Table of ~~Staff in July 2003 and promoted to Executive Vice President in March 2005.~~Content

Donald Trigg serves as Executive Vice President, Strategic Growth. He originally joined the Company in 2002 as Vice President, Corporate Positioning. He has held multiple roles during his time at the Company, including Chief Marketing Officer from 2003 to 2007, General Manager for the Kansas City region from 2006-2007, Managing Director for the United Kingdom and Ireland from 2008-2010 and Senior Vice President and President, Cerner Health Ventures from 2012-2018. From 2010-2012, Mr. Trigg served as Chief Revenue Officer at CodeRyte, Inc prior to its acquisition by 3M's healthcare division. Mr. Trigg also spent more than a decade serving in the public policy space as a senior advisor for the 2000 Bush for President campaign in Austin, TX, the Director of Policy at the U.S. Department of Commerce and in a series of senior policy roles in the U.S. House and U.S. Senate.

Julia M. Wilson first joined the Company in July 1990. Since that time, she has held several positions in the Functional Group Organization. She was promoted to Vice President and Chief People Officer in August 2003, to Senior Vice President in March 2007 and to Executive Vice President in March 2013.

Item 1A. Risk Factors.

Risks Related to the Acquisition of Cerner by Oracle

The announcement and pendency of the Merger may result in disruptions to our ~~Business~~business. On December 20, 2021, we entered into the Merger Agreement with an affiliate of Oracle, pursuant to which we will be acquired by Oracle. The Merger Agreement generally requires us to operate our business in the ordinary course pending completion of the Merger and restricts us, without Oracle's consent, from taking certain specified actions until the Merger is completed. These restrictions may affect our ability to execute our business strategies and attain financial and other goals and may impact our financial condition, results of operations and cash flows. Further, in connection with the pending Merger, our current and prospective employees may experience uncertainty about their future roles with us following the Merger, which may materially adversely affect our ability to attract and retain key personnel while the Merger is pending. Employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with us following the Merger and may depart prior to the completion of the Merger. Accordingly, no assurance can be given that we will be able to attract and retain employees to the same extent that we have been able to in the past. The proposed Merger further could cause disruptions to our business or business relationships, which could have an adverse impact on our results of operations. Parties with which we have business relationships may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. The pursuit of the Merger may place a significant burden on management and internal resources. It may also divert management's time and attention from the day-to-day operation of our business and the execution of our other strategic initiatives. This could materially adversely affect our financial results. In addition, we have incurred and will continue to incur other significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, and many of these fees and costs are payable regardless of whether or not the pending Merger is consummated. Any of the foregoing could adversely affect our business, our financial condition and our results of operations and prospects.

The Merger may not be completed within the expected timeframe, or at all, and the failure to complete the Merger could materially adversely affect our business, results of operations, financial condition, and the market price of our common stock. There can be no assurance that the Merger will be completed in the expected timeframe, or at all. The Merger Agreement contains conditions that must be satisfied or waived prior to the completion of the Merger, including, among others, the approval or clearance of the Merger under the antitrust and foreign investment laws of certain specified countries. There can be no assurance that all required approvals will be obtained, that the conditions to the completion of the Merger will otherwise be satisfied (or waived, if applicable) or that the Merger Agreement will not be terminated, and, even if all required approvals are obtained and conditions are satisfied (or waived, if applicable), we can provide no assurance as to the terms, conditions and timing of such approvals or that the Merger will be completed in a timely manner or at all. Certain conditions to completion of the Merger are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, as applicable). Even if required regulatory approvals are obtained, it is possible conditions will be imposed that could result in a material delay in, or the abandonment of, the Merger or otherwise have an adverse effect on us.

If the Merger is not completed within the expected timeframe or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices reflect a market assumption that the Merger will be completed. In addition, some costs related to the Merger must be paid whether or not the Merger is completed, and we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction, as well as the diversion of management and resources towards the Merger, for which we will have received little or no benefit if completion of the Merger does not occur. We may also experience negative reactions from our investors, clients, suppliers, and associates. In addition, if the Merger Agreement is terminated under certain specified circumstances, we will be required to pay Parent a termination fee of $950 million. Additional information about the Offer and Merger and the Merger Agreement is set forth in our filings with the SEC.

Stockholder litigation could prevent or delay the closing of the Merger or otherwise negatively impact our business, operating results and financial condition. We may incur ~~substantial~~additional costs ~~related~~in connection with current or any future stockholder litigation in connection with the Merger. Such litigation may adversely affect our ability to ~~product-related liabilities.~~ ~~Many~~complete the Merger. We could incur significant costs in connection with any such litigation, including attorneys' fees and costs associated with the indemnification obligations to our directors.

Table of Content

COVID-19 Risks

The COVID-19 pandemic has affected how we and our customers are operating our respective businesses, and the duration and extent to which this will impact our future results of operations remains uncertain. Continuing efforts to control the spread of the COVID-19 pandemic or the resurgence thereof have significantly curtailed the movement of people, goods and services worldwide, including in most or all of the regions in which we sell our software, ~~solutions, health care~~healthcare devices, technology-enabled services or other services (collectively referred to as ~~"Solutions~~"Products and Services") ~~are intended~~and conduct our business operations. The COVID-19 pandemic has caused us to modify certain of our business practices, including prolonging the requirement that most of our associates work remotely; restricting associate travel; mandating vaccines for ~~use~~our associates; developing social distancing plans for our associates; and canceling or postponing in ~~collecting, storing~~person participation in certain meetings, events and ~~displaying clinical~~conferences, and ~~health care-related information used~~we may take further actions as required by government authorities, our clients or as determined to be in the ~~diagnosis~~best interests of our associates, clients and ~~treatment of patients~~business partners. These measures and our clients' focus on the pandemic have also resulted in ~~related health care settings such as registration, scheduling~~delays in marketing, selling and ~~billing. We attempt~~implementing our Products and Services. There is no certainty that these measures will be sufficient to ~~limit~~mitigate the risks posed by ~~contract~~the virus and our ~~liability; however, the limitations of liability set forth in the contracts may not~~ability to perform critical functions could be ~~enforceable or may not otherwise protect us from liability for damages. We may also be subject to claims that are not covered by contract. Although we maintain liability insurance coverage,~~harmed. Further, there can be no ~~assurance~~assurances that our mitigation measures, such ~~coverage~~as mandating vaccines for our U.S.-based associates, will ~~cover any~~not have a negative impact on our business. The magnitude and duration of the disruption and potential ongoing impact on business activity is uncertain. In particular, ~~claim~~we have experienced and may continue to experience a negative financial impact due to a number of factors, including without limitation:

•Cerner's efforts and investments in assisting its clients in their response to the pandemic;

•Reduced new business bookings as our clients focus on helping their patients during the crisis, rather than making new or expanded purchasing decisions, and longer-term declines in bookings for new Products and Services to the extent that ~~has been brought or that may be brought in~~ the ~~future, that such coverage will prove to be adequate or that such coverage~~pandemic will continue to ~~remain available~~contribute to sustained global or U.S. economic downturns;

•Delays in implementing our Products and Services, including delays in the pace of completion of existing projects, while client resources are reallocated or dedicated to fighting the COVID-19 pandemic or the resurgence thereof, and supply chain interruptions;

•Financial pressures being put on ~~acceptable terms, if~~our clients, which may in turn result in a delay in collections or non-payment from our clients; and

•Financial pressures being put on our strategic investments for which we hold an equity interest increases the risk of asset impairment.

Although we experienced some ongoing challenges in connection with the COVID-19 pandemic during 2021, at ~~all. A successful~~this time, we have not experienced a negative impact on our liquidity, access to capital or overall operations. While we generally expect continued impact from COVID-19 in 2022, we are unable to predict the ultimate impact of the COVID-19 pandemic, including the nature and timing of when full demand recovery may occur. Even after the COVID-19 pandemic has subsided, we may experience material ~~claim or series of claims brought against us, if uninsured or under-insured, could materially harm~~adverse impacts to our business ~~results~~as a result of ~~operations~~the global and U.S. economic impact and any recession that has occurred or may occur in the future. To the extent the COVID-19 pandemic or our measures taken in response thereto adversely affects our business and financial condition. Product-related claims, even if not successful, could damage our reputation, cause us to lose existing clients, limit our ability to obtain new clients, divert management's attention from operations, result in significant revenue loss, create potential liabilities for our clientsresults, it may also have the effect of heightening many of the other risks described below.

Cybersecurity and ~~us and increase insurance and other operational costs.~~Information Technology Risks

~~We may be subject to claims for system errors and warranties.~~ Our Solutions and Services are very complex and may contain design, coding or other errors, especially when first introduced. It is not uncommon for HCIT providers to discover errors in Solutions and Services after their introduction to the market. Similarly, the installation of our Solutions and Services is very complex and errors in the implementation and configuration of our systems can occur. Our Solutions and Services are intended for use in collecting, storing, and displaying clinical and health care-related information used in the diagnosis and treatment of patients and in related health care settings such as registration, scheduling and billing. Therefore, users of our Solutions and Services are less tolerant of errors than the market for other types of technologies generally. Our client agreements typically provide warranties concerning material errors and other matters. If a client's Solutions and Services fail to meet these warranties or leads to faulty clinical decisions or injury to patients, it could 1) constitute a material breach under the client agreement, allowing the client to terminate the agreement and possibly obtain a refund or damages or both, or require us to incur additional expense in order to make the Solution or Service meet these criteria; or 2) subject us to claims or litigation by our clients or clinicians or directly by the patient. Additionally, such failures could damage our reputation and could negatively affect future sales. Our client agreements generally limit our liability arising from such claims but such limits may not be enforceable in certain jurisdictions or circumstances. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular claim that has been brought or that may be brought in the future, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful material claim or series of claims brought against us, if uninsured or under-insured, could materially harm our business, results of operations and financial condition.

We may experience interruptions at our data centers or client support facilities, which could interrupt clients' access to their data, exposing us to significant costs and reputational harm. We perform data center ~~and/or~~and hosting services for certain clients, including the collection and storage of critical patient and administrative data and the provision of support ~~services through various client support facilities. Our business relies~~services. We rely on the secure electronic transmission, ~~data center~~processing and storage ~~and hosting~~ of sensitive information, including protected health information; personally identifiable information;

financial information; and other sensitive information relating to our clients and their patients, our company and our third-party suppliers. We also use public cloud providers and ~~certain billing information,~~other third parties in connection with hosting our ~~company, our workforce and our third party suppliers. Complete~~own data. A catastrophic failure of ~~all local~~our backup generators during a prolonged public utility power ~~and backup generators;~~outage; an impairment of ~~all~~ telecommunications lines; a successful concerted denial of service attack; a significant system, network or data breach; damage, injury or impairment ~~(environmental, accidental or intentional)~~ to the buildings, ~~the~~ equipment, ~~inside the buildings housing our data centers, the~~ personnel operating such facilities or the client data contained therein; or errors by the personnel ~~trained to operate~~operating such facilities could cause a disruption in operations and negatively impact ~~clients who depend on us for data center and system support services. We offer~~ our ~~clients~~clients. System redundancy, disaster recovery ~~services for additional fees to protect clients from isolated data center failures, leveraging our multiple data center facilities; however only a small percentage~~and other continuity measures may be inadequate. Any interruption, damage or breach of our ~~hosted clients choose to contract for these services. Additionally, Cerner's core~~ systems ~~are disaster tolerant~~or with those of third parties on which we rely, such as we have implemented redundancy across physically diverse data centers. If any of these systems are interrupted, damaged or breached by an unforeseen event or actions of a Cerner associate or contractor or a third party or fail for any extended period of time, itour cloud service providers, could damage our reputation, cause us to lose existing clients, hurt

Table of Content

our ability to obtain new clients, result in significant revenue loss, create potential liabilities, ~~for~~increase our ~~clients and us, increase insurance and other~~ operating costs and have a material adverse impact on our results of operations. We use third party public cloud providers in connection with certain cloud-based offerings and third parties to host our own data, in which case we have to rely on such third parties to prevent service interruption and such reliance is

A security breach could subject ~~to similar risks described above with respect to our own data center and hosting services.~~

~~If our IT security is breached, or if the IT security of third parties on which we rely is breached~~, ~~we could be subject~~us to increased expenses, ~~exposure to~~ legal ~~claims~~exposure and regulatory actions, and clients and prospective clients could be deterred from using our ~~Solutions~~Products and Services. ~~We are in the information technology business, and in providing our Solutions~~ Our Products and Services werequire us to store, retrieve, process and manage our clients' information and data (and that of their patients), as well as our own data. ~~We believe we have a reputation for secure~~Persons with authorized access, both associates and ~~reliable Solution and Service offerings, and we have invested a great deal of time and resources in protecting~~third parties, may use such access to harm the ~~security, confidentiality, integrity and availability~~Company. Persons outside of our ~~Solutions and Services and the internal and external data that we manage. Third parties~~organization may attempt to identify and exploit ~~Solution~~Product and Service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our ~~or our clients' and suppliers'~~ software, hardware and cloud offerings, networks and systems, or those of our clients and suppliers, any of which could lead to disruptions in mission-critical systems or the unauthorized release or corruption of ~~personal~~protected health information, personally identifiable information, financial information or other sensitive information, or the confidential information or data of Cerner, our clients or their ~~patients.~~

High-profile security breaches at other companies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting information technology products and businesses. Although this is an industry-wide problem that affects other software and hardware companies, wepatients, or our suppliers. We may be targeted by computer hackers because we are a prominent ~~health care~~healthcare IT company and have high profile clients, including government clients. Additionally, our clients and their employees may be targeted by hackers who compromise their credentials and lead to unauthorized access to their systems hosted in our data centers or third-party cloud service providers. These risks ~~will~~may increase as we continue to grow our cloud offerings, collect, store and process increasingly large amounts of our clients' confidential data, including ~~personal~~protected health information and sensitive personal data, and host or manage parts of our clients' businesses in cloud-based/multi-tenant IT environments. We also use third party public cloud providers in connection with certain client facing cloud-based offerings and ~~third party providers~~ to host our own data, in which case we have to rely on the processes, control and security such third parties have in place to protect the infrastructure, which are subject to similar risks described above with respect to our IT security.

We continue to invest in and improve our threat protection, detection and mitigation policies, procedures and controls. In addition, we work with other companies in the industry on increased awareness and enhanced protections against cybersecurity threats. Because of the evolving nature and sophistication of these security threats, which can be difficult to detect, theredata. There can be no assurance that our policies, procedures, and controls or those of third parties on which we rely will detect or prevent ~~any~~all of these threats and we cannot predict the full impact of any such past or future incident.

The costs we would incur to address and remediate these security incidents would increase our ~~expenses, and our~~expenses. Our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential clients that may impede our sales, development of solutions, provision of services or other critical functions. If a cyber-attack or other security incident ~~described above~~ were to allow unauthorized access to or modification of ~~our clients' or suppliers' data, our own~~ data or our IT systems, or if our ~~Solutions~~Products or Services are perceived as having security vulnerabilities, we could suffer significant damage to our brand and reputation. This in turn could lead to fewer clients using our ~~Solutions~~Products and Services and result in reduced revenue and earnings. These types of security incidents could also lead to lawsuits, regulatory investigations and claims and, ~~increased legal liability, including regulatory actions by state and federal government authorities and non-US authorities and,~~ in some cases, contractual costs related to notification and fraud ~~monitoring of impacted persons.We maintain~~monitoring. There can be no assurance that our cyber risk insurance ~~but this insurance may not be sufficient to~~will adequately cover all of our losses from any future security breaches or remain available on acceptable terms, if at all.

Operating and Product Risks

We may be subject to claims for system errors and warranties or incur substantial costs related to product and service-related liabilities. Many of our ITProducts and Services are intended for use in collecting, storing and displaying clinical and healthcare-related information used in the diagnosis and treatment of patients and in related healthcare settings such as registration, scheduling and billing. Our Products and Services, or the third-party software products or services incorporated therein, may contain design, coding or other errors, especially when first introduced. Similarly, errors in the implementation and configuration can occur and have occurred in the past. These errors could affect the ability of our Products and Services to properly function, integrate or operate with other offerings, scale to meet the needs of our clients, create vulnerabilities and adversely affect market acceptance. If the timely delivery of medical care or other customer business requirements are impaired by data access, network or systems problems, we could be exposed to legal liability and reputational harm. Healthcare professionals delivering patient care tend to have heightened sensitivity to system and software errors and impairments of reliability and stability of systems. If our Products and Services are alleged to have contributed to faulty clinical decisions, injury to patients based on failure to provide reliable and stable uptime, or ~~those~~negative financial impact to clients, we might be subject to claims or litigation by users of ~~third parties~~our Products and Services or their patients. Errors or failures might damage our reputation and negatively affect future sales. Any such problems might have a materially adverse impact on ~~which~~our business operations and our financial position or results of operations.

Our client agreements typically provide warranties concerning material errors and other matters. Our failure to meet these warranties could allow the client to terminate the agreement and possibly obtain a refund or damages or both, require us to incur additional expense to correct such failure, subject us to claims, damage our reputation and negatively affect future sales. We attempt to contractually limit our liability; however, these contractual limitations may not be enforceable or otherwise protect us from liability. We may also be subject to claims that are not covered by contract. There is no assurance that our liability insurance will adequately cover any claim or remain available on acceptable terms, if at all. If we ~~rely~~.are uninsured or under-insured for any such claim, our business, results of operations and financial condition could be

Table of Content

materially harmed. Product and service-related claims, even if not successful, could damage our reputation, result in the loss of existing or potential clients, divert management's attention, result in significant revenue loss, create potential liabilities for our clients and us and increase our operational costs.

Our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or our intellectual property rights may be infringed or misappropriated by ~~others.~~others or our software may be subject to claims related to open source software licenses. We rely upon a combination of confidentiality practices and policies, ~~license agreements, confidentiality provisions in employment agreements, confidentiality agreements with third parties~~contractual arrangements and technical security measures to maintain the confidentiality ~~exclusivity~~ and trade secrecy of our proprietary information. We also rely on trademark, copyright and ~~copyright~~patent laws to protect our intellectual property ~~rights in the U.S. and abroad. We continue to develop our patent portfolio of U.S. and global patents, but~~rights. Despite these ~~patents do not provide comprehensive protection for the wide range of Solutions and Services we offer. Despite our protective measures and intellectual property rights,~~efforts, we may not be able to adequately protect against theft, copying, reverse engineering, misappropriation, infringement or unauthorized use or disclosure of our intellectual property, which could have an adverse effect on our competitive position.

In addition, we are ~~routinely~~occasionally involved in intellectual property infringement or misappropriation claims, and we expect this activity to continue or even increase as the number of competitors, patents and patent enforcement organizations in the HCIT and broader IT market increases, the functionality of our Solutions and Services expands, the use of open-source software increases and we enter new geographies and new market segments.claims. These claims, even if unmeritorious, are expensive to defend and are often incapable of prompt resolution. If we ~~become liable to third parties for infringing or misappropriating their intellectual property rights,~~are unsuccessful in defending these claims, we could be required to pay a substantial damage award, develop alternative technology, obtain a license or cease using, selling, offering for sale, licensing, implementing or supporting the applicable ~~Solutions~~Products and Services.

Many of our software solutions and technology-enabled services contain open source software that may pose particular risks to our proprietary software solutions and technology-enabled services in a manner that could have a negative effect on our business. We rely upon open source software in our ~~software solutions~~Products and technology-enabled services. The licensing terms applicable for certain open source software have not been interpreted by U.S. or foreign courts and could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide and support our Solutions or Services.

~~Additionally, we~~ We may encounter claims ~~from third parties claiming ownership and~~alleging unauthorized use of the software purported to be licensed under ~~the~~ open source terms, demanding release of derivative works of open source software that could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source licenses. These claims could result in litigation and, even if unmeritorious, could be expensive to defend and incapable of prompt resolution. ~~If we become liable to third parties for such claims, we~~We could also be required to make our software source code available under the applicable open source license, utilize or develop alternative technology, or cease using, selling ~~offering for sale, licensing, implementing~~ or supporting the applicable ~~solutions or technology-enabled services. In addition, use of certain open source software may pose greater risks than use of third party commercial software, as most open source licensors~~Products and ~~distributors do not provide commercial warranties or indemnities or controls on the origin of the software.~~Services if we are unsuccessful in defending such claims.

