
Basic earnings per share		0.08						0.09			0.13						0.13			0.17						0.18			0.23						0.23			0.61						0.63
Basic weighted average shares outstanding		71,118						71,118			70,790						70,790			70,718						70,718			70,989						70,989			70,710						70,710
Diluted earnings per share		0.08						0.09			0.13						0.13			0.17						0.17			0.22						0.22			0.59						0.61
Diluted weighted average shares outstanding		73,420						73,420			71,462						71,462			72,730						72,730			73,871						73,871			72,712						72,712

Attachment B

				Q104									Q204									Q304																		YTD 2004
	Q104 As			Unrecorded			Q104 If			Q204 As			Unrecorded			Q204 If			Q304 As			Unrecorded			Q304 If			Q404 As			Q404			Q404 If			YTD2004 As			Unrecorded			YTD 2004
In thousands, except per share data	Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Unrecorded Adjustments			Adjusted			Reported			Adjustments			If Adjusted
Revenues:
System sales		84,512			—			84,512			84,853			—			84,853			82,882			—			82,882			99,614			(551	)		99,063			351,861			(551	)		351,310
Support, maintenance and services		127,069			—			127,069			133,949			—			133,949			140,123			—			140,123			141,273			—			141,273			542,414			—			542,414
Reimbursed travel		7,146			—			7,146			9,588			—			9,588			8,062			—			8,062			7,285			—			7,285			32,081			—			32,081
Total revenues		218,727			—			218,727			228,390			—			228,390			231,067			—			231,067			248,172			(551	)		247,621			926,356			(551	)		925,805
Costs and expenses:
Cost of revenues		46,673			(223	)		46,450			50,564			(224	)		50,340			45,013			(224	)		44,789			54,098			(224	)		53,874			196,348			(895	)		195,453
Cost of system sales
Cost of support, maintenance and services
Cost of reimbursed travel
Sales and client service		92,842			—			92,842			94,232			—			94,232			98,919			—			98,919			97,635			—			97,635			383,628			—			383,628
Software development		42,554			(814	)		41,740			42,769			135			42,904			42,837			516			43,353			43,429			1,670			45,099			171,589			1,507			173,096
General and administrative		14,145			—			14,145			14,919			—			14,919			17,942			(3,346	)		14,596			16,321			—			16,321			63,327			(3,346	)		59,981
Write off of in-process research and development		—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
Total costs and expenses		196,214			(1,037	)		195,177			202,484			(89	)		202,395			204,711			(3,054	)		201,657			211,483			1,446			212,929			814,892			(2,734	)		812,158
Operating earnings		22,513			1,037			23,550			25,906			89			25,995			26,356			3,054			29,410			36,689			(1,997	)		34,692			111,464			2,183			113,647
Other income (expense):
Interest expense, net		(2,115	)		—			(2,115	)		(1,792	)		—			(1,792	)		(1,585	)		—			(1,585	)		(660	)		—			(660	)		(6,152	)		—			(6,152	)
Other income		3,014			—			3,014			(174	)		—			(174	)		52			—			52			(284	)		—			(284	)		2,608			—			2,608
Total other income (expense), net		899			—			899			(1,966	)		—			(1,966	)		(1,533	)		—			(1,533	)		(944	)		—			(944	)		(3,544	)		—			(3,544	)
Earnings before income taxes		23,412			1,037			24,449			23,940			89			24,029			24,823			3,054			27,877			35,745			(1,997	)		33,748			107,920			2,183			110,103
Income taxes		(9,283	)		5,835			(3,448	)		(9,626	)		189			(9,437	)		(10,044	)		(945	)		(10,989	)		(14,319	)		(210	)		(14,529	)		(43,272	)		4,869			(38,403	)
Net earnings		14,129			6,872			21,001			14,314			278			14,592			14,779			2,109			16,888			21,426			(2,207	)		19,219			64,648			7,052			71,700
Basic earnings per share		0.20						0.28			0.20						0.20			0.20						0.23			0.30						0.28			0.90						0.99
Basic weighted average shares outstanding		71,322						71,322			72,088						72,088			72,506						72,506			72,174						72,174			72,174						72,174
Diluted earnings per share		0.19						0.27			0.19						0.19			0.20						0.23			0.29						0.27			0.86						0.95
Diluted weighted average shares outstanding		74,444						74,444			75,020						75,020			75,306						75,306			75,142						75,142			75,142						75,142