We may become involved in legal proceedings that could have a material adverse impact on our business, results of operations and financial ~~condition.~~condition, and our inability or failure to effectively manage publicity related to such claims or legal proceedings could adversely impact our business. From time to time and in the ordinary course of our business, we ~~and certain of our subsidiaries~~ may become involved in various legal proceedings and claims, including for example, those relating to employment ~~disputes and litigation; client disputes and litigation alleging~~practices, solution and implementation defects, personal injury, torts, intellectual property infringement, violations of law and breaches of contract and ~~warranties; and other third party~~warranties. All disputes and ~~litigation alleging personal injury, intellectual property infringement, violations of law, and breaches of contracts and warranties. All such~~ legal proceedings are inherently ~~unpredictable and,~~unpredictable. And, regardless of the merits of the claims, litigation may lead to negative publicity and may be expensive, time-consuming and disruptive to our operations and distracting to management. If resolved against us, ~~such~~ legal proceedings could result in excessive ~~verdicts,~~judgments, injunctive relief or other equitable relief that may affect how we operate our business. ~~Similarly, if we settle such~~Any settlements of disputes or legal proceedings it may also affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, thereThere can be no assurance that ~~such coverage~~our liability insurance will adequately cover any ~~particular verdict,~~ judgment or settlement ~~that may be entered against us, that such coverage will prove to be adequate~~ or ~~that such coverage will continue to~~ remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage, ~~in legal proceedings brought against us,~~ it could have a material adverse effect on our business, results of operations and financial condition. Additionally, the dissemination of information via social media, including information about alleged harassment, discrimination or other claims, could harm our business, brand, reputation, financial condition, and results of operations, regardless of the information's accuracy.

We are subject to risks associated with our global operations. We market, sell and support our ~~Solutions~~Products and Services globally. We ~~have established offices around~~periodically evaluate entering into new markets, whether organically or by acquisition, and adjusting our focus in certain existing markets. For example, in connection with the ~~world, including~~acquisition of the Kantar Health business, we acquired business in, ~~the Americas, Europe, the Middle East~~among other countries, new markets such as China and ~~the Asia~~

~~Pacific region. We plan to continue to expand our non-U.S. operations and enter new global markets. This expansion will require significant~~Taiwan. Significant management attention and financial resources are required to ~~develop successful direct~~address the risks noted below associated with new market entry into non-U.S. markets, including the noted markets above, and ~~indirect non-U.S. sales and support channels. Our business is generally transacted~~potential disruptions if we chose to adjust our focus in ~~the local functional currency. In some countries, our success will depend in part on our ability to form relationships with local partners. There is~~ a ~~risk that we may sometimes choose the wrong partner. For these and other reasons, we may not be able to maintain or increase non-U.S. market demand for our Solutions and Services.~~

given market. Non-U.S. operations are subject to inherent risks, and our business, results of operations and financial condition, including our revenue growth and profitability, could be adversely affected by a variety of uncontrollable and changing factors. These include, but are not limited to:

•Greater difficulty in collecting accounts receivable and longer collection periods;

•Difficulties and costs of staffing and managing non-U.S. ~~operations;~~operations and labor disruptions;

~~The impact of global economic and political market conditions;~~

•Effects of sovereign debt conditions, including budgetary ~~constraints;~~constraints, or health service provider or government spending patterns or government-imposed austerity measures;

~~Unfavorable or volatile foreign currency exchange rates;~~

•Legal compliance costs or business risks associated with our global operations, ~~where:~~such as: i) local laws and customs ~~differ~~differing from, or ~~are~~ more stringent than those in the ~~U.S.,~~United States, such as those relating to data protection and data security, ortrade protection measures and intellectual property rights, ii) heightened risk ~~is heightened~~ with respect to

Table of Content

laws prohibiting improper payments and bribery, including without limitation the U.S. Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act and similar laws and regulations in foreign ~~jurisdictions;~~

~~Certification,~~jurisdictions, iii) export control regulations, iv) different or additional functionality requirements or preferences, or v) certification (e.g. CE marking for medical device software), licensing or regulatory requirements and unexpected changes to those requirements;

~~Changes to or reduced protection~~•The United Kingdom's withdrawal of ~~intellectual property rights in some countries;~~its membership from the European Union ("EU") (Brexit) and associated uncertainty and disruptions relating thereto;

~~Potentially adverse tax consequences as a result of changes in tax laws or otherwise, and difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner;~~

~~Different or additional functionality requirements or preferences;~~

~~Trade protection measures;~~

~~Export control regulations;~~

~~Health service provider or government spending patterns or government-imposed austerity measures;~~

•Natural disasters, war, terrorist acts or ~~terrorist acts;~~

~~Labor disruptions that may occur in a country; and~~

~~Political~~political unrest which may impact sales or threaten the safety of associates or our continued presence in these countries and the related potential impact on global ~~stability.~~stability;

~~Fluctuations in foreign currency exchange rates could materially affect our financial results.~~ •Our ~~consolidated financial statements are presented in U.S. dollars. In general, the functional currency of our subsidiaries is the~~ability to form relationships with local currency where the subsidiary operates. For each subsidiary, assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates and revenues and expenses are translated at the average exchange rates prevailing during the month of the transaction. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies affect our revenues, net earnings and the value of balance sheet items denominated in foreign currencies. Future fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, could materially affect our financial results.

~~We are subject to tax legislation in numerous countries; changes in tax laws or challenges to our tax positions could adversely affect our business, results of operations and financial condition.~~ We are a global corporation with a presence in more than 35 countries. As such, we are subject to tax laws, regulations and policies of the U.S. federal, state and local governments and of comparable taxing authorities in other country jurisdictions. Changes in tax laws, including for example the U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 ("Tax Act"), as well as other factors, could causepartners, which help us to ~~experience fluctuations in~~offer our ~~tax obligations~~Products and ~~effective tax rates in 2018~~Services at scale, and ~~thereafter and otherwise adversely affect~~ our ~~tax positions and/or our tax liabilities. Although our accounting for the effects of the enactment of the Tax Act is now complete, there could be additional regulations we~~reliance on these partners whose reputation may become subject to. The full impact of the Tax Act on us may change significantly as regulations, interpretations and rulings relating to the Tax Act are issued and additional changes in U.S. federal and state tax laws may be made in the future. There can be no assurance that our effective tax rates, tax payments, tax credits or incentives will not be ~~adversely affected by these or other initiatives.~~

~~In addition, U.S. federal, state and local,~~regarded as well as other countries' tax laws and regulations, are extremely complex and subject to varying interpretations and requires significant judgment in determining our worldwide provision for income taxes and other tax liabilities. Longstanding international tax norms that determine each country's jurisdiction to tax cross-border

international trade are evolving as a result of the Base Erosion and Profit Shifting reporting requirements ("BEPS") recommended by the G8, G20 and Organization for Economic Cooperation and Development ("OECD"). Further, during 2018, the European Commission issued proposals and the OECD issued an interim report related to the taxation of the digital economy. As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess the overall effect of such potential tax changes, but such changes could adversely impact our financial results.

In the ordinary course of a global business, there are many intercompany transactions and calculations which could be subject to challenge by tax authorities. We are regularly under audit by tax authorities and those authorities often do not agree with positions taken by us on our tax returns. Our intercompany transfer pricing has been reviewed by the U.S. Internal Revenue Service ("IRS") and by foreign tax jurisdictions and will likely be subject to additional audits in the future. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge, which could result in additional taxation, penalties and interest payments.

~~The vote by~~highly outside the United ~~Kingdom (UK) to leave the European Union (EU) could adversely affect our financial results.~~ ~~In June 2016, UK voters approved a referendum~~to withdraw the UK's membership from the EU, which is commonly referred to as "Brexit". In March 2017, the UK government initiated the exit process under Article 50 of the Treaty of the European Union, commencing a period of up to two years for the UKStates; and the other EU member states to negotiate the terms of the withdrawal, such period ending on March 29, 2019 unless extended. There has been limited progress so far in the negotiations and continued uncertainty in the UK government and Parliament, which increases the possibility of the UK exiting the EU on March 29, 2019 without a formal withdrawal agreement in place and of significant market and economic disruption. We have operations in the UK and the EU, and as a result, we face

•The increased risks, ~~associated with the potential uncertainty and disruptions that may lead up to and follow Brexit, including~~especially with respect to ~~volatility~~perceived corruption, cybersecurity threats and IP protection rights, in exchange rates and interest rates and potential material changes to the regulatory regime applicable to our operations in the UK. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. For example, depending on the terms of Brexit, the UK could also lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members. Disruptions and uncertainty caused by Brexit may also cause our clients to closely monitor their costs and reduce their spending budget on our Solutions and Services. Any of these effects of Brexit, and others we cannot anticipate or that may evolve over time, could adversely affect our business, results of operations and financial condition.

~~Our success depends upon the recruitment and retention of key personnel.~~ To remain competitive in our industries, we must attract, motivate and retain highly skilled managerial, sales, marketing, consulting and technical personnel, including executives, consultants, programmers and systems architects skilled in the HCIT, health care devices, health care transactions, population health management and revenue cycle industries and the technical environments in which our Solutions and Services are offered. Competition for such personnel in our industries is intense in both the U.S. and abroad. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales. Our failure to attract additional qualified personnel and to retain and motivate existing personnel to meet our needs could have a material adverse effect on our prospects for long-term growth. In addition, we invest significant time and expense in training our associates, which increases their value to clients and competitors who may seek to recruit them and increases the cost of replacing them. Our success is dependent to a significant degree on the continued contributions of key management, sales, marketing, consulting and technical personnel. Members of our senior management team have left over the years for a variety of reasons, and we cannot guarantee that there will not be additional departures. The unexpected loss of key personnel, or the failure to successfully develop and execute effective succession planning to assure smooth transitions of those key associates and their knowledge, relationships and expertise, could disrupt our business and have a material adverse impact on our results of operations and financial condition, and could potentially inhibit development and delivery of our Solutions and Services and market share advances.

We may be subject to harassment or discrimination claims and legal proceedings, and our inability or failure to respond to and effectively manage publicity related to such claims could adversely impact our business. Although our Global Code of Conduct and other employment policies prohibit harassment and discrimination in the workplace, in sexual or in any other form, we have ongoing programs for workplace training and compliance, and we investigate and take disciplinary action with respect to alleged violations, actions by our associates could violate those policies. And, with the increased use of social media platforms, including blogs, chat platforms, social media websites, and other forms of Internet-based communications that allow individuals access to a broad audience, there has been an increase in the speed and accessibility of information dissemination. The dissemination of information via social media, including information about alleged harassment, discrimination or other claims, could harm our business, brand, reputation, financial condition, and results of operations, regardless of the information's accuracy.

~~We depend on strategic relationships and third party suppliers and our revenue and operating earnings could suffer if we fail to manage these relationships properly.~~ ~~To be successful, we must continue to maintain our existing strategic relationships and establish additional strategic relationships as necessary with leaders in the~~certain new markets in which we operate. We believe that these relationships contribute to our ability to further build our brand, extend the reach of our Solutions and Services and generate additional revenues and cash flows. If we were to lose critical strategic relationships, this could have a material adverse impact on our business, results of operations and financial condition.

We license or purchase certain intellectual property and technology (such as software, services, hardware and content) from third parties, including some competitors, and depend on such third party intellectual property and software, services, hardware and content in the operation and delivery of our Solutions and Services. Additionally, we sell or license third party intellectual property, services and software, hardware or content in conjunction with our Solutions and Services. For instance, we currently depend on Amazon Web Services, Microsoft, Cloudera, Oracle, VMWare and IBM technologies for portions of the operational capabilities of, among others, our ~~Millennium~~ ~~and~~ ~~HealtheIntent~~ ~~solutions. Our remote hosting and cloud services businesses also rely on a limited number of software and services suppliers for certain functions of these businesses,~~ such as ~~Oracle, NetApp, Microsoft, Veritas, CITRIX, GTT~~China and ~~Equinix. Additionally, we rely on Dell/EMC, Hewlett-Packard Enterprise, Cisco, NetApp, IBM and others for our hardware technology platforms.~~Taiwan.

Most of our third party software license support contracts expire within one to five years, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. Most of these third party software licenses are non-exclusive; therefore, our competitors may obtain the right to use any of the technology covered by these licenses and use the technology to compete directly with us.

If any of our third party suppliers were to change product offerings, cease actively supporting the technologies, fail to update and enhance the technologies to keep pace with changing industry standards, encounter technical difficulties in the continuing development of these technologies, significantly increase prices, change delivery models, terminate our licenses or supply contracts, suffer significant capacity or supply chain constraints or suffer significant disruptions, we may need to seek alternative suppliers and incur additional internal or external development costs to ensure continued performance of our Solutions and Services. Such alternatives may not be available on attractive terms, or may not be as widely accepted or as effective as the intellectual property or technology provided by our existing suppliers. If the cost of licensing, purchasing or maintaining our third party intellectual property or technology significantly increases, our operating earnings could significantly decrease. In addition, interruption in functionality of our Solutions and Services as a result of changes in third party suppliers could adversely affect our commitments to clients, future sales of Solutions and Services, and negatively affect our revenue and operating earnings.

~~We intend to continue strategic business acquisitions and other combinations, which are subject to inherent risks.~~ In order to expand our Solutions and Services offerings and grow our market and client base, we may continue to seek and complete strategic business acquisitions and other combinations that we believe are complementary to our business. Acquisitions have inherent risks which may have a material adverse effect on our business, results of operations, financial condition or prospects, including, but not limited to: 1) failure to successfully integrate the business, culture and financial operations, services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies, procedures and information systems; 2) diversion of our management's attention from other business concerns; 3) management of a larger company and entry into markets in which we have little or no direct prior experience; 4) failure to achieve projected synergies and performance targets; 5) failure to commercialize "go forward" Solutions and Services under development and increase revenues from existing marketed Solutions and Services; 6) loss of clients, key personnel, supplier, research and development, distribution, marketing, promotion and other important relationships; 7) incurrence of debt or assumption of known and unknown liabilities; 8) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 9) dilutive issuances of equity securities; 10) accounting deficiencies that could arise in connection with, or as a result of, the acquisition of an acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies; and 11)litigation arising from claims or liabilities assumed from an acquired company or that are otherwise related to acquisition activity, such as claims from former employees, former stockholders or other third parties, all of which could require us to incur significant expenses and cause management distraction. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.

~~Volatility and disruption resulting from global economic or market conditions could negatively affect our business, results of operations and financial condition.~~ Our business, results of operations, financial condition and outlook may be impacted by the health of the global economy. Volatility and disruption in global capital and credit markets may lead to slowdowns or declines in client spending which could adversely affect our business and financial performance. Our business and financial performance, including new business bookings and collection of our accounts receivable, may be adversely affected by current and future economic conditions (including a reduction in the availability of credit, higher energy costs, rising interest rates, financial market volatility and lower than expected economic growth) that cause a slowdown or decline in client spending. Reduced purchases by our clients or changes in payment terms could adversely affect our revenue growth and cause a decrease in our cash flow from operations. Bankruptcies or similar events affecting clients may cause us to incur bad debt expense at levels higher than historically experienced. Further, volatility and disruption in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if global financial and economic volatility continues or worsens, our business, results of operations and financial condition could be materially and adversely affected.

We operate in intensely competitive and dynamic industries, and our ability to successfully compete ~~and continue to grow our business~~ depends on our ability to anticipate or respond quickly to market changes ~~changing technologies and evolving pricing and deployment methods~~ and to bring competitive new ~~Solutions~~Products and Services and features to market in a timely fashion.The IT industry and the market for ~~health care information systems, Solutions~~our Products and Services ~~to the health care industry is~~are intensely competitive, dynamically evolving and subject to rapid technological advances and innovative enhancements, changing delivery and pricing models, evolving standards in computer hardware and software development and communications infrastructure, and changing and increasingly sophisticated client needs. We compete on the basis of a number of factors, including breadth and depth of services, including our open architecture and the level of product integration across care settings; integrated platform; regulatory compliance; reputation; reliability, accuracy and security; client service; total cost of ownership; innovation; and industry acceptance, expertise and experience. Development of new proprietary ~~Solutions~~Products or Services is complex, entails significant time and expense, may not be successful and often involves a long return on investment cycle. We cannot guarantee that the market for our ~~Solutions~~Products and Services will ~~develop as quickly as expected or at all~~continue to grow or that we will be able to successfully introduce new ~~Solutions~~Products or Services on schedule or at all. Moreover, we cannot guarantee that errors will not be found in our new Solution releases before or after commercial release, which could result in Solution delivery redevelopment costs, harmServices. We provide solutions to ~~our reputation, lost sales, license terminations or renegotiations, product liability claims, diversion of resources to remedy errors~~clients via various deployment models, including client-server-based solutions and ~~loss of, or delay in, market acceptance.~~We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position; and oftentimes, successful investments require several years before generating significant revenue.cloud-based offerings.

In addition, we expect that major software information systems companies, highly capitalized consumer technology companies, large information technology consulting service providers and system integrators, start-up companies and others operating in the ~~health care~~healthcare industry may offer competitive ~~Solutions~~Products and Services. As we continue to develop new ~~Solutions~~Products and Services to address areas such as analytics, ~~transaction services, device integration, revenue cycle and~~machine learning ("ML"), artificial intelligence ("AI"), value-based care, consumer solutions, population health management and other health network solutions, we expect to face new competitors, and these competitors may have more experience in these markets, better brand recognition ~~and/~~or more established relationships with prospective clients. Moreover, we expect that competition will continue to increase as a result of consolidation in both the IT and healthcare industries. We face strong competition and often face downward price pressure, which could adversely affect our results of operations or liquidity. For example, some of our competitors may bundle products for promotional purposes or as a long-term pricing strategy, commit to large deployments at prices that are unprofitable, or provide guarantees of prices and product implementations. These practices could, over time, significantly constrain the prices that we can charge for certain of our Solutions and Services. If we do not adapt our pricing models to reflect changes in use of our ~~Solutions~~Products and Services or changes in client demand, our revenues could ~~decrease~~.decrease.

Additionally, the pace of change in the health care information systems market is rapid and there are frequent new software solution introductions, new deployment models (such as via the cloud), software solution enhancements, device introductions, device enhancements and evolving industry standards and requirements. We provide our cloud and other offerings to clients globally via deployment models that best suit their needs, including via our cloud-based software as a services (SaaS) offering. As our business models continue to evolve, we may not be able to compete effectively, generate significant revenues or maintain the profitability of our cloud offerings. If we do not successfully execute our strategy or anticipate the needs of our clients, our reputation as a SaaS provider could be harmed and our revenues and profitability could decline. There are a limited number of hospitals and other health care providers in the U.S. market and in recent years, the health care industry has been subject to increasing consolidation. If we are unable to recognize the impact of industry consolidation, falling costs and technological advancements in a timely manner, or we are too inflexible to rapidly adjust our business models, our prospects and financial results could be negatively affected materially.

Our success also depends on our ability to maintain and expand our business with our existing clients and effectively transition existing clients to current ~~Solutions~~Products and Services, as well as attracting additional clients. Certain clients originally purchased

one or a limited number of our ~~Solutions~~Products and Services. These clients may choose not to expand their use of or purchase new ~~Solutions~~Products and Services. Failure to retain and generate additional business from our current clients could materially and adversely impact our business, financial condition and operating results. In addition, there are a limited number of hospitals and other healthcare providers in the U.S. market, and the healthcare industry has been subject to increasing consolidation, which can cause fewer new footprint opportunities or lead to the replacement of our Products and Services in existing clients if the acquiror (or the group being acquired) has a relationship with a different Health Information Technology (HIT) provider. If we are unable to adapt to the impact of industry consolidation, falling costs and technological advancements in a timely manner, our prospects and financial results could be negatively affected.

We may continue complementary strategic business acquisitions and strategic investments to expand our Products and Services offerings and grow our market and client base. Acquisitions and strategic investments have inherent risks which may have a material adverse effect on our business, results of operations, financial condition or prospects, including, but not limited to: 1) diversion of our management's attention; 2) investment in or entry into markets in which we have little or no direct prior experience; 3) failure to achieve projected synergies; 4) failure to commercialize "go forward" Products and Services; 5) failure to successfully integrate the business; 6) loss of clients, key personnel, suppliers and other important relationships; 7) incurrence of debt or assumption of known and unknown liabilities; 8) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 9)

Table of Content

dilutive issuances of equity securities; 10) accounting deficiencies relating to the acquisition of an acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies; and 11) litigation related to acquisition activity. Further, when we make a strategic investment, we have to rely on third party management teams to drive the portfolio company's success and at times infuse additional capital or provide bridge loans to protect our investment. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to our acquisitions or investments, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses or invested into a portfolio company.

If we are unable to manage our growth in the new markets in which we offer ~~Solutions~~Products and Services, our business, results of operations and financial condition could suffer. Our future financial results will depend on our ability to profitably manage our business in the new markets that we enter. ~~Over the past several years, we have pursued~~We expect to pursue growth and expansion opportunities in the areas of analytics, ~~revenue cycle~~ML, AI, value-based care, consumer solutions, population health and ~~population health.~~other health network solutions. To achieve success in those areas, we will need to, among other things, recruit, train, retain and effectively manage associates, manage changing business conditions and implement and improve our technical, administrative, financial control and reporting systems for offerings in those areas. Difficulties in managing future growth in new markets could have a material adverse impact on our business, results of operations and financial condition.

Long sales cycles for our ~~Solutions~~Products and Services could have a material adverse impact on our future results of operations. Some of our ~~Solutions~~Products and Services have long sales cycles, ranging from several months to eighteen months or more beginning at initial contact with the client through execution of a contract. ~~How and when to implement, replace,~~Implementing, replacing, or ~~expand~~expanding an information system, or ~~modify, add~~modifying, adding or ~~outsource~~outsourcing business processes, are major decisions for ~~health care~~healthcare organizations. Many of the ~~Solutions~~Products and Services we provide require a substantial capital investment and time commitments by the client or prospective client. Any decision by our clients or prospective clients to delay a purchasing decision could have a material adverse impact on our results of operations.

~~Our work~~We depend on strategic relationships and third-party suppliers and our revenue and operating earnings could suffer if we fail to manage these relationships properly. To be successful, we must continue to maintain our existing strategic relationships and establish additional strategic relationships as necessary with ~~government clients exposes us to additional risks inherent~~leaders in the ~~government contracting environment.~~ ~~Our clients include national, provincial, state, local~~markets in which we operate. As we decide to partner rather than directly provide certain Products and ~~foreign governmental entities and their agencies. Our government work carries various risks inherent in contracting with such government entities and agencies. These risks include, but are not limited~~Services, we will become more dependent on these strategic relationships to ~~the following:~~

~~Government entities, particularly in the U.S., often reserve the right~~meet our clients' needs. We believe that these relationships contribute to audit our contracts and conduct inquiries and investigations of our business practices with respect to government contracts. U.S. government agencies conduct reviews and investigations and make inquiries regarding our systems in connection with our performance and business practices with respect to our government contracts. Negative findings from audits, investigations or inquiries could affect our future sales and profitability by preventing us, by operation of law or in practice, from receiving new government contracts for some period of time.

If a government client discovers improper or illegal activities during its audits or investigations, we may become subject to various civil and criminal penalties, including those under the civil U.S. False Claims Act, and administrative sanctions, which may include termination of contracts, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent or detect all improper or illegal activities.

U.S. government contracting regulations impose strict compliance and disclosure obligations. Disclosure is required if certain company personnel have knowledge of "credible evidence" of a violation of federal criminal laws involving fraud, conflict of interest, bribery or improper gratuity, a violation of the civil U.S. False Claims Act or receipt of a significant overpayment from the government. Failure to make required disclosures could be a basis for suspension and/or debarment from federal government contracting in addition to breach of the specific contract and could also impact contracting beyond the U.S. federal level. Reported matters also could lead to audits or investigations and other civil, criminal or administrative sanctions.

Government contracts are subject to heightened reputational and contractual risks compared to contracts with commercial clients. For example, government contracts and the proceedings surrounding them are often subject to more extensive scrutiny and publicity. Negative publicity, including allegations of improper or illegal activity, poor contract performance, deficiencies in services or other deliverables, or information security breaches, regardless of accuracy, may adversely affect our reputation.

Terms and conditions of government contracts also tend to be more onerous and are often more difficult to negotiate. Because government contracts are subject to specific procurement regulations and a variety of other socio-economic requirements, we must comply with such requirements. We must also comply with various statutes, regulations and requirements related to employment practices, recordkeeping and accounting. These regulations and requirements

~~affect how we transact business with our clients and suppliers, and in some instances, impose additional costs on our business operations.~~

Government entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, government entities usually reserve the right to change the scope of projects or terminate these projects at their convenience either for lack of approved funding or any other reason. Changes in government or political developments, including budget deficits, shortfalls or uncertainties, government spending reductions (e.g., U.S. Congressional sequestration of funds under the Budget Control Act of 2011) or other debt constraints could result in our projects being reduced in price or scope or terminated altogether, which also could limit our recovery of reimbursable expenses. Furthermore, if insufficient funding is appropriated to the government entity to cover termination costs, we may not be able to fully recover our investments.

Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting. We must comply with laws and regulations relating to the formation, administration and performance of government contracts, which affect how we do business with our customers and may impose added costs on our business. Significant statutes and regulations in the U.S. that we must comply with include the Federal Acquisition Regulation and supplements, the Truth in Negotiations Act, the Procurement Integrity Act, and the Civil False Claims Act.

Government contracts may be protested by unsuccessful bidders. These protests could result in administrative procedures and litigation, could be expensive to defend and incapable of prompt resolution. Loss of a bid protest may result in loss of the award, contract modification, expense or delay.

The occurrences or conditions described above could affect not only our business with the particular government entities involved, but also our business with other entities of the same or other governmental bodies or with certain commercial clients and could have a material adverse effect on our business, results of operations and financial condition.

~~There are risks associated with our outstanding and future indebtedness.~~ ~~We have customary restrictive covenants in our current debt agreements, which may limit our flexibility to operate our business. These~~covenants include limitations on priority debt, liens, mergers, asset dispositions, and transactions with affiliates, and require us to maintain certain leverage and interest coverage ratios. Failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in reduced liquidity for the Company and could have a material adverse effect on our business, results of operations and financial condition. Additionally, our ability to ~~pay interest~~further build our brand, extend the reach of our Products and ~~repay~~Services, develop and deploy new products and services, and generate additional revenues and cash flows. The loss of a critical strategic relationship or failure to establish additional relationships, or the ~~principal for our indebtedness is dependent upon our ability~~failure to ~~manage our business operations, generate sufficient cash flows to service such debt~~realize anticipated synergies and ~~the other factors discussed in this section. There can be no assurance that we will be able to manage any~~benefits of these ~~risks successfully.~~

~~Changes~~strategic relationships, including as a result of delays, shortages or increasing costs in ~~accounting standards issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies may adversely affect~~ our ~~financial statements.~~ Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB and the SEC. It is possible that future accounting standards we are required to adopt, such as amended guidance for lease accounting, may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our processes and systems. Refer to Note (1) of the notes to consolidated financial statements relating to summary of significant accounting policies and recently issued accounting pronouncements for more information. Such changessupply chain, could ~~result in~~have a material adverse impact on our business, results of operations and financial condition.

~~Goodwill~~We license or purchase certain intellectual property and technology (such as software, services, hardware and content) from third parties, including some competitors, and depend on such intellectual property and technology in the operation and delivery of our Products and Services. Additionally, we sell or license third party intellectual property and technology in conjunction with our Products and Services. Our remote hosting and cloud services businesses also rely on a limited number of software and services suppliers for certain functions of these businesses. Most of our third-party software license support contracts expire within one to five years, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time. Most of these third-party software licenses are non-exclusive; therefore, our competitors may obtain the right to use the technology covered by these licenses to compete directly with us. If our third party suppliers were to change product offerings, cease actively supporting the technologies, fail to update and enhance the technologies, encounter technical difficulties in developing these technologies, significantly increase prices, change delivery models, terminate our licenses or supply contracts or suffer significant capacity or supply chain constraints or disruptions, we may need to seek alternative suppliers and incur additional internal or external development costs to ensure continued performance of our Products and Services. Such alternatives may not be available on attractive terms or may not be as widely accepted or as effective as the intellectual property or technology provided by our existing suppliers. In addition, interruption in functionality of our Products and Services as a result of changes in third party suppliers could adversely affect our commitments to clients, future sales of Products and Services, and negatively affect our revenue and operating earnings.

Our success depends upon the recruitment and retention of key personnel. Members of our senior management team and other ~~intangible assets represent approximately 19%~~key personnel have departed the Company during the past few years for a variety of ~~our total assets~~reasons, and we cannot guarantee that there will not be additional departures. To remain competitive, we must attract, motivate and retain highly skilled managerial, sales, marketing, consulting and technical personnel, including key personnel skilled in the

Table of Content

industries and technical environments in which our Products and Services are offered. As we modernize our core platforms, it is important that we retain and attract experienced technical talent with cloud expertise to lead this transformation. Competition for such personnel in our industries is intense in both the United States and abroad. Our failure to attract additional qualified personnel and to retain and motivate existing personnel to meet our needs could ~~suffer losses due~~have a material adverse effect on our prospects for long-term growth. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales. The unexpected loss of key personnel, or the failure to ~~asset impairment charges.~~ ~~We assess~~successfully develop and execute effective succession planning to assure smooth transitions of those key associates and their knowledge, relationships and expertise, could disrupt our ~~goodwill~~business and ~~other intangible assets for impairment periodically in accordance with applicable authoritative accounting guidance. Declines in business performance or other factors could result in~~have a ~~non-cash impairment charge. This could materially and negatively affect~~material adverse impact on our results of operations and financial ~~condition.~~condition, and could potentially inhibit development and delivery of our Products and Services and market share advances.

~~Risks Related~~We might not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions and might experience business disruptions and adverse tax consequences associated with restructuring, realignment and cost reduction activities. Cerner has implemented and plans to continue to implement several restructuring and realignment initiatives to reduce costs and increase operating efficiencies. There can be no assurance that we will realize, in full or in part, the anticipated benefits of these initiatives. If we are unable to deliver on these initiatives, while continuing to invest in business growth, or if the volume and nature of change overwhelms available resources, our business operations and financial results could be materially and adversely impacted. Our ability to successfully manage and execute these initiatives and realize expected savings and benefits in the amounts and at the times anticipated is important to our ~~Industries~~business success. Any failure to do so could have a material adverse effect on our businesses, financial condition and results of operations. Moreover, our ability to achieve our other strategic goals and business plans might be adversely affected and we could experience business disruptions with clients and elsewhere if our restructuring and realignment efforts and our cost reduction activities prove ineffective.

Regulatory Risks

The ~~health care~~healthcare industry is subject to changing political, economic and regulatory influences, which could impact the purchasing practices and operations of our clients and increase our costs to deliver ~~compliant Solutions~~Products and Services that enable our clients to meet their compliance requirements. Many healthcare providers are consolidating to create integrated healthcare delivery systems with greater market power. These providers may try to use their market power to negotiate price reductions for our Products and Services. As the healthcare industry consolidates, our client base could be consolidated with fewer buyers, competition for clients could become more intense and the importance of maintaining and acquiring new client relationships becomes greater.

The last ~~four years have~~decade has been quite active legislatively with major statutes such as the Protecting Access to Medicare Act (PAMA) of 2014 establishing requirements for "Appropriate Use Criteria" in ordering high dollar diagnostic

imaging services, the Medicare and CHIP Reauthorization Act ~~(MACRA)~~ of 2015 which reformed how physicians are paid under Medicare and which established the ~~Merit~~-~~based~~Merit-based Incentive Payment System (MIPS),; the 21st Century Cures Act of 2016 (Cures Act), which laid the groundwork for a nationwide trusted health information exchange, established interoperability requirements for providers, payers and consumers, and ~~which~~ set the framework for information blocking ~~regulations~~,regulations; and most recently the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act of 2018 that includes significant policies for addressing the opioid crisis. These statutes are heavily laden with provisions that directly call for or describe roles for the use of health information technology to help providers comply with new federal requirements under Medicare and ~~for~~ state Medicaid programs.

Many health care providers are consolidating to create integrated health care delivery systems with greater market power. These providers may try to use their market power to negotiate price reductions for our Solutions and Services. As the health care industry consolidates, our client base could be consolidated with fewer buyers, competition for clients could become more intense and the importance of landing new client relationships becomes greater.

Reform of payment policies for Medicare and Medicaid continues to evolve. The Patient Protection and Affordable Care Act ~~(the "ACA")~~ became law in 2010; this comprehensive ~~health care~~healthcare reform legislation introduced value-based principles into federal health insurance payments systems, sought to improve ~~health care~~healthcare quality, and expanded access to affordable health insurance. MACRA built upon the value based policies introduced by the ACA. These legislative initiatives accelerated the adoption of "Alternative Payment Models" (APMs) as bundled payment models based on episodes of care or per capita payment for defined populations ~~emerged~~ as alternatives to traditional fee for service payments to providers. ~~Subsequent legislative, regulatory~~New APMs continue to be developed under the authorities of the Centers for Medicare and ~~judicial developments~~Medicaid Innovations, and value-based efforts such as the Medicare Shared Savings Program Accountable Care Organization (MSSP ACO) program have ~~created~~seen various iterations. APMs have evolved to usually require two-sided risk (shared saving and shared losses) and use of Certified EHR Technology (CEHRT) as a precondition for program participation. However, even after failed attempts to repeal the ACA, continuing challenges in the courts create uncertainty for the continued implementation of the ~~ACA~~ACA. Given a fractious and ~~other health care-related legislation and, to~~polarized legislative environment at the extent that implementation continues, the way in which they are implemented. Examples include the Medicare Shared Savings Program for Accountable Care Organizations and the Bundled Payment for Care Improvement - Advanced model program under the Innovation Center of the Center for Medicare and Medicaid Services (CMS) which focuses on episode-based payment for hospital and ambulatory services. Together with ongoing statutory and budgetary policy developments at a federal level, the ~~collective impact of this health care reform~~near-term prospects for healthcare related legislation could include changes in Medicare and Medicaid payment policies and other health care delivery administrative reforms that could potentially negatively impact our business and the business of our clients.face uncertainty. Because ~~of that uncertainty and because~~ of ongoing federal fiscal budgetary pressures yet to be resolved for federal health

Table of Content

programs, we cannot predict the full effect of ~~health care~~healthcare legislation on our business at this time. The direction and pace of ~~health care~~healthcare reform initiatives may adversely impact either our operational results or the way we operate our business. Federal health insurance programs still routinely require adoption of certified HCIT as a program requirement or prerequisite, and we anticipate future adoption of new certification requirements. But we also anticipate possible significant impacts from information blocking provisions of the Cures Act andWe expect expanded surveillance by federal agencies of ~~both~~ certified ~~HCIT~~HIT and its use by our clients. ~~CMS has~~We also ~~mandated updates~~anticipate newly expanded regulations under the federal Self-Referral and Anti-Kickback Laws that will contain expanded safe harbors for value based care, and that may promote expanded donation of certified HIT and of cybersecurity technologies in support of trusted health information exchange to the electronic prescribing standards and adoption of controlled substance electronic prescribing by hospitals in response to the opioid crisis which may drive upgrades of existing HCIT investments by hospitals and physicians rather than seeking replacement.support coordinated patient care within value based APMs. In response to this uncertainty, purchasers of ~~HCIT~~HIT may elect to update HIT already in use and postpone investment decisions in new or replacement HIT, including investments in our ~~Solutions~~Products and Services. Future legislation and regulation together with future judicial decisions may ultimately impact the fiscal stability and sustainability of ~~HCIT~~HIT purchasers. Differences in demand related to new regulatory requirements ~~and/or~~and near-term compliance deadlines that contribute to demand for our ~~Solutions~~Products and Services could impact our financial results. There can be no certainty that any legislation that may be adopted or judicial decisions will be favorable to our business. We cannot predict whether or when future ~~health care~~healthcare reform initiatives at the federal or state level or other initiatives affecting our business will be proposed, enacted or implemented or what impact those initiatives may have on our business, results of operations and financial condition.

The ~~health care~~healthcare industry is highly regulated, and thus, we are subject to several laws, regulations and industry initiatives, non-compliance with certain of which could materially adversely affect our operations or otherwise adversely affect our business, results of operations and financial condition. As a participant in the ~~health care~~healthcare industry, our operations and relationships, and those of our clients, are regulated by several U.S. federal, state, local and foreign governmental entities. The impact of these regulations on us is both direct, to the extent that we are ourselves subject to these laws and regulations, and also indirect, in terms of government program requirements applicable to our clients for the use of ~~HCIT and because, in a number of situations, even~~HIT. Even though we may not be directly regulated by specific ~~health care~~healthcare laws and regulations, our ~~Solutions~~Products and Services must be capable of being used by our clients in a way that complies with those laws and regulations. There isare a significant and wide-ranging number of regulations both within the ~~U.S.~~United States and abroad, such as regulations in the areas of ~~health care~~healthcare fraud, information ~~blocking,~~sharing, e-prescribing, claims processing and transmission, ~~health care~~healthcare devices, the security and privacy of patient data and interoperability standards, that may be directly or indirectly applicable to our operations and relationships or the business practices of our clients. Specific risks include, but are not limited to, the following:

~~Health Care~~Healthcare Fraud. U.S. federal and state governments continue to enhance regulation of and increase their scrutiny over practices involving ~~health care~~healthcare fraud, waste and abuse perpetuated by ~~health care~~healthcare providers and professionals whose services are reimbursed by Medicare, Medicaid and other government ~~health care~~healthcare programs. Our ~~health care~~healthcare provider clients, as well as our provision of ~~Solutions~~Products and Services to government entities, subject our business to laws and regulations on fraud and abuse which, among other things, prohibit the direct or indirect payment or receipt of any remuneration for patient referrals, or arranging for or recommending referrals or other business paid for in whole or in part by these federal or state ~~health care~~healthcare programs. U.S. federal enforcement personnel have substantial funding, powers and remedies to pursue suspected or perceived fraud and abuse. The effect of this government regulation on our clients is difficult to predict. Many of the regulations applicable to our clients and that may be applicable to us, including those relating to marketing incentives offered in connection with ~~health care~~healthcare device sales and information blocking, are vague or indefinite and have not been interpreted by the courts. They may be interpreted or applied by a prosecutorial, regulatory or judicial ~~authority~~authorities in a manner that could broaden their applicability to us or require our clients to make changes in their operations or the way in which they deal with us. If ~~such laws and regulations are determined to be applicable to us and if~~ we fail to comply with any applicable laws and regulations, we could be subject to civil and criminal penalties, sanctions or other liability, including exclusion from government health programs or from providing certain Products and Services to our clients who participate in such programs, which could have a material adverse effect on our business, results of operations and financial condition. Even an unsuccessful challenge by a regulatory or prosecutorial authority of our activities could result in adverse publicity, require a costly response from us and adversely affect our business, results of operations and financial condition.

Preparation, Transmission, Submission and Collection of Medical Claims for Reimbursement. Our ~~Solutions~~Products and Services are capable of electronically transmitting claims for services and items rendered by a physician to many patients' payers for approval and ~~reimbursement. We also provide revenue cycle management services to our clients that include the coding, preparation, submission and collection of claims for medical service to payers for~~ reimbursement. Such claims are governed by U.S. federal and state laws. U.S. federal law provides civil liability to any persons that knowingly submit, or cause to be submitted, a claim to a payer, including Medicare, Medicaid and private health plans, seeking payment for any services or items that overbills or bills for services or items that have not been provided to the patient. U.S. federal law may also impose criminal penalties for intentionally submitting such false claims. In addition, federal and state law regulates the collection of debt and may impose monetary penalties for violating those regulations. We have policies and procedures in place that we believe result in the accurate and complete preparation, transmission, submission and collection of claims, provided that the information given to us by our clients is also accurate and complete. The ~~HIPAA~~Health Insurance Portability and Accountability Act of 1996 ("HIPAA") security, privacy

Table of Content

and transaction standards, as discussed below, also have a potentially significant effect on our claims preparation, transmission and submission services, ~~since~~because those services must be structured and provided in a way that supports our clients' HIPAA compliance obligations. In connection with these laws, we may be subjected to U.S. federal or state government investigations and possible penalties may be imposed upon us; false claims actions may have to be defended; private payers may file claims against us; and we may be excluded from Medicare, Medicaid or other government-funded ~~health care~~healthcare programs. Any investigation or proceeding related to these laws, even if unwarranted or without merit, may have a material adverse effect on our business, results of operations and financial condition.

Regulation of ~~Health Care~~Healthcare Devices. The U.S. Food and Drug Administration ("FDA") has determined that certain of our ~~Solutions~~Products and Services are covered medical devices that are actively regulated under the Federal Food, Drug and Cosmetic Act ("Act") and amendments to the Act. Other countries have similar regulations in place related to medical devices, that now or may in the future apply to certain of our ~~Solutions~~Products and Services. The FDA has also expressed an intention to update its regulatory framework to address AI/ML-based Software as a Medical Device. If other of our ~~Solutions~~Products and Services are deemed to be actively regulated medical devices by the FDA or similar regulatory agencies in countries where we do business, we could be subject to extensive requirements governing pre- and post-marketing activities including pre-market notification clearance. Complying with these medical device regulations globally is time consuming and expensive and could be subject to unanticipated and significant delays. Further, it is possible that these regulatory agencies may become more active in regulating software and devices that are used in ~~health care.~~healthcare. If we are unable to obtain the required regulatory approvals for any such ~~Solutions~~Products and Services, our short- and long-term business plans for these ~~Solutions~~Products and Services could be delayed or canceled.