Attachment B

				Q105									Q205									Q305									Q405									YTD 2005
	Q105 As			Unrecorded			Q105 If			Q205 As			Unrecorded			Q205 If			Q305 As			Unrecorded			Q305 If			Q405 As			Unrecorded			Q405 If			YTD2005 As			Unrecorded			YTD 2005 If
In thousands, except per share data	Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted			Reported			Adjustments			Adjusted
Revenues:
System sales		99,942			551			100,493			105,200			—			105,200			110,173			—			110,173			134,419			(949	)		133,470			449,734			(398	)		449,336
Support, maintenance and services		156,001			—			156,001			164,251			—			164,251			175,208			—			175,208			182,204			—			182,204			677,664			—			677,664
Reimbursed travel		6,591			—			6,591			8,364			—			8,364			9,241			—			9,241			9,191			—			9,191			33,387			—			33,387
Total revenues		262,534			551			263,085			277,815			—			277,815			294,622			—			294,622			325,814			(949	)		324,865			1,160,785			(398	)		1,160,387
Costs and expenses:
Cost of revenues		55,408			895			56,303			59,601			—			59,601			65,305			—			65,305			74,371			—			74,371
Cost of system sales																																						171,073			895			171,968
Cost of support, maintenance and services																																						50,226			—			50,226
Cost of reimbursed travel																																						33,387			—			33,387
Sales and client service		110,840			—			110,840			114,291			—			114,291			117,010			—			117,010			124,065			—			124,065			466,206			—			466,206
Software development		49,329			495			49,824			48,702			149			48,851			53,968			663			54,631			59,456			663			60,119			211,455			1,970			213,425
General and administrative		17,922			—			17,922			21,013			—			21,013			21,142			—			21,142			21,543			41			21,584			81,620			41			81,661
Write off of in-process research and development		6,382			—			6,382			—			—			—			—			—			—			—			—			—			6,382			—			6,382
Total costs and expenses		239,881			1,390			241,271			243,607			149			243,756			257,425			663			258,088			279,435			704			280,139			1,020,349			2,906			1,023,255
Operating earnings		22,653			(839	)		21,814			34,208			(149	)		34,059			37,197			(663	)		36,534			46,379			(1,653	)		44,726			140,436			(3,304	)		137,132
Other income (expense):
Interest expense, net		(1,742	)		—			(1,742	)		(1,366	)		—			(1,366	)		(1,358	)		—			(1,358	)		(1,392	)		—			(1,392	)		(5,858	)		—			(5,858	)
Other income		30			—			30			47			—			47			310			—			310			279			—			279			666			—			666
Total other income (expense), net		(1,712	)		—			(1,712	)		(1,319	)		—			(1,319	)		(1,048	)		—			(1,048	)		(1,113	)		—			(1,113	)		(5,192	)		—			(5,192	)
Earnings before income taxes		20,941			(839	)		20,102			32,889			(149	)		32,740			36,149			(663	)		35,486			45,266			(1,653	)		43,613			135,244			(3,304	)		131,940
Income taxes		(8,421	)		537			(7,884	)		(13,086	)		273			(12,813	)		(9,593	)		(4,342	)		(13,935	)		(17,893	)		848			(17,045	)		(48,993	)		(2,684	)		(51,677	)
Net earnings		12,520			(302	)		12,218			19,803			124			19,927			26,556			(5,005	)		21,551			27,373			(805	)		26,568			86,251			(5,988	)		80,263
Basic earnings per share		0.17						0.16			0.27						0.27			0.35						0.28			0.36						0.35			1.16						1.08
Basic weighted average shares outstanding		73,480						73,480			74,314						74,314			75,778						75,778			76,757						76,757			74,144						74,144
Diluted earnings per share		0.16						0.16			0.25						0.26			0.33						0.27			0.34						0.33			1.10						1.03
Diluted weighted average shares outstanding		76,588						76,588			77,972						77,972			79,794						79,794			80,811						80,810			78,090						78,090

Attachment B

     Detail of Unrecorded Adjustments

     (+ = debit, — = credit)