~~There~~ Our sites have been ~~nine~~previously subject to FDA inspections, ~~at various Cerner sites since 2003. Inspections conducted at our Headquarters Campus, Realization Campus~~ and ~~Innovations Campus in 2010 and 2017 resulted in the issuance of an FDA Form 483 observation to which~~ we responded promptly. The FDA has taken no further action with respect to the Form 483 observations that were issued in 2010 and 2017. The remaining FDA inspections, including inspections at our campuses in 2006, 2007 and 2014, resulted in no issuance of a Form 483. We remain subject to periodic FDA ~~inspections and we~~inspections. We could be required to undertake additional actions to comply with the Act and any other applicable regulatory requirements. Our failure to comply with the Act and any other applicable regulatory requirements could have a material adverse effect on our ability to continue to manufacture, distribute and deliver our ~~Solutions~~Products and Services. ~~The FDA has many enforcement tools including recalls, device corrections, seizures, injunctions, refusal to grant pre-market clearance of products, civil fines and criminal~~

~~prosecutions. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.~~

Security and Privacy. U.S. federal, state and local laws and foreign ~~laws regulate~~legislation govern the confidentiality of personal information, how that information may be used, and the circumstances under which such information may be released. These regulations govern both the disclosure and use of confidential personal and patient medical record information and require the users of such information to implement specified security and privacy measures. U.S. regulations currently in place governing electronic health data transmissions continue to evolve and are often unclear and difficult to ~~apply.~~apply in light of the complexity of our client environments. Laws in non-U.S. jurisdictions are also evolving and ~~may~~often have ~~similar or even~~ stricter requirements related to the treatment of personal or patient information.

Data protection regulations impact how businesses, including both us and our clients, can collect and process the personal data of individuals. The costs of compliance with, and other burdens imposed by, such laws, regulations and policies, or modifications thereto, that are applicable to us may limit the use and adoption of our Products and Services and could have a material adverse impact on our business, results of operations and financial condition. Furthermore, we incur development, resource, and capital costs in delivering, updating, and supporting Products and Services to enable our U.S. and non-U.S. clients to comply with these varying and evolving standards. U.S. federal, state, and non-U.S. governmental enforcement personnel have substantial powers and remedies, particularly in the EU, to pursue suspected or perceived violations. If we fail to comply with any applicable laws or regulations or fail to deliver compliant Products and Services, we could be subject to civil penalties, sanctions and contract liability and could otherwise damage our reputation. Enforcement investigations, even if meritless, could have a negative impact on our reputation, cause us to lose existing clients or limit our ability to attract new clients.

In the U.S., HIPAA regulations apply national standards for some types of electronic health information transactions and the data elements used in those transactions to ensure the integrity, security and confidentiality of health information and standards to protect the privacy of individually identifiable health information. Covered entities under HIPAA, which include ~~health care~~healthcare organizations such as our clients, and their business associates, many of our employer clinic business and our claims processing, transmission and submission services, are required to comply with HIPAA privacy standards, transaction regulations and security regulations. ~~Moreover, the HITECH provisions of the American Recovery~~We and ~~Reinvestment Act of 2009 ("ARRA"), and associated regulatory requirements, extend many of the HIPAA obligations, formerly imposed only upon covered entities,~~our U.S. clients are also subject to business associates as well. As a business associate of our clients who are covered entities, we were in most instances already contractually required to comply with the HIPAA regulations as they pertain to handling of covered client data. However, the extension of these HIPAA obligations to business associates by law has created additional liability risks related toevolving state laws regarding the privacy and security of ~~individually identifiable health information.~~healthcare information and personal information generally.

~~Evolving HIPAA and HITECH-related laws and regulations in the U.S. and data privacy and security laws and regulations in~~In non-U.S. jurisdictions, could restrict the ability of our clients to obtain, use or disseminate patient information. This could adversely affect demand for our Solutions and Services if they are not re-designed in a timely manner to meet the requirements of any new interpretations or regulations that seek to protect the privacy and security of patient data or enable our clients to execute new or modified health care transactions. We may need to expend additional capital, software development and other resources to modify our Solutions and Services to address these evolving data security and privacy issues. Furthermore, our failure to maintain confidentiality of sensitive personal information in accordance with the applicable regulatory requirements could damage our reputation and expose us to claims, fines and penalties.

~~In Europe,~~ we are subject to EUtransnational, national and ~~national~~local data protection legislation, including, but not limited to, the ~~2016~~EU General Data Protection Regulation ("GDPR") ~~which imposes~~, UK GDPR, Canadian Personal Information Protection and Electronic Documents Act and Canadian Provincial legislation. In addition to EU and Canadian federal legislation, certain European member states and Canadian provinces have adopted more stringent data protection standards, particularly for health data. These regulations may impose restrictions on the processing of personal data (including health

Table of Content

data) that, in some respects, are more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the ~~U.S. The EU regulation establishes several obligations that organizations must follow with respect~~United States.

In non-U.S. jurisdictions, we also are subject to ~~use of personal data, including a prohibition~~potential restrictions on ~~the transfer of personal information from the EU to other countries whose laws do not adequately protect the privacy and security~~cross-border transfers of personal data to ~~European standards. In addition~~the United States as well as other countries where Cerner has business operations. A recent EU court decision regarding the adequacy of U.S. law to ~~this EU-wide legislation, certain member states have adopted more stringent~~protect EU personal data ~~protection standards, particularly for health data. We have~~created additional uncertainty regarding the lawfulness of transfers of EU personal data to the United States and India. Cerner has addressed these requirements ~~relative~~through the execution of Standard Contractual Clause Agreements and by designing our support services to ~~data transfers, by self-certifying our compliance with the EU-U.S. Privacy Shield Framework~~minimize, to the ~~U.S. Department~~extent feasible, transfers of ~~Commerce International Trade Administration ("ITA"). The ITA has approved~~ our ~~self-certification. However, continued criticism of the Privacy Shield by officials in Europe casts uncertainty as~~EU client's patient data to the ~~long-term effectiveness~~United States. However, the adoption of data privacy laws and court decisions that restrict cross border transfers or otherwise require data localization could have a material impact on our business. Furthermore, the ~~Privacy Shield to support EU-U.S.~~perception by non-U.S. clients that we cannot provide adequate assurance for transfers of personal data. For that reason, we are also pursuing alternative methods of compliance (e.g. Standard Contractual Clauses), but those methods also may be subject to scrutiny by data protection authorities in European member states.

The GDPR impacts how businesses, including both us and our clients, can collect and process the personal data of EU individuals. We have incurred development costs in delivering Solutions and Services as we update our Solutions and Services to enable our European clients to comply with these varying and evolving standards. The costs of compliance with, and other burdens imposed by, such laws, regulations and policies, or modifications thereto, that are applicable to usinformation may limit the use and adoption of our ~~Solutions~~Products and Services and could have a material adverse impact on our business, results of operations and financial condition.

Development and adoption of ML and AI technologies offer the potential to significantly improve the delivery of healthcare. The ~~GDPR grants broad enforcement powers~~application of ML and AI technologies to ~~regulatory agencies to investigate~~personal and ~~enforce~~patient information may be regulated under some privacy laws (e.g. GDPR). Furthermore, the lack of standards for measuring the accuracy and effectiveness of ML and AI can raise new or exacerbate existing technological, legal or other challenges that could impact our ~~compliance with their data privacy~~reputation and security requirements. Governmental enforcement personnel, particularly in the EU, have substantial powers and remedies to pursue suspected or perceived violations. If we fail to comply with any applicable laws or regulations or fail to deliver compliant Solutions and Services, we could be subject to civil penalties, sanctions or contract liability. Enforcement investigations, even if meritless, could have a ~~negative~~material adverse impact on our ~~reputation, cause us to lose existing clients or limit our ability to attract new clients.~~results of operations.

~~Interoperability Standards~~. Our clients continue to be concerned and often require that our Solutions and Services be interoperable with other third party HCIT suppliers. Market forces and governmental/regulatory authorities create software interoperability standards that may apply to our Solutions and Services. If our Solutions and Services are not consistent with those standards, we could be forced to incur substantial additional development costs to conform. The Office of the National Coordinator for Health Information Technology (ONC) is charged under the Cures Act with developing a Trusted Exchange Framework that establishes governance requirements for trusted health information exchange in the U.S. ONC has developed the U.S. Common Data Set for Interoperability which may lay the groundwork for future data exchange requirements for trusted exchange. ONC continues to modify and refine these standards. We may incur increased software development and administrative expense and delays in delivering Solutions and Services if we need to update our Solutions and Services to conform to these varying and evolving requirements. In addition, delays in interpreting these standards may result in postponement or cancellation of our clients' decisions to purchase our Solutions and Services. If our Solutions and Services are not compliant with these evolving standards, our market position and sales could be impaired, and we may have to invest significantly in changes to our Solutions and Services.

Federal Requirements for Use of Interoperable and Certified Health Information Technology. Various U.S. federal, state and non-government agencies continue to generate requirements for the use of certified health information ~~technology. In many cases, these requirements have become conditions for receiving payment for health care services to beneficiaries of federal health insurance programs.~~technology and interoperability standards. These requirements are expansions of the statutory ARRA HITECH program that began providing incentive payments in 2011 to hospitals and eligible providers for the "meaningful use of certified electronic health record technology ("CEHRT")." Although those incentive programs have expired, CEHRT continues to be a ~~condition~~requirement of participation in federal healthcare programs in order to receive reimbursement for health care programs. In 2015, MACRA required the use of CEHRT as part of its Quality Payment Program for eligible providers under Medicare. CEHRT is also one of the areas measured under the Merit based Incentive Payment System (known as MIPS)items and services provided by ~~which the~~our clients to Medicare ~~Physician Fee Schedule was restructured.~~and Medicaid beneficiaries. In the last several years, participation in Medicare's "alternative payment models" to replace traditional "fee for service" payments with quality and risk-sharing payment models has been conditioned on ~~CEHRT and this continues with~~ the ~~Trump Administration.~~adoption of CEHRT. The Cures Act has tied CEHRT to its policy goals of reducing barriers to the exchange of health information, ~~data blocking,~~ encouraging nationwide interoperability, consumer access to health information and improving health information availability between consumers and their care teams. The regulations establishing the certification and interoperability standards for CEHRT will continue to be updated to support these policy goals with greater emphasis on interoperability, consumer engagement, patient safety and health information privacy and security. ~~The ONC is due~~

Along with recent CMS actions taken for Medicare and Medicaid, these regulations will also mandate adoption of updated and expanded certified capabilities of CEHRT that our clients must adopt to ~~develop additional regulations under~~remain able to participate in the ~~Cures Act to enforce the act’s policy directives relating to data blocking and interoperability.~~federal programs mentioned earlier. In addition, the ONC has increased its surveillance activities concerning vendor compliance relative to CEHRT.

~~We have completed~~Cerner will be completing software development updates to its certified products and taking them through ONC's certification ~~efforts~~process in 2022 to meet ~~current CEHRT~~the new certification requirements that ~~became~~will become mandatory for certain Federal programs onunder the Cures Act and various CMS regulations. Given recent CMS regulations, these updates must become certified and adopted by our clients by January 1, ~~2019, and for many others that become mandatory during 2019. We will continue to address additional regulatory requirements as they evolve.~~2023. However, these standards and specifications are subject to interpretation by the entities designated to certify our electronic ~~health care~~healthcare technology as CEHRT compliant. Additionally, the Cures Act requires us to comply with conditions of certification such that if our business practices ~~Solutions~~or our Products and Services are not compliant with these evolving regulatory requirements, our market position and sales could be impaired, ~~and~~ we may have to invest significantly in changes to our ~~Solutions~~Products and ~~Services.~~Services, and our reputation could be damaged. Further, we bear potential financial risks where we are alleged to have not appropriately complied with these regulations. We also bear financial risk where we have entered into agreements with clients to warrant ~~their~~our ability to ~~meet future federal program requirements that require use of CEHRT.~~provide certified Products and Services. While a client's ability to meet future federal health program related attestation requirements may be dependent on the client's ability to adopt, rollout and attain sufficient use of our certified ~~Solutions~~Products and Services on a timely basis, we may face risks that come from issues in full adoption of our certified ~~Solutions~~Products and Services, which in turn could lead to a client missing its attestation targets. These risks are enhanced when we are under agreements to provide application management services to our clients that place responsibilities on us for application configuration and implementation as a prerequisite to ~~meaningful use~~ attainment of quality measures ordinarily borne by the client.

~~Risks Related~~

Table of Content

The ONC has finalized additional regulations under the Cures Act to ~~Our Common Stock~~

~~Our quarterly operating results may vary, which could adversely affect our stock price.~~ ~~Our quarterly operating results have varied~~enforce the Act's policy directives relating to data sharing and interoperability. The ONC is charged under the Cures Act with developing a Trusted Exchange Framework that establishes governance requirements for trusted health information exchange in the ~~past~~United States. In addition, the ONC certification criteria updated under the Cures Act require that Cerner enable its clients to capture, store and exchange the types of health information defined within the ONC developed U.S. Common Data Set for Interoperability (USCDI) which represents the essential health information data for the U.S. healthcare system. The USCDI is designed to be maintained on an iterative basis to account for new requirements and priorities for health information that may ~~continue~~emerge such through the COVID-19 pandemic. ONC continues to ~~vary~~modify and refine these standards. We may incur increased software development and administrative expense and delays in ~~future periods, including variations from guidance, expectations or historical results or trends. Quarterly operating results may vary for a number of reasons including demand for our Solutions~~delivering Products and Services ~~the financial condition~~if we need to update our Products and Services to conform to these varying and evolving requirements and standards. In addition, delays in interpreting these standards may result in postponement or cancellation of our ~~current~~clients' decisions to purchase our Products and ~~potential clients,~~Services. If our long sales cycle, potentially long installation and implementation cycles for larger, more complex systems, accounting policy changes and other factors described in this section and elsewhere in this report. As a result of health care industry trends and the market for our SolutionsProducts and Services ~~a large percentage of~~are not compliant with these evolving standards, our ~~revenues are generated by the sale~~market position and ~~installation of larger, more complex~~sales could be impaired, we may have to invest significantly in changes to our Products and ~~higher-priced~~

~~systems. The sales process for these systems is lengthy and involves a significant technical evaluation and commitment of capital and other resources by the client. Sales~~Services, we may be subject to ~~delays due~~contractual liability and our reputation could be damaged. If our Products and Services are not consistent with those requirements, we could be forced to ~~changes in clients' internal budgets, procedures for approving large capital expenditures, competing needs for other capital expenditures, additions or amendments~~incur substantial additional development costs to ~~U.S. federal, state or local regulations, availability of personnel resources or by actions taken by competitors. Delays~~conform.

Our work with government clients exposes us to additional risks inherent in the ~~expected sale, installation~~government contracting environment. Our clients include national, provincial, state, local and foreign governmental entities and their agencies. Our government work carries various risks inherent in contracting with government entities. These risks include, but are not limited to, the following:

•Government entities, particularly in the United States, often reserve the right to audit our contracts and conduct reviews, inquiries and investigations of our business practices and performance with respect to government contracts. If a government client discovers improper conduct during its audits or ~~implementation~~investigations, we may become subject to various civil and criminal penalties, including those under the civil U.S. False Claims Act, and administrative sanctions, which may include termination of contracts, suspension of payments, fines and civil money penalties, and suspensions or debarment from doing business with other government agencies.

•U.S. government contracting regulations impose strict compliance and disclosure obligations and our failure to comply with these ~~large systems~~obligations could be a basis for suspension or debarment, or both, from federal government contracting in addition to breach of the specific contract.

•Government contracts are subject to heightened reputational and contractual risks compared to contracts with commercial clients and often involve more extensive scrutiny and publicity. Negative publicity, including allegations of improper or illegal activity, poor contract performance, or information security breaches, regardless of accuracy, may adversely affect our reputation.

•Terms and conditions of government contracts also tend to be more onerous, are often more difficult to negotiate and involve additional costs. We must comply with specific procurement regulations and a variety of other socio-economic requirements, as well as various statutes, regulations and requirements related to employment practices, recordkeeping and accounting. Our failure to comply with a variety of complex procurement rules and regulations could result in our liability for penalties, including termination of our government contracts, disqualification from bidding on future government contracts and suspension or debarment from government contracting.

•Government entities typically fund projects through appropriated monies. Our VA Electronic Health Record Modernization and DOD MHS Genesis agreements are indefinite delivery, indefinite quantity contracts. The change in presidential administration may affect VA and DOD budget priorities for this ongoing work.

•Government entities reserve the right to change the scope of or terminate these projects at their convenience for lack of approved funding or other reasons, which could limit our recovery of reimbursable expenses or investments. In addition, government contracts may be protested, which could result in administrative procedures and litigation, result in delays in performance and payment, be expensive to defend and be incapable of prompt resolution.

•It is common in contracting with governments for there to be a prime contractor with privity of contract to the government client and one or more subcontractors. We serve in both capacities for different government clients. There are inherent risks in being a subcontractor, including without limitation, reliance on the performance of the prime contractor for the execution of the contract to the satisfaction of the client. Additionally, when we serve as the prime contractor, we rely on our subcontractors to fulfill certain contractual obligations under our agreements with government clients. A failure by the prime contractor to perform under an agreement under which we serve as a subcontractor, or a failure by a subcontractor to perform under an agreement under which we serve as a prime contractor, could have a ~~significant negative~~material adverse impact on our ~~anticipated quarterly revenues~~business, results of operations and ~~consequently~~financial condition.

Table of Content

The occurrences or conditions described above could affect not only our ~~earnings, since a significant percentage of~~business with the particular government entities involved, but also our ~~expenses are relatively fixed. Because~~business with other entities of the ~~complexity and value of our contracts, the loss of even a small number of~~same or other governmental bodies or with certain commercial clients ~~could have a significant negative effect on our financial results.~~

Revenue recognized in any quarter may depend upon our or our clients' abilities to meet project milestones. Delays in meeting these milestone conditions or modification of the project plan could result in a shift of revenue recognition from one quarter to another and could have a material adverse effect on our business, results of operations ~~for~~and financial condition.

Capital and Credit Risks

Volatility and disruption resulting from global economic or market conditions could negatively affect our business, results of operations and financial condition. Our business, results of operations, financial condition and outlook may be impacted by the health of the global economy. Our business and financial performance, including new business bookings and collection of our accounts receivable, may be adversely affected by current and future economic conditions that cause a ~~particular quarter.~~

Weslowdown or decline in client spending. Reduced purchases by our clients or changes in payment terms could adversely affect our revenue growth and cause a decrease in our cash flow from operations. Bankruptcies or similar events affecting clients may cause us to incur bad debt expense at levels higher than historically experienced. Further, volatility and disruption in global financial markets may also ~~experience seasonality~~limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if global financial and economic volatility continues or worsens, particularly in ~~revenues. For example,~~light of the ongoing COVID-19 pandemic or the resurgence thereof, our ~~revenues historically have been lower~~business, results of operations and financial condition could be materially and adversely affected.

There are risks associated with our outstanding and future indebtedness. As of December 31, 2021, we had $1.84 billion of total outstanding indebtedness, and we may incur additional indebtedness in the ~~first quarter~~future. We have customary restrictive covenants in our current debt agreements, which may limit our flexibility to operate our business. Thesecovenants include limitations on priority debt, liens, mergers, asset dispositions, and transactions with affiliates, and require us to maintain certain leverage and interest coverage ratios. Failure to comply with these covenants could result in an event of default that, if not cured or waived, could have a material adverse effect on our business, results of operations and financial condition. Additionally, our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.

Our Fourth Amended and Restated Credit Agreement (as amended, the "Credit Agreement") bears interest at variable interest rates, primarily based on the London Interbank Offered Rate ("LIBOR"). LIBOR is currently in the process of being phased out. The Credit Agreement includes provisions intended to provide for the replacement of LIBOR with the Secured Overnight Financing Rate ("SOFR") or another widely-accepted alternative benchmark rate upon the cessation of LIBOR or the occurrence of other triggering events, with corresponding adjustments to the applicable interest rate margins. However, uncertainty as to the timing and nature of such modifications could cause the interest rate calculated for the Credit Agreement to be materially different than expected, and there is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have an adverse effect on our business, results of operations and financial condition. With respect to our Credit Agreement and the related interest rate swap, if the swap and the Credit Agreement replacement rates are not identical, our hedge could be less effective. Our failure to manage these risks effectively could adversely affect our financial condition and results of operations.

We cannot guarantee that our capital allocation strategy, which may include share repurchases and dividend payments, will be fully implemented or that it will enhance long-term shareholder value. As of December 31, 2021, $3.18 billion remains available for repurchase under our stock repurchase program, which expires on December 31, 2023. We are not obligated to repurchase a specified number or dollar value of shares and do not plan to repurchase shares in the near term. Additionally, while we expect to pay a cash dividend on a quarterly basis, future declarations of such dividends are subject to approval by the Board of Directors. Either or both of our repurchase or dividend programs may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term shareholder value.

Tax, Finance and Accounting Related Risks

We are subject to tax legislation in numerous countries; changes in tax laws or challenges to our tax positions could adversely affect our business, results of operations and financial condition. We are a global corporation with a presence primarily in North America, Europe, the Middle East, Australia, and India. As such, we are subject to tax laws, regulations and policies of the ~~year~~U.S. federal, state and ~~greater~~local governments and comparable taxing authorities in ~~the fourth quarter~~other

Table of ~~the year, primarily as a result of clients' year-end efforts~~Content

country jurisdictions. Changes in tax laws could cause us to ~~make final capital expenditures for the then-current year. These seasonal variations may lead to~~experience fluctuations in our ~~annual~~tax obligations and ~~quarterly~~effective tax rates in future periods and otherwise adversely affect our tax positions and our tax liabilities. Our effective tax rates, tax payments, tax credits or incentives could be adversely affected by changes in tax laws. In addition, U.S. federal, state and local, as well as other countries' tax laws and regulations, are extremely complex and subject to varying interpretations and require significant judgment in determining our worldwide provision for income taxes and other tax liabilities. As these and other tax laws and related regulations change, our financial results could be materially impacted. In the ordinary course of a global business, there are many intercompany transactions and calculations which could be subject to challenge by tax authorities. We are regularly under audit by tax authorities and those authorities often do not agree with positions taken by us on our tax returns. Our intercompany transfer pricing has been reviewed by the U.S. Internal Revenue Service ("IRS") and by foreign tax jurisdictions and will likely be subject to additional audits in the future. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge, which could result in additional taxation, penalties and interest payments.

Our strategy to transition to a subscription based recurring revenue model and continued modernization of our technology may adversely affect our near-term revenue growth and results of operations. As we transition more of our offerings to leverage cloud technologies, we may incur disruption as we transition existing clients and be less competitive during the transition, which could impact revenue and profitability. We believe we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position; and oftentimes, successful investments require several years before generating significant revenue. We expect our ongoing shift from a software license model to a subscription-based services revenue model to create a recurring revenue stream that is more predictable. The transition, however, creates changes related to the timing of revenue recognition compared to historical patterns. We also incur certain expenses associated with the infrastructures of our cloud-based offerings in advance of our ability to recognize the revenues associated with these offerings, which may adversely affect our near-term reported revenues, results of operations and ~~operating results.~~cash flows. A decline in renewals of recurring revenue offerings in any period may not be immediately reflected in our results for that period but may result in a decline in our revenue and results of operations in future quarters.

Goodwill and other intangible assets represent approximately 21% of our total assets and we could suffer losses due to asset impairment charges. We assess our goodwill and other intangible assets for impairment periodically in accordance with applicable authoritative accounting guidance. Declines in business performance or other factors could result in a non-cash impairment charge. This could materially and negatively affect our results of operations and financial condition.

Our sales forecasts may vary from actual sales in a particular quarter. We use a "pipeline" system, a common industry practice, to forecast sales and trends in our business. Our sales associates monitor the status of all sales opportunities, such as the date when they estimate that a client will make a purchase decision and the potential dollar amount of the sale. These estimates are aggregated periodically to generate a sales pipeline. We compare this pipeline at various points in time to evaluate trends in our business. This analysis provides guidance in business planning and forecasting, but these pipeline estimates are by their nature speculative. Our pipeline estimates are not necessarily reliable predictors of revenues in a particular quarter or over a longer period of time, partially because of changes in the pipeline and in conversion rates of the pipeline into contracts that can be very difficult to estimate. A negative variation in the expected conversion rate or timing of the pipeline into contracts, or in the pipeline itself, could cause our plan or forecast to be inaccurate and thereby adversely affect business results. ~~For example,~~

Lower than expected revenue growth or shifts in our revenue mix could adversely affect our results of operations. Our revenue growth and mix could vary over time due to a ~~slowdown~~number of factors, including timing of contracts signing, changes in ~~information technology spending, adverse economic conditions, new or changed U.S. federal, state or local regulations related~~the health of our end markets, unexpected client attrition, and the mix of software, hardware, devices, maintenance, support and services revenues, which carry different margin rates which can vary from period to ~~our industry or a variety of~~period. Our operating results could be harmed by changes in revenue mix and costs, together with numerous other factors, ~~can cause purchasing decisions~~including rapid growth in lower margin services business, declines in software, and growth in non-cash expenses, such as amortization and depreciation.

General Risk Factors

Our quarterly operating results may vary, which could adversely affect our stock price. Our quarterly operating results have varied in the past and may continue to vary in future periods, including variations from guidance, expectations or historical results or trends. Quarterly operating results may vary for a number of reasons including demand for our Products and Services, the financial condition of our current and potential clients, our long sales cycle, potentially long

Table of Content

installation and implementation cycles for larger, more complex systems, accounting policy changes, our clients' abilities to meet project milestones, seasonality of revenue collection and other factors described in this section and elsewhere in this report. As a result of healthcare industry trends and the market for our Products and Services, a large percentage of our revenues are generated by the sale and installation of larger, more complex and higher-priced systems. The sales process for these systems is lengthy and involves a significant technical evaluation and commitment of capital and other resources by the client. Sales may be ~~delayed, reduced~~subject to delays due to changes in ~~amount~~clients' internal budgets, procedures for approving large capital expenditures, competing needs for other capital expenditures, additions or ~~cancelled, which would reduce~~amendments to applicable laws, availability of personnel resources or by actions taken by competitors. Revenue recognized in any quarter may also depend upon our clients' abilities to meet project milestones. Delays in the ~~overall pipeline conversion rate~~expected sale, installation or implementation of these large systems or in meeting project milestones may have a ~~particular period~~significant negative impact on our anticipated quarterly revenues and consequently our earnings, since a significant percentage of ~~time.~~our expenses are relatively fixed. Because ~~a substantial portion~~of the complexity and value of our contracts, ~~are completed~~the loss of even a small number of clients could have a significant negative effect on our financial results. We may also experience seasonality in the latter part of a quarter, we may not be able to adjust our cost structure quickly enough in response to a revenue shortfall resulting from a decrease in our pipeline conversion rate in any given fiscal quarter.revenues.

The trading price of our common stock may be volatile. The market for our common stock may experience significant price and volume fluctuations in response to a number of factors including actual or anticipated variations in operating results, articles or rumors about our performance or ~~Solutions~~Products and Services, announcements of technological innovations or new services or products by our competitors or us, changes in expectations of future financial performance or estimates of securities analysts, governmental regulatory action, ~~health care~~healthcare reform measures, client relationship developments, economic conditions, our pending acquisition by Oracle and ~~changes occurring in the securities markets in general~~its affiliates, and other factors, many of which are beyond our control. ~~For instance, our quarterly operating results have varied in~~Furthermore, broad market and industry fluctuations may also adversely affect the ~~past and may continue to vary in future periods, due to a number of reasons including, but not limited to, demand for our Solutions and Services, the financial condition~~trading price of our current and potential clients, our long sales cycle, potentially long installation and implementation cycles for larger, more complex and higher-priced systems, key management changes, accounting policy changes and other factors described herein.common stock, regardless of actual operating performance. As a matter of policy, we do not generally comment on our stock price or rumors.

~~Furthermore,~~Fluctuations in foreign currency exchange rates could materially affect our financial results. Our consolidated financial statements are presented in U.S. dollars. In general, the stock market in general, and the markets for software, health care devices, other health care solutions and services and information technology companies in particular have experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading pricefunctional currency of our ~~common stock, regardless of actual operating performance.~~

~~We cannot guarantee that our stock repurchase program or our quarterly dividend program will be fully implemented or that either will enhance long-term stockholder value.~~ ~~Our Board of Directors has approved a stock repurchase program totaling $1.0 billion, of which $283 million remains available for purchase~~subsidiaries is the local currency where the subsidiary operates. For each subsidiary, assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the ~~end of 2018. The repurchase program does not have an expiration date~~exchange rates in effect at the balance sheet dates and werevenues and expenses are ~~not obligated to repurchase a specified number or dollar value of shares. Additionally, our Board has approved~~translated at the ~~initiation of a quarterly cash dividend program and while we expect to pay a cash dividend on a quarterly basis, future declarations of such quarterly cash dividends are subject to approval by~~average exchange rates prevailing during the ~~Board of Directors and the Board of Directors' determination that the declaration of dividends are in the best interests of Cerner and its shareholders~~.

~~Either or both of our repurchase or dividend programs may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value.~~

~~Our Directors have authority to issue preferred stock and our corporate governance documents contain anti-takeover provisions.~~ Our Board of Directors has the authority to issue up to 1,000,000 shares of preferred stock and to determine the preferences, rights and privileges of those shares without any further vote or action by the shareholders. The rightsmonth of the ~~holders of common stock may be harmed by rights granted to~~transaction. Therefore, future fluctuations in foreign currency exchange rates, particularly the ~~holders of any preferred stock that may be issued in the future and issuances of preferred stock could be used to delay or hinder a change of control~~strengthening of the ~~Company.~~U.S. dollar against major currencies, could materially affect our financial results.

In addition, some provisions of our Certificate of Incorporation and Bylaws could make it more difficult for a potential acquirer to acquire a majority of our outstanding voting stock or otherwise effect a change of control of the Company. These include provisions that provide for a classified board of directors, require advance notice of stockholder proposals at stockholder meetings, prohibit shareholders from taking action by written consent and restrict the ability of shareholders to call special meetings. We are also subject to provisions of Delaware law that prohibit us from engaging in any business combination with any interested shareholder for a period of three years from the date the person became an interested shareholder, unless certain conditions are met, which could have the effect of delaying or preventing a change of control.

~~Risks Relating to Forward-looking Statements~~

Statements made in this report, the Annual Report to Shareholders of which this report is made a part, other reports and proxy statements filed with the SEC, communications to shareholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company's or management’s intentions, hopes, beliefs, expectations, plans, goals or predictions of future events or performance, may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "could," "should," "will," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast," "plan," "guidance," "opportunity," "prospects" or "estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Item 1A. Risk Factors and elsewhere herein or in other reports filed with the SEC. Other unforeseen factors not identified herein could also have such an effect. Any forward-looking statements made in this report speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in our business, results of operations, financial condition or business over time.

~~Market and Industry Data~~

This Annual Report on Form 10-K may contain market, industry and government data and forecasts that have been obtained from publicly available information, various industry publications and other published industry sources. We have not independently verified the information and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third party sources referred to in this Annual Report on Form 10-K were prepared for use in, or in connection with, this Annual Report.

Item 1B. Unresolved Staff Comments.

None

Item 2. Properties.

As of the end of ~~2018,~~2021, we owned ~~approximately six~~an aggregate of 6.5 million gross square feet of real estate located in the greater Kansas City metro area and Malvern, Pennsylvania. Such property primarily consists of office space, ~~data center,~~datacenter, and warehouse facilities used primarily by our Domestic ~~Segment.~~segment. An aggregate of 1.2 million gross square feet of this space is currently designated as held for sale. Refer to Note (5) of the Notes for further information regarding our real estate held for sale.

As of the end of ~~2018,~~2021, we leased ~~additional~~an aggregate of 355 thousand gross square feet of office space in the United States used ~~primarily~~ by our Domestic ~~Segment~~segment, and an aggregate of 1.4 million gross square feet of office and datacenter space outside the United States, primarily in Australia, Europe, India, and the ~~following locations:~~



Ÿ ~~Arlington, Virginia~~	Ÿ ~~Franklin, Tennessee~~	Ÿ ~~New York, New York~~
Ÿ ~~Brooklyn, New York~~	Ÿ ~~Jefferson City, Missouri~~	Ÿ ~~North Kansas City, Missouri~~
Ÿ ~~Carlsbad, California~~	Ÿ ~~Kansas City, Missouri~~	Ÿ ~~Rochester, Minnesota~~
Ÿ ~~Colchester, Vermont~~	Ÿ ~~Lakeland, Florida~~	Ÿ ~~Salt Lake City, Utah~~
Ÿ ~~Columbia, Missouri~~	Ÿ ~~Mason, Ohio~~	Ÿ ~~Tempe, Arizona~~
Ÿ ~~Costa Mesa, California~~	Ÿ ~~Minneapolis, Minnesota~~	Ÿ ~~Waltham, Massachusetts~~
Ÿ ~~Denver, Colorado~~	Ÿ ~~Nevada, Missouri~~
Ÿ ~~Durham, North Carolina~~	Ÿ ~~New Concord, Ohio~~

~~We also leased space primarily~~Middle East, which is used by our ~~Global Segment in the following locations:~~International segment.



Ÿ ~~Abu Dhabi, United Arab Emirates~~	Ÿ ~~Gothenburg, Sweden~~	Ÿ ~~Oslo, Norway~~
Ÿ ~~Bangalore, India~~	Ÿ ~~Hamburg, Germany~~	Ÿ ~~Palma de Mallorca, Spain~~
Ÿ ~~Berlin, Germany~~	Ÿ ~~Idstein, Germany~~	Ÿ ~~Paris, France~~
Ÿ ~~Brasov, Romania~~	Ÿ ~~Kolkata, India~~	Ÿ ~~Riyadh, Saudi Arabia~~
Ÿ ~~Brisbane, Australia~~	Ÿ ~~Kuala Lumpur, Malaysia~~	Ÿ ~~Sao Paulo, Brazil~~
Ÿ ~~Cairo, Egypt~~	Ÿ ~~Las Palmas, Gran Canaria, Spain~~	Ÿ ~~Singapore~~
Ÿ ~~Doha, Qatar~~	Ÿ ~~Lisbon, Portugal~~	Ÿ ~~St. Wolfgang, Germany~~
Ÿ ~~Dubai, United Arab Emirates~~	Ÿ ~~London, England~~	Ÿ ~~Stockholm, Sweden~~
Ÿ ~~Dublin, Ireland~~	Ÿ ~~Lund, Sweden~~	Ÿ ~~Sydney, Australia~~
Ÿ ~~Erlangen, Germany~~	Ÿ ~~Madrid, Spain~~	Ÿ ~~The Hague, Netherlands~~
Ÿ ~~Essen, Germany~~	Ÿ ~~Markham, Ontario, Canada~~	Ÿ ~~Vienna, Austria~~
Ÿ ~~Gmund, Austria~~	Ÿ ~~Melbourne, Australia~~

In general, we believe our facilities are suitable to meet our current and reasonably anticipated future needs.

Item 3. Legal Proceedings.

From time to time, we are involved in litigation which is incidental to our business. In our opinion, no litigation to which we are currently a party is likely to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

The disclosure relating to our dispute with Steward Health Care System LLC contained in Note (19) is incorporated herein by reference.

Table of Content

Item 4. Mine Safety Disclosures.

Not ~~applicable~~applicable.

Part II.

Item 5. Market for ~~Registrant’s~~Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on the Nasdaq Global Select Market^SM under the symbol CERN. ~~The following table sets forth the high, low and last sales prices for the fiscal quarters of~~ ~~2018~~ ~~and~~ ~~2017~~ ~~as reported by the~~ ~~Nasdaq Global Select Market~~.

2018 2017

High Low Last High Low Last

First Quarter $ 73.43
$ 56.49
$ 58.00
$ 59.83
$ 47.09
$ 58.85
Second Quarter 63.22
52.05
59.79
69.28
58.09
66.47
Third Quarter 67.57
59.49
64.41
72.27
61.53
71.32
Fourth Quarter 65.44
48.78
52.01
73.86
62.86
67.39

At ~~January 28, 2019,~~February 10, 2022, there were approximately ~~940~~920 owners of record. ~~To date, we have paid no~~

Our Board of Directors declared cash ~~dividends.~~dividends on our issued and outstanding common stock in 2021, 2020, and 2019. Subject to declaration by ~~the~~our Board of Directors, ~~the Company plans~~we expect to ~~initiate a~~continue paying quarterly cash ~~dividend~~dividends as a part of ~~$0.15 per share, with the first payment expected in the third quarter of 2019~~.our current capital allocation strategy. Future dividends will be subject to the determination, declaration and discretion of ~~the~~our Board of Directors and compliance with ~~our~~ covenants under our ~~credit facility.~~outstanding debt agreements and the Merger Agreement. Refer to Note (16) of the Notes for further information regarding our dividend program.

The table below provides information with respect to ~~Common Stock~~common stock purchases by the Company during the fourth fiscal quarter of ~~2018~~:2021:


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a)
Period
October 1, 2021 - October 31, 2021	2,866,152	$	70.98	2,866,152	$	3,348,677,338
November 1, 2021 - November 30, 2021	2,300,941	74.53		2,300,941	$	3,177,186,928
December 1, 2021 - December 31, 2021	—	—		—	$	3,177,186,928
Total	5,167,093	$	72.56	5,167,093

Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b)
Period
September 30, 2018 - October 27, 2018 —
$ —
—
$ 581,522,399
October 28, 2018 - November 24, 2018 1,722,734
58.05
1,722,124
481,556,844
November 25, 2018 - December 29, 2018 3,745,917
52.96
3,745,917
283,172,767
Total 5,468,651
$ 54.56
5,468,041

(a) Under our share repurchase program, which was initially approved by our Board of Directors on May 23, 2017 (and announced May 25, 2017) and most recently amended on December 12, 2019 (as announced on December 13, 2019) (the "2017 Share Repurchase Program"), the Company was authorized to repurchase up to $3.70 billion of shares of our common stock, excluding transaction costs. The repurchases were to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers, or any combination thereof. This program was completed in the third quarter of 2021.

~~(a)~~

Of the 5,468,651 shares of common stock, par value $0.01 per share, presented in the table above, 610 shares were originally granted to employees as restricted stock pursuant to our 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"). The Omnibus Plan allows for the withholding of shares to satisfy the minimum tax obligations due upon the vesting of restricted stock. Pursuant to the Omnibus Plan, the 610 shares reflected above were relinquished by employees in exchange for our agreement to pay U.S. federal and state withholding obligations resulting from the vesting of the Company's restricted stock.

~~(b)~~

As announced on May 25, 2017, our Board of Directors authorized a share repurchase program that allows the Company to repurchase up to $500 million of shares of our common stock, excluding transaction costs. As announced on May 21, 2018, our Board of Directors approved an amendment to the repurchase program that was authorized in May 2017. Under the amendment, the Company was authorized to repurchase up to an additional $500 million of shares of our common stock, for an aggregate of $1 billion, excluding transaction costs. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers. No time limit was set for the completion of the program. During 2018, we repurchased 11.2 million shares for total consideration of $644 million under the program pursuant to Rule 10b5-1 plans. At December 29, 2018, $283 million remains available for repurchase under the outstanding program. Refer to Note (14) of the notes to consolidated financial statements for further information regarding our share repurchase program.

On April 23, 2021, our Board of Directors approved (and announced on May 5, 2021) a new share repurchase program (the "2021 Share Repurchase Program"), which authorizes the Company to repurchase up to $3.75 billion in the aggregate of shares of our common stock, excluding transaction costs. The 2021 Share Repurchase Program was incremental to our 2017 Share Repurchase Program. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.

During 2021, we repurchased 20.0 million shares for total consideration of $1.50 billion under our share repurchase programs pursuant to Rule 10b5-1 plans. As of December 31, 2021, $3.18 billion remained available for repurchase under the 2021 Share Repurchase Program. The Merger Agreement prohibits us from repurchasing our shares without Parent's consent.

See Part III, Item 12 for information relating to securities authorized for issuance under our equity compensation plans.