				’03														’04															’05
				1Q03		2Q03			3Q03			4Q03			2003			1Q04			2Q04			3Q04			4Q04			2004			1Q05			2Q05			3Q05			4Q05			2005
	(A	)	To adjust for the non-GAAP policy around software capitalization	(780	)		(355	)		(648	)		406			(1,377	)		(814	)		135			516			1,670			1,507			495			149			663			663			1,970
	(B	)	To properly remove depreciation expense recorded for a fixed asset which was disposed of in 2003	—			—			—			—			—			(142	)		(142	)		(142	)		(142	)		(568	)		—			—			—			—			—
	(C	)	To properly reduce accrued commissions to account for commissions paid in November	—			—			—			—			—			(81	)		(82	)		(82	)		(82	)		(327	)		—			—			—			—			—
	(D	)	To properly state accounts receivable as a result of our confirmation procedures (known error of $69k extrapolated across population)	—			—			—			—			—			—			—			—			551			551			—			—			—			—			—
	(E	)	To properly remove out of period vacation accrual	—			—			—			—			—			—			—			(3,346	)		—			(3,346	)		—			—			—			—			—
	(F	)	Reversal of prior year entries (b-d above)	—			—			—			—			—			—			—			—			—			—			344			—			—			—			344
	(G	)	To properly extrapolate error in deferred revenue testing	—			—			—			—			—			—			—			—			—			—			—			—			—			430			430
	(H	)	To write-off loan of product in the current year due to the Company’s estimate of recoverability	—			—			—			—			—			—			—			—			—			—			—			—			—			519			519
	(I	)	To properly record cash activity in the December bank reconciliation	—			—			—			—			—			—			—			—			—			—			—			—			—			41			41
	(J	)		—			—			—			—			—			—			—			—			—			—			—			—			—			—			—
			Total	(780	)		(355	)		(648	)		406			(1,377	)		(1,037	)		(89	)		(3,054	)		1,997			(2,183	)		839			149			663			1,653			3,304
			Tax Effect	298			136			248			(155	)		527			397			34			1,168			(764	)		835			(321	)		(57	)		(254	)		(632)			(1,264	)
			After Tax Amount	(482	)		(219	)		(400	)		251			(850	)		(640	)		(55	)		(1,886	)		1,233			(1,348	)		518			92			409			1,021			2,040
	(K	)	To properly record tax benefit on Zynx sale	—			—			—			—			—			(4,812	)		—			—			—			(4,812	)		—			—			4,812			—			4,812
	(L	)	To properly reverse tax expense which was recorded as an estimate on the sale of Zynx and then reversed in Q4 when client realized the sale would result in a tax loss	—			—			—			—			—			(1,197	)		—			—			1,197			—			—			—			—			—			—
	(N	)	To properly record the tax effect of book/ tax differences relating to intangibles acquired in stock acquisitions	(169	)		(169	)		(169	)		(169	)		(676	)		(223	)		(223	)		(223	)		(223	)		(892	)		(216	)		(216	)		(216	)		(216	)		(864	)
			Total	(651)			(388	)		(569	)		82			(1,526	)		(6,872	)		(278	)		(2,109	)		2,207			(7,052	)		302			(124	)		5,005			805			5,988
			Net Income	5,593			8,943			12,047			16,208			42,791			14,129			14,314			14,779			21,426			64,648			12,520			19,803			26,556			27,372			86,251
			Audit Difference as a % of Net Income	11.6	%		4.3	%		4.7	%		-0.5	%		3.6	%		48.6	%		1.9	%		14.3	%		-10.3	%		10.9	%		-2.4	%		0.6	%		-18.8	%		-2.9	%		-6.9	%
			As a % of Net Income (+=increase):
(A)			- SW Cap	8.6	%		2.5	%		3.3	%		-1.5	%		2.0	%		3.6	%		-0.6	%		-2.2	%		-4.8	%		-1.4	%		-2.4	%		-0.5	%		-1.5	%		-1.5	%		-1.4	%
(K)&(L)			- Zynx	0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		42.5	%		0.0	%		0.0	%		-5.6	%		7.4	%		0.0	%		0.0	%		-18.1	%		0.0	%		-5.6	%
(E)			- Vacation	0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		14.0	%		0.0	%		3.2	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
(B)+(C)+(D) +(F)+(G)+ (H)+(I)+(N)			- All other	3.0	%		1.9	%		1.4	%		1.0	%		1.6	%		2.6	%		2.5	%		2.4	%		0.1	%		1.7	%		0.0	%		1.1	%		0.8	%		-1.4	%		0.0	%

Attachment C

Impact on line items for Tax Benefit on Sale of Zynx
(amounts in ‘000 except for EPS)

			Full Year				Full Year
	Q1 2004		2004		Q3 2005		2005
As Originally Reported:
Income tax expense		9,283		43,272		9,593		48,993
Net Income		14,129		64,648		26,556		86,251
Basic EPS		0.20		0.90		0.36		1.16
Fully diluted EPS		0.19		0.86		0.34		1.10
Prepaid expenses and other		33,379		30,117		54,439		42,685
Other accrued expenses		12,629		6,634		13,912		20,078
Retained Earnings		293,492		344,011		402,890		430,262
If adjusted tax benefit would have been recorded in Q1 2004
Income tax expense		4,471		38,460		14,405		53,805
Net Income		18,941		69,460		21,744		81,439
Basic EPS		0.27		0.96		0.29		1.10
Fully diluted EPS		0.25		0.92		0.27		1.04
Prepaid expenses and other		38,191		34,929		54,439		42,685
Other accrued expenses		12,629		6,634		13,912		20,078
Retained Earnings		298,304		348,823		402,890		430,262