Item 6. ~~Selected Financial Data.~~[Reserved]

b)10.17*

~~Exhibits~~

Executive Employment Agreement between Cerner Corporation and David T. Feinberg

10-Q

10.1

10/29/2021

10.18*

Time Sharing Agreement between Cerner Corporation and David T. Feinberg

10-Q

10.2

10/29/2021

10.19*

Waiver Agreement to the Amended Employment agreement, dated December 20, 2021, between Cerner Corporation and David T. Feinberg

8-K

10.1

1/19/2022

10.20*

Amended Employment Agreement between Cerner Corporation and Tracy Platt

SC 14D-9

(e)(16)

1/19/2022

10.21*

Offer Letter - Tracy Platt

10.22*

Amended Employment Agreement between Cerner Corporation and Travis Dalton

SC 14D-9

(e)(18)

1/19/2022

10.23*

Offer Letter - Travis Dalton

10.24*

Amended Employment Agreement between Cerner Corporation and Daniel P. Devers

SC 14D-9

(e)(17)

1/19/2022

10.25*

Amended Employment Agreement between Cerner Corporation and Nasim Afsarmanesh

SC 14D-9

(e)(19)

1/19/2022

10.26*

Cerner Corporation 2011 Omnibus Equity Incentive Plan (As Amended and Restated May 22, 2015)

8-K

10.2

5/27/2015

10.27*

Cerner Corporation 2011 Omnibus Equity Incentive Plan (As amended and Restated May 30, 2019)

8-K

10.1

6/3/2019

10.28*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Director Restricted Stock Agreement

10-Q

10.2

5/6/2016

10.29*

2011 Omnibus Equity Incentive Plan - Form of Director Restricted Stock Agreement

10-Q

10.5

4/26/2019

10.30*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement

10-K

10(u)

2/8/2013

10.31*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement

10-Q

10.3

5/6/2016

10.32*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement

10-Q

10.4

10/27/2017

10.33*

2011 Omnibus Equity Incentive Plan - Form of Performance Based Restricted Stock Agreement

10-Q

10.4

4/26/2019

10.34*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Agreement

10-Q

10.4

5/6/2016

10.35*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Agreement

10-Q

10.3

10/27/2017

10.36*

2011 Omnibus Equity Incentive Plan - Form of Time Based Restricted Stock Agreement

10-Q

10.3

4/26/2019

10.37*

Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-Qualified Stock Option Grant Certificate

10-K

10(v)

2/8/2013

10.38*

Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-qualified Stock Option Grant Certificate

10-Q

10.5

5/6/2016

10.39*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Non-Qualified Stock Option Grant Certificate

10-Q

10.2

8/3/2016

10.40*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Non-Qualified Stock Option Grant Certificate

10-Q

10.2

10/27/2017

10.41*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time-Based Restricted Stock Unit Agreement

10-Q

10.2

4/28/2017

Table of Content

Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit(s)
Filing Date
SEC File No./Film No.
Filed Herewith

3.1
Third Restated Certificate of Incorporation of Cerner Corporation
10-K 3(a) 2/11/2015

3.2
Amended & Restated Bylaws of Cerner Corporation (effective March 2, 2018)
8-K 3.1 3/6/2018

4
Specimen stock certificate
10-K 4(a)
2/28/2007
000-15386/07658265

10.1*
2006 Form of Indemnification Agreement for use between the Registrant and its Directors
10-K 10(a)
2/28/2007
000-15386/07658265

10.2*
2010 Form of Indemnification Agreement for use between the Registrant and its Directors and Section 16 Officers
8-K 99.1
6/3/2010
000-15386/10875957

10.3*
Executive Employment Agreement between Cerner Corporation and Brent Shafer
10-K 10.3 2/12/2018

10.4*
Relocation Agreement between Cerner Corporation and Brent Shafer
10-Q 10.2 5/3/2018

10.5*
Amended & Restated Aircraft Time Sharing Agreement between Cerner Corporation and Brent Shafer
10-Q 10.1 10/26/2018

10.6*
Amended & Restated Executive Employment Agreement between Cerner Corporation and Clifford W. Illig
8-K/A 10.1 8/17/2017

10.7*
Amended Employment Agreement between Cerner Corporation and Zane M. Burke
8-K 10.1 9/11/2017

10.8*
Separation Agreement between Cerner Corporation and Zane M. Burke
10-Q 10.2 10/26/2018

10.9*
Amended Employment Agreement between Cerner Corporation and Michael R. Nill
8-K 10.2 9/11/2017

10.10*
Amended Employment Agreement between Cerner Corporation and Jeffrey A. Townsend
8-K 10.3 9/11/2017

10.11*
Relocation Agreement between Cerner Corporation and Jeffrey A. Townsend
10-Q 10.10 10/27/2017

10.12*
Amended Employment Agreement between Cerner Corporation and Marc G. Naughton
8-K 10.4 9/11/2017

10.13*
Amended Employment Agreement between Cerner Corporation and John Peterzalek
X

10.14*
Amended Stock Option Plan D of Registrant dated December 8, 2000
10-K 10(f)
3/30/2001
000-15386/1586224

10.15*
Amended Stock Option Plan E of Registrant dated December 8, 2000
10-K 10(g)
3/30/2001
000-15386/1586224

10.16*
Cerner Corporation Associate Equity Participation Program Non-Qualified Stock Option Agreement
X

10.17*
Cerner Corporation 2001 Long-Term Incentive Plan F
DEF 14A Annex I
4/16/2001
000-15386/1603080

10.42*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time-Based Restricted Stock Unit Agreement

10-Q

10.5

10/27/2017

10.43*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance-Based Restricted Stock Unit Agreement

10-Q

10.3

4/28/2017

10.44*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance-Based Restricted Stock Unit Agreement

10-Q

10.6

10/27/2017

10.45*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Unit Agreement

10-K

10.32

2/19/2021

10.46*

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Unit Agreement

10-K

10.33

2/19/2021

10.47*

Cerner Corporation 20 0 1 Associate Stock Purchase Plan as Amended and Restated January 1, 2022

10.48*

Cerner Corporation 2018 Performance Compensation Plan (effective January 1, 2018)

8-K

10.1

3/6/2018

10.49*

Form 2020 Executive Performance Agreement - Section 16 Officer

10-Q

10.1

4/29/2020

10.50*

Form 2021 Executive Performance Agreement - Section 16 Officer

10-Q

10.1

5/5/2021

10.51*

Form Amendment to Executive Severance Agreement

10-K

10.38

2/19/2021

10.52*

Form Clawback re: Accelerated Vesting of Time-Based RSUs Letter Agreement

10.53

Master Note Purchase Agreement between Cerner Corporation and the Purchasers listed in Schedule A thereto dated December 4, 2014

8-K

10.1

12/5/2014

10.54

Fourth Amended and Restated Credit Agreement, dated December 30, 2021, among Cerner Corporation, U.S. Bank National Association, Bank of America, N.A., PNC Bank, National Association, PNC Capital Markets LLC and Commerce Bank, N.A.

8-K

10.1

1/4/2022

10.55

Master Note Agreement dated November 11, 2019, between Cerner Corporation and the Purchasers listed therein

8-K

10.4

11/12/2019

10.56

First Amendment to Master Note Agreement dated October 8, 2020, between Cerner Corporation and the Purchasers listed therein

8-K

10.1

10/9/2020

Subsidiaries of Registrant

Consent of Independent Registered Public Accounting Firm

31.1

Certification of David T. Feinberg pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2

Certification of Mark J. Erceg pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1

Certification of David T. Feinberg pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

32.2

Certification of Mark J. Erceg pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002

Table of Content

10.18*
Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Agreement
10-K 10(v)
3/17/2005
000-15386/05688830

10.19*
Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Grant Certificate
10-Q 10(a)
11/10/2005
000-15386/051193974

10.20*
Cerner Corporation 2004 Long-Term Incentive Plan G (as amended on December 3, 2007)
10-K 10(g)
2/27/2008
000-15386/08646565

10.21*
Cerner Corporation 2004 Long-Term Incentive Plan G Nonqualified Stock Option Grant Certificate
10-K 10(q)
2/27/2008
000-15386/08646565

10.22*
Cerner Corporation 2011 Omnibus Equity Incentive Plan (As Amended and Restated May 22, 2015)
8-K 10.2 5/27/2015

10.23*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Director Restricted Stock Agreement
10-Q 10.2 5/6/2016

10.24*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement
10-K 10(u)
2/8/2013
000-15386/13586825

10.25*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement
10-Q 10.3 5/6/2016

10.26*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement
10-Q 10.4 10/27/2017

10.27*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Agreement
10-Q 10.4 5/6/2016

10.28*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Agreement
10-Q 10.3 10/27/2017

10.29*
Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-Qualified Stock Option Grant Certificate
10-K 10(v)
2/8/2013
000-15386/13586825

10.30*
Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-qualified Stock Option Grant Certificate
10-Q 10.5 5/6/2016

10.31*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Non-Qualified Stock Option Grant Certificate
10-Q 10.2 8/3/2016

10.32*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Non-Qualified Stock Option Grant Certificate
10-Q 10.2 10/27/2017

10.33*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time-Based Restricted Stock Unit Agreement
10-Q 10.2 4/28/2017

10.34*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time-Based Restricted Stock Unit Agreement
10-Q 10.5 10/27/2017

10.35*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance-Based Restricted Stock Unit Agreement
10-Q 10.3 4/28/2017

10.36*
Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance-Based Restricted Stock Unit Agreement
10-Q 10.6 10/27/2017

10.37*
Cerner Corporation 2001 Associate Stock Purchase Plan as Amended and Restated January 1, 2019
X

10.38*
Cerner Corporation 2018 Performance Compensation Plan (effective January 1, 2018)
8-K 10.1 3/6/2018

10.39*
2018 Executive Performance Agreement - Section 16 Officer
8-K 10.2 3/6/2018

10.40
Interparty Agreement, dated January 19, 2010, among Kansas Unified Development, LLC, OnGoal, LLC and Cerner Corporation
8-K 99.1
1/25/2010
000-15386/10543089

10.41
Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated August 5, 2014
10-Q 2.1
10/24/2014
000-15386/141172425

10.42
Amendment Agreement to the Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated February 2, 2015
8-K 10.1 2/2/2015

10.43
Master Note Purchase Agreement between Cerner Corporation and the Purchasers listed in Schedule A thereto dated December 4, 2014
8-K 10.1
12/5/2014
000-15386/141269611

10.44
Third Amended and Restated Credit Agreement, dated October 30, 2015, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A. and Commerce Bank, N.A.
8-K 10.1 11/3/2015

21
Subsidiaries of Registrant
X

23
Consent of Independent Registered Public Accounting Firm
X

31.1
Certification of D. Brent Shafer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
X

31.2
Certification of Marc G. Naughton pursuant to Section 302 of Sarbanes-Oxley Act of 2002
X

32.1
Certification of D. Brent Shafer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
X

32.2
Certification of Marc G. Naughton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
X

101.INS XBRL Instance Document X

101.SCH XBRL Taxonomy Extension Schema Document X

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X

101.LAB XBRL Taxonomy Extension Labels Linkbase Document X

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

101.INS

XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101.

* Indicates a management contract or compensatory plan or arrangement required to be identified by Part IV, Item 15(a)(3).

PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this annual report on Form 10-K. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Company or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures. Accordingly, investors

should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.

Item 16. Form 10-K Summary.

None.

Table of Content

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CERNER CORPORATION

~~CERNER CORPORATION~~

Date: February 22, 2022

By:

/s/ David T. Feinberg

~~Date: February 8, 2019~~

~~By:~~

~~/s/ Brent Shafer~~David T. Feinberg

~~D. Brent Shafer~~

~~Chairman of the Board~~President and

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:


Signature and Title			Date

/s/ David T. Feinberg			February 22, 2022
David T. Feinberg, President and Chief Executive Officer (Principal Executive Officer) and Director

~~Signature and Title~~/s/ Mark J. Erceg			~~Date~~February 22, 2022

~~/s/ Brent Shafer~~	~~February 8, 2019~~
~~Brent Shafer, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)~~

~~/s/ Marc G. Naughton~~	~~February 8, 2019~~
~~Marc G. Naughton,~~Mark J. Erceg, Executive Vice President and Chief Financial Officer (Principal Financial Officer)

/s/ Michael R. Battaglioli			February ~~8, 2019~~22, 2022
Michael R. Battaglioli, Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

/s/ Gerald E. Bisbee, Jr.			February ~~8, 2019~~22, 2022
Gerald E. Bisbee, Jr., Ph.D., Director

~~/s/ Denis A. Cortese~~		~~February 8, 2019~~
~~Denis A. Cortese, M.D., Director~~

/s/ Mitchell E. Daniels		February ~~8, 2019~~22, 2022
Mitchell E. Daniels, Director

~~/s/ Linda M. Dillman~~		~~February 8, 2019~~
~~Linda M. Dillman, Director~~

/s/ Julie L. Gerberding		February ~~8, 2019~~22, 2022
Julie L. Gerberding, M.D., Director

/s/ Elder Granger			February 22, 2022
Elder Granger, M.D., Director

/s/ John J. Greisch			February 22, 2022
John J. Greisch, Director

/s/ Melinda J. Mount			February 22, 2022
Melinda J. Mount, Director

/s/ George A. Riedel			February 22, 2022
George A. Riedel, Director

/s/ R. Halsey Wise			February 22, 2022
R. Halsey Wise, Director

/s/ William D. Zollars			February ~~8, 2019~~22, 2022
William D. Zollars, ~~Director~~Chairman of the Board

Table of Content

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Cerner Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Cerner Corporation and subsidiaries' (the ~~"Company")~~Company) internal control over financial reporting as of December ~~29, 2018,~~31, 2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December ~~29, 2018,~~31, 2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ~~("PCAOB")~~(PCAOB), the consolidated balance sheets of the Company as of December ~~29, 2018~~31, 2021 and ~~December 30, 2017,~~2020, the related consolidated statements of operations, comprehensive income, cash flows, and changes in shareholders' equity for each of the years in the ~~three‑year~~three-year period ended December ~~29, 2018,~~31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February ~~8, 2019~~22, 2022 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Kantar Health during 2021, and management excluded from its assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2021, Kantar Health's internal control over financial reporting associated with total assets of $104 million and total revenues of $148 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Kantar Health.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Table of Content

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/KPMG LLP

Kansas City, Missouri

February ~~8, 2019~~22, 2022

Table of Content

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Cerner Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Cerner Corporation and subsidiaries (the ~~"Company")~~Company) as of December ~~29, 2018~~31, 2021 and ~~December 30, 2017,~~2020, the related consolidated statements of operations, comprehensive income, cash flows, and changes in shareholders' equity for each of the years in the ~~three‑year~~three-year period ended December ~~29, 2018,~~31, 2021, and the related notes (collectively, the ~~"consolidated~~consolidated financial ~~statements")~~statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December ~~29, 2018~~31, 2021 and ~~December 30, 2017,~~2020, and the results of its operations and its cash flows for each of the years in the ~~three‑year~~three-year period ended December ~~29, 2018,~~31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ~~("PCAOB")~~(PCAOB), the Company's internal control over financial reporting as of December ~~29, 2018,~~31, 2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February ~~8, 2019~~22, 2022 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

~~Changes in Accounting Principle~~

As discussed in note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue transactions with customers in 2018 due to the adoption of Accounting Standards Update 2014-09, "Revenue from Contracts with Customers (Topic 606)". The Company also changed its method of accounting for certain share-based payment award transactions in 2017 due to the adoption of Accounting Standards Update 2016-09 "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting".

Basis for Opinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of contract modifications

As discussed in Note 2 to the consolidated financial statements, the Company executes modifications to existing arrangements with a significant customer, which may involve significant customization or development of software licenses. When a modification occurs, the Company evaluates the modification in order to determine if it should be accounted for (i) as a separate contract, (ii) as the termination of the original contract and creation of a new contract, (iii) through a cumulative catch up adjustment to the original contract, or a combination thereof. During 2021, the Company recognized $5.8 billion in total revenue, of which 20% related to this customer.

Table of Content

We identified the evaluation of contract modifications as a critical audit matter. Specifically, for certain contract modifications with the significant customer, determining whether the modification should be accounted for as a separate contract or part of the existing contract and whether promises in the contract modification represented separate or combined performance obligations required challenging auditor judgment. Certain of the existing arrangements and contract modifications involve customization and significant integration services. This evaluation required challenging auditor judgment due to the varying nature of the underlying promises and the number of contract modifications requiring assessment during the period.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of management’s internal control related to the determination of whether contract modifications should be accounted for as a separate contract or part of the existing contract, and whether promises in these arrangements are distinct or combined performance obligations. For a selection of contract modifications involving the significant customer, we:

•obtained and read the agreements and evaluated the terms and conditions therein

•assessed whether the modification should be accounted for as a separate contract or part of the existing contract

•evaluated the identification of performance obligations in each arrangement by considering the nature of the promises within the contract and the interrelationship of the promised goods and services.

/s/KPMG LLP

We have served as the Company's auditor since 1983.

Kansas City, Missouri

February ~~8, 2019~~22, 2022

Table of Content

CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December ~~29, 2018~~31, 2021 and December ~~30, 2017~~31, 2020


(In thousands, except share data)	2018			2017			(In thousands, except share data)	2021		2020

Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	374,126		$	370,923		Cash and cash equivalents	$	589,847	$	615,615
Short-term investments	401,285			434,844			Short-term investments	252,622		442,473
Receivables, net	1,183,494			1,042,781			Receivables, net	1,161,361		1,168,712
Inventory	25,029			15,749			Inventory	28,159		23,027
Prepaid expenses and other	334,870			515,930			Prepaid expenses and other	417,465		401,160
Total current assets	2,318,804			2,380,227			Total current assets	2,449,454		2,650,987

Property and equipment, net	1,743,575			1,603,319			Property and equipment, net	1,656,171		1,804,083
Right-of-use assets							Right-of-use assets	82,940		104,536
Software development costs, net	894,512			822,159			Software development costs, net	1,000,357		1,009,349
Goodwill	847,544			853,005			Goodwill	1,131,121		914,520
Intangible assets, net	405,305			479,753			Intangible assets, net	458,482		329,249
Long-term investments	300,046			196,837			Long-term investments	461,984		510,220
Other assets	198,850			134,011			Other assets	193,649		198,152

Total assets	$	6,708,636		$	6,469,311		Total assets	$	7,434,158	$	7,521,096

Liabilities and Shareholders’ Equity
Liabilities and Shareholders' Equity							Liabilities and Shareholders' Equity

Current liabilities:							Current liabilities:
Accounts payable	$	293,534		$	218,996		Accounts payable	$	329,582	$	235,755
Current installments of long-term debt and capital lease obligations	4,914			11,585
Current installments of long-term debt							Current installments of long-term debt	225,000		—
Deferred revenue	399,189			311,337			Deferred revenue	531,234		393,293
Accrued payroll and tax withholdings	195,931			183,770			Accrued payroll and tax withholdings	317,092		309,814
Other accrued expenses	69,122			63,907
Other current liabilities							Other current liabilities	223,350		229,764
Total current liabilities	962,690			789,595			Total current liabilities	1,626,258		1,168,626

Long-term debt and capital lease obligations	438,802			515,130
Long-term debt							Long-term debt	1,611,256		1,336,069
Deferred income taxes	336,379			336,446			Deferred income taxes	395,177		376,035
Other liabilities	42,376			42,792			Other liabilities	121,005		157,799
Total liabilities	1,780,247			1,683,963			Total liabilities	3,753,696		3,038,529

Shareholders’ Equity:
Common stock, $.01 par value, 500,000,000 shares authorized, 362,212,843 shares issued at December 29, 2018 and 359,204,864 shares issued at December 30, 2017	3,622			3,592
Shareholders' Equity:							Shareholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 380,232,975 shares issued at December 31, 2021 and 373,224,832 shares issued at December 31, 2020							Common stock, $0.01 par value, 500,000,000 shares authorized, 380,232,975 shares issued at December 31, 2021 and 373,224,832 shares issued at December 31, 2020	3,802		3,732
Additional paid-in capital	1,559,562			1,380,371			Additional paid-in capital	2,717,244		2,288,806
Retained earnings	5,576,525			4,938,866			Retained earnings	6,751,692		6,475,551
Treasury stock, 37,905,013 shares at December 29, 2018 and 26,743,517 shares at December 30, 2017	(2,107,768		)	(1,464,099		)
Treasury stock, 87,383,166 shares at December 31, 2021 and 67,371,686 shares at December 31, 2020							Treasury stock, 87,383,166 shares at December 31, 2021 and 67,371,686 shares at December 31, 2020	(5,664,718)		(4,164,718)
Accumulated other comprehensive loss, net	(103,552		)	(73,382		)	Accumulated other comprehensive loss, net	(127,558)		(120,804)
Total shareholders’ equity	4,928,389			4,785,348
Total shareholders' equity							Total shareholders' equity	3,680,462		4,482,567

Total liabilities and shareholders’ equity	$	6,708,636		$	6,469,311
Total liabilities and shareholders' equity							Total liabilities and shareholders' equity	$	7,434,158	$	7,521,096

Table of combined age and tenure. Associates who elected to participate in the 2016 VSP received financial benefits commensurate with their tenure and position, along with vacation payout and medical benefits. The irrevocable acceptance period for associates electing to participate in the 2016 VSP ended in December 2016. During 2016, we recorded pre-tax charges for the 2016 VSP of $36 million, which are included in general and administrative expense in our consolidated statements of operations. At the end of 2016, this program was complete.Content

In January 2019, we adopted a new voluntary separation plan ("2019 VSP") for eligible associates. Generally, this 2019 VSP is available to U.S. associates who meet a minimum level of combined age and tenure, excluding, among others, or executive officers. Associates who elect to participate in the 2019 VSP will receive financial benefits commensurate with their tenure and position, along with vacation payout, medical benefits, and accelerated vesting of certain share-based payment awards. Eligible associates will have until February 13, 2019 to indicate interest in participation. For those associates approved to participate, their voluntary departure date will be in April 2019. We expect to record expense related to the 2019 VSP in 2019, once we know the level of associate participation.

Supplemental Disclosures of Cash Flow Information


	For the Years Ended
(In thousands)	2021		2020		2019
Cash paid during the year for:
Interest (including amounts capitalized of $10,954, $14,855, and $17,190, respectively)	$	46,559	$	36,302	$	25,639
Income taxes, net of refunds	125,553		149,059		100,004
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases	9,678		26,352		29,542
Financed capital purchases	7,255		22,218		12,673

For the Years Ended
(In thousands) 2018 2017 2016
Cash paid during the year for:
Interest (including amounts capitalized of $12,710, $10,387, and $14,852, respectively) $ 15,707
$ 17,914
$ 18,484
Income taxes, net of refunds (15,560 ) 186,544
254,539

CARES Act

Cash flows from operating activities in 2021 and 2020 include the impact of certain federal payroll taxes related to pay cycles in the second through fourth quarters of 2020, for which we deferred remittance to the taxing authority as permitted under the CARES Act. We remitted $38 million of such amounts to the taxing authority in December 2021 and expect to remit $38 million of remaining deferrals in December 2022, as permitted by the CARES Act. At both December 31, 2021 and December 31, 2020, $38 million of these deferred remittances were included in "Accrued payroll and tax withholdings" in our consolidated balance sheets. At December 31, 2020, an additional $38 million of deferred remittances were included in "Other liabilities" in our consolidated balance sheets.

Summary of Significant Accounting Policies

(a) ~~Revenue Recognition~~ ~~- Refer to Note (2) for discussion regarding new revenue guidance adopted in the first quarter of 2018.~~

~~(b)~~ Cash Equivalents - Cash equivalents consist of short-term ~~marketable~~debt securities with original maturities of less than 90 days.

~~(c) Available-for-sale~~(b) Investments in Debt Securities – ~~Our short-term~~We account for our investments in debt securities as available-for-sale investments in accordance with Accounting Standards Codification Topic ("ASC") 320, Investments-Debt Securities. Short-term available-for-sale investments are primarily invested in time deposits, commercial paper, government and corporate bonds, with maturities of less than one year. ~~Our long-term~~Long-term available-for-sale investments are primarily invested in government and corporate bonds with maturities of less than two years.

Available-for-sale ~~securities~~investments are recorded at fair value with the unrealized gains and losses reflected in accumulated other comprehensive loss until realized. Realized gains and losses from the sale of available-for-sale ~~securities,~~investments, if any, are determined on a specific identification basis.

We regularly review investment securities for impairment based on both quantitative and qualitative criteria that include the extent to which cost exceeds fair value, the duration of any market decline, and the financial health of and specific prospects for the issuer. Unrealized losses that are other than temporary are recognized in earnings.

~~Premiums~~Generally, premiums are amortized and discounts are accreted over the life of the security as adjustments to interest income for our investments. For investments in callable debt securities, any premiums are amortized to the earliest call date. Interest income is recognized when earned.

Refer to Note (4) and Note ~~(5)~~(12) for further description of these assets and their fair value.

(c) Investments in Equity Securities - We account for our investments in equity securities that give us the ability to exercise significant influence over the operating and financial policies of an investee under the equity method in accordance with ASC 323, Investments-Equity Method and Joint Ventures. Under the equity method, we recognize our share of the earnings or losses of an investee, generally on a three-month lag. Such share of the investee's earnings or losses are presented in "Other income (loss), net" in our consolidated statements of operations.

We account for our investments in equity securities that do not qualify for equity method accounting in accordance with ASC 321, Investments-Equity Securities ("ASC 321"). We measure these investments at fair value with changes in fair value recognized in "Other income (loss), net" in our consolidated statements of operations for such investments with readily determinable fair values. For these investments that do not have readily determinable fair values, we measure such investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Table of Content

(d) Concentrations - The majority of our cash and cash equivalents are held at three major financial institutions. ~~The majority of our cash equivalents consist of money market funds.~~ Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand.

(e) Inventory - Inventory consists primarily of computer hardware and sublicensed software, held for resale. Inventory is recorded at the lower of cost (first-in, first-out) or net realizable value.

(f)Property and Equipment - We account for property and equipment in accordance with ~~Accounting Standards Codification Topic ("ASC")~~ASC 360, Property, Plant, 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 one to 50 years. Amortization of leasehold improvements is computed using a straight-line method over the shorter of the lease terms or the useful lives, which range from periods of one to 15 years.

(g) ~~Software Development Costs~~ ~~- Software development costs are accounted for in accordance with ASC 985-20,~~ ~~Costs of Software to be Sold, Leased or Marketed~~. Software development costs incurred internally in creating computer software products are expensed until technological feasibility has been established upon completion of a detailed program design. Thereafter, all software development costs incurred through the software's general release date are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the solution. We amortize capitalized software development costs over five years.

~~(h)~~ Goodwill - We account for goodwill under the provisions of ASC 350, Intangibles – Goodwill and Other. Goodwill is not amortized but is evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an annual impairment assessment. Based on these evaluations, there was no impairment of goodwill in ~~2018~~, ~~2017~~2021, 2020 or ~~2016~~.2019. Refer to Note ~~(7)~~(10) for more information on goodwill and other intangible assets.

~~(i)~~(h) Intangible Assets - We account for intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Amortization of finite-lived intangible assets is computed using the straight-line method over periods of three to 30 years.

~~(j)~~(i) Income Taxes - Income taxes are accounted for in accordance with ASC 740, Income Taxes. 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. Refer to Note ~~(12)~~(14) for additional information regarding income taxes.

~~(k)~~(j) Earnings per Common Share - Basic earnings per share ("EPS") excludes dilution and is computed, in accordance with ASC 260, Earnings Per Share, by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. Refer to Note ~~(13)~~(15) for additional details of our earnings per share computations.

~~(l)~~(k) Accounting for Share-based Payments - We recognize all share-based payments to associates, directors and consultants, including grants of stock options, restricted stock, restricted stock units and performance shares, in the financial statements as compensation cost based on their fair value on the date of grant, in accordance with ASC 718, Compensation-Stock Compensation. This compensation cost is recognized over the vesting period on a straight-line basis for the fair value of awards that actually vest. Refer to Note ~~(14)~~(16) for a detailed discussion of share-based payments.

~~In 2017 we adopted Accounting Standards Update ("ASU") 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~. ASU 2016-09 impacted several aspects of our accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification.

Prior to the adoption of ASU 2016-09, when associates exercised stock options, or upon the vesting of restricted stock awards, we recognized any related excess tax benefits or deficiencies (the difference between the deduction for tax purposes and the cumulative compensation cost recognized in the consolidated financial statements) in additional paid-in capital ("APIC"). During 2016 we recognized net excess tax benefits in APIC of $53 million. Under the new guidance, all excess tax benefits and tax deficiencies are recognized as a component of income tax expense. They are not estimated when determining the annual estimated effective tax rate; instead, they are recorded as discrete items in the reporting period they occur. This provision of the new guidance was required to be applied prospectively, and prior periods were not retrospectively adjusted.

We utilize the treasury stock method for calculating diluted earnings per share. Prior to the adoption of ASU 2016-09, this method assumed that any net excess tax benefits generated from the hypothetical exercise of dilutive options were used to repurchase outstanding shares. Assumed share repurchases for net excess tax benefits included in our calculation of diluted earnings per share for 2016 were 2.0 million shares. Under the new guidance, net excess tax benefits generated from the hypothetical exercise of dilutive options are excluded from the calculation of diluted earnings per share. Therefore, the denominator in our diluted earnings per share calculation has increased (comparatively). This provision of the new guidance was required to be applied prospectively, and prior periods were not retrospectively adjusted.

~~(m)~~(l) Voluntary Separation Benefits - We account for voluntary separation benefits in accordance with the provisions of ASC 712, Compensation-Nonretirement Postemployment Benefits. Voluntary separation benefits are recorded to expense when ~~the associates~~an associate irrevocably ~~accept~~accepts the offer and the amount of the termination liability is reasonably estimable.

In 2021, 2020 and 2019, we recognized $53 million, $20 million and $52 million, respectively, of expenses in connection with voluntary separation benefits, which are included in "General and administrative" expense in our consolidated statements of operations.

(m) Exit or Disposal Cost Obligations - We account for involuntary employee separation benefits pursuant to one-time benefit arrangements and contract termination costs in accordance with ASC 420, Exit or Disposal Cost Obligations.

In 2021, 2020 and 2019, we recognized $56 million, $22 million and $34 million, respectively, of expenses in connection with involuntary associate termination events, which are included in "General and administrative" expense in our consolidated statements of operations.

Table of Content

In 2020 and 2019, we recognized $29 million and $66 million, respectively, of pre-tax charges within our Domestic segment in connection with the termination of certain contracts prior to the end of their stated terms. Such charges are included in "Sales and client service" expense in our consolidated statements of operations.

(n) Foreign Currency - In accordance with ASC 830, Foreign Currency Matters, assets and liabilities of non-U.S. subsidiaries whose functional currency is the local currency are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates during the year. The net exchange differences resulting from these translations are reported in accumulated other comprehensive loss. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations.

(o) ~~Collaborative Arrangements~~ ~~- In accordance with ASC 808,~~ ~~Collaborative Arrangements~~, third party costs incurred and revenues generated by arrangements involving joint operating activities of two or more parties that are each actively involved and exposed to risks and rewards of the activities are classified in the consolidated statements of operations on a gross basis only if we are determined to be the principal participant in the arrangement. Otherwise, third party revenues and costs generated by collaborative arrangements are presented on a net basis. Payments between participants are recorded and classified based on the nature of the payments.

~~(p)~~Recently Issued Accounting Pronouncements ~~Adopted in 2018~~

~~Revenue Recognition~~. ~~In the first quarter of 2018, we adopted new revenue guidance. Refer to Note (2) for further details.~~

~~Financial Instruments.~~ ~~In January 2016, the~~Reference Rate Reform. The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020 and ASU ~~2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10)~~2021-01, Reference Rate Reform (Topic 848): ~~Recognition and Measurement of Financial Assets and Financial Liabilities, which was subsequently amended~~Scope in ~~February 2018 by ASU 2018-03,~~ ~~Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This new guidance addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments.~~January 2021. Such guidance ~~impacts how we account for our investments reported under~~provides optional financial reporting alternatives to reduce the cost ~~method of~~and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform, such as ~~follows:~~

~~Equity investments (except those accounted for under~~ the ~~equity method of accounting or those that result in consolidation~~upcoming discontinuance of the ~~investee)~~London Interbank Offered Rate ("LIBOR"). The accommodations within this guidance may be applied prospectively from the beginning of our 2020 first quarter through December 31, 2022. We are ~~required to be measured at fair value with changes in fair value recognized in net earnings. However, an entity~~currently evaluating the effect that this guidance may ~~choose to measure equity investments~~have on our contracts that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investmentreference LIBOR, specifically, our Fourth Amended and Restated Credit Agreement and related interest rate swap. As of the ~~same issuer.~~

~~The impairment assessment~~date of equity investments without readily determinable fair values will require a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.

~~We adopted~~ this ~~new guidance effective for our first quarter of 2018. Provisions within the guidance applicable to the Company were required to be applied prospectively. We~~filing, we have not elected to ~~measure our cost method investments that do not have readily determinable fair values at cost minus impairment, if~~apply any ~~plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment~~ of the ~~same issuer. At December 29, 2018, we had cost method investments~~provisions of $277 million, which do not have readily determinable fair values. Such investments are included in long-term investments in our consolidated balance sheets. We did not record any changes in the measurement of such investments during 2018.this guidance.

~~Internal-Use Software.~~ ~~In August 2018, the~~Business Combinations. The FASB issued ASU ~~2018-15,~~ ~~Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)~~2021-08, Business Combinations (Topic 805): ~~Customer's~~ Accounting for ~~Implementation Costs Incurred~~Contract Assets and Contract Liabilities from Contracts with Customers in October 2021. Such guidance amends the recognition and measurement principles that apply to business combinations to require that an entity recognize and measure contract assets and contract liabilities acquired in a ~~Cloud Computing Arrangement That is a Service Contract (a consensus of the FASB Emerging Issues Task Force). Such guidance aligns the requirements for capitalizing implementation costs incurred~~business combination in ~~a hosting arrangement that is a service contract~~accordance with ~~the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.~~Topic 606. ASU ~~2018-15~~2021-08 is effective for the Company in the first quarter of 2020, with early adoption permitted, and either prospective or retrospective application accepted. The Company adopted the standard early, in the third quarter of 2018, and elected prospective application. The adoption of such guidance did not have a material impact on our consolidated financial statements and related disclosures.

~~(q) Recently Issued Accounting Pronouncements~~

~~Leases~~. ~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which introduces a new model that requires most leases to be reported on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard. The standard requires the use of the modified retrospective (cumulative effect) transition approach. ASU 2016-02 is effective for the Company in the first quarter of 2019, with early adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures.

~~In July 2018, the FASB issued ASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~, which includes new transition guidance for the adoption of ASU 2016-02. Such guidance creates an additional transition method allowing entities to use the effective date of ASU 2016-02 as the date of initial application on transition. Under this method, entities will not be required to recast comparative periods when transitioning to the new guidance. Entities will also not be required to present comparative period disclosures under the new guidance in the period of adoption. We expect to select this new transition method upon our adoption in the first quarter of 2019.

In the fourth quarter of 2018, we continued our analysis of contractual arrangements that may qualify as leases under the new standard. We currently expect the most significant impact of this new guidance will be the recognition of right-of-use assets and lease liabilities for our operating leases of office space. Refer to Note (16) where we disclose aggregate minimum future payments under these arrangements of $125 million at the end of 2018.

Our analysis and evaluation of the new standard will continue through the effective date in the first quarter of 2019. We must complete our analysis of contractual arrangements, quantify all impacts of this new guidance, and evaluate related disclosures. We must also implement any necessary changes/modifications to processes, accounting systems, and internal controls.

~~Credit Losses on Financial Instruments.~~ ~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables and evaluate our available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of 2020, with early adoption permitted in the first quarter of 2019. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures, and we do not expect to early adopt.

~~Callable Debt Securities.~~ ~~In March 2017, the FASB issued ASU 2017-08,~~ ~~Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~, which shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring the premium be amortized to the earliest call date. Such guidance will impact how premiums are amortized on our available-for-sale investments. ASU 2017-08 is effective for the Company in the first quarter of 2019,2023, with early adoption permitted. The standard requires prospective application to business combinations occurring on or after the ~~use~~date of adoption. As of the ~~modified retrospective (cumulative effect) transition approach. We do not expect ASU 2017-08 to have a material impact on our consolidated financial statements and related disclosures.~~

~~Accumulated Other Comprehensive Income.~~ ~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification~~date of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~, which allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for "stranded tax effects" resulting from certain U.S. tax reform enacted in December 2017. Such "stranded tax effects" were created when deferred tax assets and liabilities related to items in AOCI were remeasured at the lower U.S. corporate tax rate in the period of enactment. ASU 2018-02 is effective for the Company in the first quarter of 2019, with early adoption permitted. The guidance in this ASU is to be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. corporate tax rate was recognized. We are currently evaluating the effect that ASU 2018-02 will have on our consolidated financial statements and related disclosures.

~~Collaborative Arrangements.~~ ~~In November 2018, the FASB issued ASU 2018-18,~~ ~~Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606~~, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB's new revenue standard (Topic 606). Such guidance clarifies revenue recognition and financial statement presentation for transactions between collaboration participants. ASU 2018-18 is effective for the Company in the first quarter of 2020, with early adoption permitted. The standard requires retrospective application to the date we adopted Topic 606, December 31, 2017. We are currently evaluating the effect that ASU 2018-18 will have on our consolidated financial statements and related disclosures, andfiling, we have not determined if we will early adopt.

(2)Revenue Recognition

~~In May 2014,~~Revenue Recognition Policy

We recognize revenue in accordance with the ~~FASB issued~~guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ~~ASU 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP.~~ The ~~new~~ standard ~~introduces~~contains a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under prior U.S. GAAP.

ASU 2014-09, as amended ("Topic 606"), was effective for the Company in the first quarter of 2018. We selected the modified retrospective (cumulative effect) transition method of adoption. Such method provides that the cumulative effect from prior periods upon applying the new guidance to contracts which were not complete as of the adoption date be recognized in our consolidated balance sheets as of December 31, 2017, including an adjustment to retained earnings. A summary of such cumulative effect adjustment is as follows:

(In thousands)
Increase /
(Decrease)

Receivables, net $ (79,492 )
Prepaid expenses and other (2,253 )
Other assets 81,157
Accounts payable (9,361 )
Deferred income taxes 1,173
Retained earnings 7,600

Prior periods were not retrospectively adjusted. The impact of applying Topic 606 (versus prior U.S. GAAP) increased 2018 revenues and earnings before income taxes by $207 million and $101 million, respectively. This impact is primarily driven by certain new contracts in 2018, which include certain specified upgrades for which we are required to estimate stand-alone selling price when allocating transaction consideration to performance obligations. Under prior U.S. GAAP, we would not have been able to establish vendor specific objective evidence ("VSOE") of fair value for such items, and thus would have delayed the timing of revenue recognition for such contracts.

The application of Topic 606 (versus prior U.S. GAAP) did not have a significant impact on other line items in our consolidated statements of operations, statements of comprehensive income, and statements of cash flows in 2018. Additionally, the application of Topic 606 did not have a significant impact on our consolidated balance sheet as of December 29, 2018.

~~Revenue Recognition Policy~~

We enter into contracts with customers that may include various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined. Contracts that include software customization may result in the combination of the customization services with the software license as one distinct performance obligation.

The predominant model of customer procurement involves multiple deliverables and includes a software license agreement, project-related implementation and consulting services, software support, hosting services, and computer hardware. We allocate revenues to each performance obligation within an arrangement based on estimated relative stand-alone selling price. Revenue is then recognized for each performance obligation upon transfer of control of the software solution or services to the customer in an amount that reflects the consideration we expect to receive.

Generally, we recognize revenue under Topic 606 for each of our performance obligations as follows:

•Perpetual software licenses - We recognize perpetual software license revenues when control of such licenses are transferred to the client ("point in time"). We determine the amount of consideration allocated to this performance obligation using the residual ~~approach~~.approach.

Table of Content

•Software as a service - We recognize software as a service ratably over the related hosting period ("over time").

•Time-based software and content license fees - We recognize a license component of time-based software and content license fees upon delivery to the client ("point in time") and a non-license component (i.e. support) ratably over the respective contract term ("over time").

•Hosting - Remote hosting recurring services are recognized ratably over the hosting service period ("over time"). Certain of our hosting arrangements contain fees deemed to be a "material right" under Topic 606. We recognize such fees over the term that will likely affect the client's decision about whether to renew the related hosting service ("over time").

•Services - We recognize revenue for fixed fee services arrangements over time, utilizing a labor hours input method. For fee-for-service arrangements, we recognize revenue over time as hours are worked at the rates clients are

invoiced, utilizing the "as invoiced" practical expedient available in Topic 606. For stand-ready services arrangements, we recognize revenue ratably over the related service ~~period~~.period.

•Support and maintenance - We recognize support and maintenance fees ratably over the related contract period ("over time").

•Hardware - We recognize hardware revenues when control of such hardware/devices is transferred to the client ("point in time").

•Transaction processing - We recognize transaction processing revenues ratably as we provide such services ("over time").

~~Such~~Certain customer contracts require significant customization of the software to meet the particular requirements specified by each customer. The contract pricing is stated as a fixed amount and generally results in the transfer of control of the applicable performance obligation over time. We recognize revenue for such contracts based on the proportion of labor hours expended to the total hours expected to complete the performance obligation. The impact to revenues for changes in estimates of total hours expected to complete performance obligations are recognized in the period in which they occur, and were not material for the periods presented herein.

Revenues are recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

Disaggregation of Revenue

The following table presents revenues disaggregated by our business models:


	For the Years Ended
	2021						2020						2019
(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total

Licensed software	$	671,926	$	53,730	$	725,656	$	604,707	$	51,512	$	656,219	$	628,958	$	51,627	$	680,585
Technology resale	163,280		21,392		184,672		173,264		23,327		196,591		225,076		21,809		246,885
Subscriptions	365,936		16,922		382,858		354,023		24,185		378,208		333,298		25,417		358,715
Professional services	1,817,213		299,278		2,116,491		1,717,873		212,572		1,930,445		1,760,532		231,946		1,992,478
Managed services	1,143,188		145,265		1,288,453		1,120,939		124,488		1,245,427		1,098,695		115,205		1,213,900
Support and maintenance	849,428		183,479		1,032,907		881,778		189,001		1,070,779		904,204		200,434		1,104,638
Reimbursed travel	33,658		129		33,787		27,185		934		28,119		87,364		8,033		95,397

Total revenues	$	5,044,629	$	720,195	$	5,764,824	$	4,879,769	$	626,019	$	5,505,788	$	5,038,127	$	654,471	$	5,692,598

For the Years Ended
2018
2017⁽¹⁾

2016⁽¹⁾
(In thousands) Domestic
Segment Global
Segment Total Domestic
Segment Global
Segment Total Domestic
Segment Global
Segment Total

Licensed software $ 573,034
$ 40,544
$ 613,578
$ 563,524
$ 48,666
$ 612,190
$ 499,422
$ 49,697
$ 549,119
Technology resale 208,722
36,354
245,076
248,524
25,069
273,593
246,694
27,781
274,475
Subscriptions 300,555
25,154
325,709
446,426
22,963
469,389
416,311
26,057
442,368
Professional services 1,574,407
237,056
1,811,463
1,393,056
198,793
1,591,849
1,251,726
192,852
1,444,578
Managed services 1,060,081
94,860
1,154,941
970,609
76,523
1,047,132
909,584
71,993
981,577
Support and maintenance 921,336
196,780
1,118,116
856,304
190,352
1,046,656
838,745
177,066
1,015,811
Reimbursed travel 92,131
5,311
97,442
96,728
4,735
101,463
82,615
5,930
88,545

Total revenues $ 4,730,266
$ 636,059
$ 5,366,325
$ 4,575,171
$ 567,101
$ 5,142,272
$ 4,245,097
$ 551,376
$ 4,796,473

⁽¹⁾As noted above, prior period amounts were not adjusted upon our adoption of Topic 606.

Table of Content

The following table presents our revenues disaggregated by timing of revenue recognition:


	For the Years Ended
	2021						2020						2019
(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total

Revenue recognized over time	$	4,736,395	$	680,557	$	5,416,952	$	4,557,358	$	585,316	$	5,142,674	$	4,565,172	$	600,953	$	5,166,125
Revenue recognized at a point in time	308,234		39,638		347,872		322,411		40,703		363,114		472,955		53,518		526,473

Total revenues	$	5,044,629	$	720,195	$	5,764,824	$	4,879,769	$	626,019	$	5,505,788	$	5,038,127	$	654,471	$	5,692,598

For the Year Ended
2018
(In thousands)
Domestic
Segment
Global
Segment
Total

Revenue recognized over time $ 4,271,934
$ 569,780
$ 4,841,714
Revenue recognized at a point in time 458,332
66,279
524,611

Total revenues $ 4,730,266
$ 636,059
$ 5,366,325

Significant Customers

Revenues attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, within our Domestic segment, comprised 20%, 18% and 13% of our consolidated revenues for 2021, 2020 and 2019, respectively. Amounts due in connection with these relationships comprised 15% and 13% of client receivables as of December 31, 2021 and December 31, 2020, respectively.

Transaction Price Allocated to Remaining Performance Obligations

As of December ~~29, 2018,~~31, 2021, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates ~~$15.25~~$13.26 billion, of which we expect to recognize approximately ~~29%~~31% of the revenue over the next 12 months and the remainder thereafter. As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied) for executed contracts approximated $13.04 billion.

Contract Liabilities

Our payment arrangements with clients typically include an initial payment due upon contract signing and date-based licensed software payment terms and payments based upon delivery for services, hardware and sublicensed software. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. Such amounts are classified in our consolidated balance sheets as ~~deferred revenue.~~"Deferred revenue". During ~~2018,~~2021 and 2020, substantially all of our contract liability balance at the beginning of ~~such period~~each respective year was recognized in ~~revenues.~~revenues during that year.

Costs to Obtain or Fulfill a Contract

We have determined the only significant incremental costs incurred to obtain contracts with clients within the scope of Topic 606 are sales commissions paid to our associates. We record sales commissions as an asset, and amortize to expense ratably over the remaining performance periods of the related contracts with remaining performance obligations. AtAs of December ~~29, 2018,~~31, 2021 and December 31, 2020, our consolidated balance ~~sheet includes an $86~~sheets included assets of $91 million ~~asset~~and $88 million, respectively, related to sales commissions to be expensed in future periods, which isare included in ~~other assets.~~"Other assets".

~~In 2018, we~~We recognized $39 million, $38 million and $41 million of amortization related to ~~this~~these sales commissions ~~asset,~~assets in 2021, 2020 and 2019, respectively, which is included in ~~costs~~"Costs of ~~revenue~~revenue" in our consolidated statements of operations.

Significant Judgments when Applying Topic 606

Our contracts with clients typically include various combinations of our software solutions and related services. Determining whether such software solutions and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. ~~Specifically, judgment is required to determine whether software licenses are distinct from services and hosting included in an arrangement.~~

Contract transaction price is allocated to distinct performance obligations using estimated stand-alone selling price. ~~Judgment is required in estimating stand-alone selling price for each distinct performance obligation.~~ We determine stand-alone selling price maximizing observable inputs such as stand-alone sales when they exist or substantive renewal prices charged to clients. In instances where stand-alone selling price is not observable, we utilize an

Table of Content

estimate of stand-alone selling price. Such estimates are derived from various methods that include: cost plus margin, historical pricing practices, and the residual ~~approach, which~~approach. Judgment may be required to determine standalone selling prices for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service.

Contract modifications occur when we and our customers agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some, or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine if the modification should be accounted for as (i) a ~~considerable amount~~separate contract, (ii) the termination of ~~judgment.~~the original contract and creation of a new contract, (iii) a cumulative catch up adjustment to the original contract, or a combination thereof.

The labor hours input method used for our fixed fee services performance obligation is dependent on our ability to reliably estimate the direct labor hours to complete a project, which may span several years. We utilize our historical project experience and detailed planning process as a basis for our future estimates to complete current projects.

Certain of our arrangements contain variable consideration. We do not believe our estimates of variable consideration to be significant to our determination of revenue recognition.

~~Practical Expedients~~

We have reflected the aggregate effect of all contract modifications occurring prior to the Topic 606 adoption date when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.

~~Revenue Recognition - 2017 and Prior~~

~~Prior to the adoption of Topic 606, we recognized software related revenue in accordance with the provisions of ASC 985-605,~~ ~~Software - Revenue Recognition~~ ~~and non-software related revenue in accordance with ASC 605,~~ ~~Revenue Recognition. In general, revenue was recognized when all of the following criteria were met:~~

~~Persuasive evidence of an arrangement existed;~~

~~Delivery had occurred or services had been rendered;~~

~~Our fee was fixed or determinable; and~~

~~Collection of the revenue was reasonably assured.~~

For multiple element arrangements that contained software and non-software elements, we allocated revenue to software and software-related elements as a group and any non-software element separately. After the arrangement consideration had been allocated to the non-software elements, revenue was recognized when the basic revenue recognition criteria were met for each element. For the group of software and software-related elements, revenue was recognized under the guidance applicable to software transactions.

Since we did not have VSOE of fair value on software licenses within our multiple element arrangements, we recognized revenue on our software and software-related elements using the residual method. Under the residual method, license revenue was recognized in a multiple-element arrangement when VSOE of fair value existed for all of the undelivered elements in the arrangement, when software was delivered, installed and all other conditions to revenue recognition were met. We allocated revenue to each undelivered element in a multiple-element arrangement based on the element's respective fair value, with the fair value determined by the price charged when that element was sold separately. Specifically, we determined the fair value of (i) the software support, hardware maintenance, sublicensed software support, remote hosting, subscriptions and software as a service portions of the arrangement based on the substantive renewal price for those services charged to clients; (ii) the professional services (including training and consulting) portion of the arrangement based on the hourly rates that we charged for these services when sold apart from a software license; and (iii) the sublicensed software based on its price when sold separately from the software. The residual amount of the fee after allocating revenue to the fair value of the undelivered elements was attributed to the licenses for software solutions. If evidence of the fair value could not be established for the undelivered elements of a license agreement using VSOE, the entire amount of revenue under the arrangement was deferred until those elements were delivered or VSOE of fair value was established.

We also entered into arrangements that included multiple non-software deliverables. For each element in a multiple element arrangement that did not contain software-related elements to be accounted for as a separate unit of accounting, the following were met: the delivered products or services had value to the client on a stand-alone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service was considered probable and is substantially controlled by the Company. We allocated the arrangement consideration to each element based on the selling price hierarchy of VSOE of fair value, if it existed, or third-party evidence ("TPE") of selling price. If neither VSOE nor TPE were available, we used estimated selling price.

For certain arrangements, revenue for software, implementation services and, in certain cases, support services for which VSOE of fair value could not be established were accounted for as a single unit of accounting. If VSOE of fair value could not be established for both the implementation services and the support services, the entire arrangement fee was recognized ratably over the period during which the implementation services were expected to be performed or the support period, whichever was longer, beginning with delivery of the software, provided that all other revenue recognition criteria were met.

(3) Receivables

~~Receivables consist of client receivables and the current portion of amounts due under sales-type leases.~~

Client receivables primarily represent recorded revenues that have either been billed, or for which we have an unconditional right to invoice and receive payment in the future. We periodically provide long-term financing options to creditworthy clients through extended payment terms. Generally, these extended payment terms provide for date-based payments over a fixed period, not to exceed the term of the overall arrangement. Thus, our portfolio of client contracts contains a financing component, which is recognized over time as a component of ~~other~~"Other income ~~net~~(loss), net" in our consolidated statements of operations.

~~Lease receivables represent our net investment in sales-type leases resulting from the sale of certain health care devices to our clients.~~

We perform ongoing credit evaluations of our clients and generally do not require collateral from our clients. ~~We provide an allowance for estimated uncollectible accounts based on specific identification, historical experience and our judgment.~~

A summary of net receivables is as follows:


(In thousands)	2021		2020

Client receivables	$	1,307,167	$	1,322,278
Less: Provision for expected credit losses	145,806		153,566

Total receivables, net	$	1,161,361	$	1,168,712

In addition to the client receivables presented above, at December 31, 2021 and December 31, 2020, we had $16 million and $17 million, respectively, of non-current net client receivables, which are presented in "Other assets" in our consolidated balance sheets.

(In thousands) 2018 2017

Client receivables $ 1,237,127
$ 1,082,886
Less: Allowance for doubtful accounts 64,561
52,786

Client receivables, net of allowance 1,172,566
1,030,100

Current portion of lease receivables 10,928
12,681

Total receivables, net $ 1,183,494
$ 1,042,781

Table of Content

A reconciliation of the beginning and ending amount of our ~~allowance~~provision for ~~doubtful accounts~~expected credit losses is as follows:

(in thousands) 2018 2017 2016

Allowance for doubtful accounts - beginning balance $ 52,786
$ 43,028
$ 48,119
Additions charged to costs and expenses 25,529
29,248
5,060
Deductions^(a)
(13,754 ) (19,490 ) (10,151 )

Allowance for doubtful accounts - ending balance $ 64,561
$ 52,786
$ 43,028

^(a)Deductions in 2017 include a $13 million reclassification to other non-current assets.


(In thousands)	Current		Non-current		Total

Provision for expected credit losses - balance at December 29, 2018	$	64,561	$	63,849	$	128,410
Additions charged to costs and expenses	57,167		—		57,167
Deductions, foreign currency and other	(15,653)		1,490		(14,163)

Provision for expected credit losses - balance at December 28, 2019	106,075		65,339		171,414
Cumulative effect of accounting change (ASU 2016-13)	4,606		—		4,606
Additions charged to costs and expenses	65,099		20,703		85,802
Deductions, foreign currency and other	(22,214)		(47,478)		(69,692)

Provision for expected credit losses - balance at December 31, 2020	153,566		38,564		192,130
Additions charged to costs and expenses	39,791		—		39,791
Reclassifications to non-current	(26,480)		26,480		—
Deductions, foreign currency and other	(21,071)		(3,938)		(25,009)

Provision for expected credit losses - balance at December 31, 2021	$	145,806	$	61,106	$	206,912

Lease receivables represent our net investment in sales-type leases resulting from the sale of certain health care devices to our clients. The components of our net investment in sales-type leases are as follows:

(In thousands) 2018 2017

Minimum lease payments receivable $ 11,854
$ 20,425
Less: Unearned income 926
1,447

Total lease receivables 10,928
18,978

Less: Long-term receivables included in other assets —
6,297

Current portion of lease receivables $ 10,928
$ 12,681

During ~~the second quarter of 2008, Fujitsu Services Limited's ("Fujitsu") contract as the prime contractor in the National Health Service ("NHS") initiative to automate clinical processes~~2021 and digitize medical records in the Southern region of England was terminated. This gave rise to the termination of our subcontract for the project. We continue to be in dispute with Fujitsu regarding Fujitsu's obligation to pay amounts due upon termination, including our client receivables and damages for pre-termination losses. Part of the process required final resolution of disputes between Fujitsu and the NHS regarding the prime contract termination, which has now occurred. In 2018 we initiated the formal dispute resolution procedure under the subcontract, with the non-binding alternative dispute resolution procedures concluding in the fourth quarter of 2018. The Company must now resolve the issues based on the formal processes provided for in the subcontract. In the fourth quarter of 2018 we recorded a pre-tax charge of $45 million to provide an allowance against the disputed client receivables, reflecting the uncertainty in collection of such receivables and related litigation risk resulting from the conclusion of the non-binding alternative dispute resolution procedures. Such pre-tax charge is included in sales and client service expense in our consolidated statements of operations. As of December 29, 2018, it remains unlikely that our matter with Fujitsu will be resolved in the next 12 months. Therefore, these client receivables remain classified in other long-term assets at December 29, 2018. While the ultimate collectability of the client receivables pursuant to this process is uncertain, we believe that we have valid and equitable grounds for recovery of such amounts. Nevertheless, it is possible that our estimates regarding collectability of such amounts might materially change as the parties proceed through the formal phases of the subcontract dispute resolution procedure.

~~During 2018 and 2017,~~2020, we received total client cash collections of ~~$5.49~~$6.13 billion and ~~$5.44~~$5.70 billion, respectively.

Expected Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides a new impairment model for certain financial assets that is based on expected losses rather than incurred losses. Such guidance impacts how we determine our allowance for estimated uncollectible client receivables. The standard requires use of the modified retrospective (cumulative effect) transition approach as of the beginning of the first reporting period in which the guidance was effective, which for the Company was the first quarter of 2020. Under this transition method, the cumulative effect from prior periods upon applying this new guidance was recognized in our consolidated balance sheets as of December 29, 2019. We did not recast comparative periods.

A summary of such cumulative effect adjustment is as follows:


(In thousands)	Increase/(Decrease)

Receivables, net	$	(4,606)
Retained earnings	(4,606)

The cumulative effect adjustment is the result of providing an allowance on unbilled client receivables, for which we have an unconditional right to invoice and receive payment in the future.

Our estimates of expected credit losses for client receivables at both December 31, 2021 and December 31, 2020, were primarily based on historical credit loss experience and adjustments for certain asset-specific risk characteristics (i.e. known client financial hardship or bankruptcy). Exposure to credit losses may increase if our clients are adversely affected by changes in healthcare laws; changes in reimbursement or payor models; economic pressures or uncertainty associated with local or global economic recessions; disruption associated with the COVID-19 pandemic; or other client-specific factors. Although we have historically not experienced significant credit losses, it is possible that there could be an adverse impact from potential adjustments to the carrying amount of client receivables as clients' cash flows are impacted by the COVID-19 pandemic and related economic uncertainty, which may be material.

Table of Content

(4) Investments

Available-for-sale investments at the end of ~~2018~~2021 were as follows:


(In thousands)	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Cash equivalents:
Money market funds	$	149,429	$	—	$	—	$	149,429
Time deposits	35,342		—		—		35,342
Commercial paper	77,850		—		—		77,850
Government and corporate bonds	5,000		—		—		5,000
Total cash equivalents	267,621		—		—		267,621

Short-term investments:
Time deposits	25,598		—		—		25,598
Commercial paper	57,000		—		(14)		56,986
Government and corporate bonds	170,123		18		(103)		170,038
Total short-term investments	252,721		18		(117)		252,622

Long-term investments:
Government and corporate bonds	31,167		—		(149)		31,018

Total available-for-sale investments	$	551,509	$	18	$	(266)	$	551,261

(In thousands) Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Cash equivalents:
Money market funds $ 76,471
$ —
$ —
$ 76,471
Time deposits 71,461
—
—
71,461
Commercial paper 10,000
—
—
10,000
Total cash equivalents 157,932
—
—
157,932

Short-term investments:
Time deposits 31,947
—
—
31,947
Commercial paper 75,445
—
(91 ) 75,354
Government and corporate bonds 294,941
1
(958 ) 293,984
Total short-term investments 402,333
1
(1,049 ) 401,285

Long-term investments:
Government and corporate bonds 18,247
—
(55 ) 18,192

Total available-for-sale investments $ 578,512
$ 1
$ (1,104 ) $ 577,409

Available-for-sale investments at the end of ~~2017~~2020 were as follows:


(In thousands)	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Cash equivalents:
Money market funds	$	40,027	$	—	$	—	$	40,027
Time deposits	36,756		—		—		36,756
Commercial Paper	61,000		—		—		61,000
Total cash equivalents	137,783		—		—		137,783

Short-term investments:
Time deposits	28,302		—		—		28,302
Commercial Paper	264,000		12		(19)		263,993
Government and corporate bonds	149,975		247		(44)		150,178
Total short-term investments	442,277		259		(63)		442,473

Long-term investments:
Government and corporate bonds	136,983		152		(57)		137,078

Total available-for-sale investments	$	717,043	$	411	$	(120)	$	717,334

(In thousands) Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Cash equivalents:
Money market funds $ 99,472
$ —
$ —
$ 99,472
Time deposits 60,226
—
—
60,226
Government and corporate bonds 850
—
—
850
Total cash equivalents 160,548
—
—
160,548

Short-term investments:
Time deposits 40,186
—
—
40,186
Commercial paper 147,646
2
(139 ) 147,509
Government and corporate bonds 247,626
—
(477 ) 247,149
Total short-term investments 435,458
2
(616 ) 434,844

Long-term investments:
Government and corporate bonds 185,478
—
(1,026 ) 184,452

Total available-for-sale investments $ 781,484
$ 2
$ (1,642 ) $ 779,844

Investments reported under the cost method of accounting as of December 29, 2018 and December 30, 2017 were $277 million and $11 million, respectively. Investments reported under the equity method of accounting were $5 million and $2 million at December 29, 2018 and December 30, 2017, respectively.

We sold available-for-sale investments for proceeds of ~~$45~~$420 million, $71 million and ~~$29~~$233 million in ~~2018~~2021, 2020 and ~~2017,~~2019, respectively, resulting in insignificant gains/losses in each period.

Other Investments

~~Essence Group Holdings Corporation~~

At December 31, 2021 and December 31, 2020, we had investments in equity securities that do not have readily determinable fair values of $406 million and $361 million, respectively, accounted for in accordance with ASC 321,

~~On July 27, 2018,~~

Table of Content

Investments-Equity Securities. Such investments are included in "Long-term investments" in our consolidated balance sheets. We did not record any changes in the measurement of such investments in 2021, 2020, or 2019, respectively.

At December 28, 2019, we ~~acquired a minority interest~~had investments in ~~Essence Group Holdings Corporation ("Essence Group")~~equity securities with readily determinable fair values of $14 million, accounted for in accordance with ASC 321. Such investments were included in "Short-term investments" in our consolidated balance sheets. Changes in the measurement of such investments favorably impacted "Other income (loss), net" by $76 million and $14 million in 2020 and 2019, respectively. In August 2020, we sold these investments for cash ~~consideration~~proceeds of ~~$266~~$90 million.

At December 31, 2021 and December 31, 2020, we had investments in equity securities reported under the equity method of accounting of $25 million ~~under~~and $12 million, respectively. Such investments are included in "Long-term investments" in our consolidated balance sheets.

Impairment Assessment

We adopted ASU 2016-13 in the first quarter of 2020, which made certain amendments to the model used to assess available-for-sale debt securities for impairment. Such guidance provides that an available-for-sale debt security is impaired if the fair value of the security is less than its amortized cost basis. A determination is made whether the decline in fair value below the amortized cost basis has resulted from a ~~Stock Purchase Agreement ("SPA") dated~~credit loss or other factors, such as market liquidity or changes in interest rates. Impairment related to credit losses is recognized in net earnings, whereas impairment related to other factors is recognized as a component of accumulated other comprehensive loss, net. We did not recognize any impairment on our available-for-sale debt securities through net earnings in 2021 or 2020.

(5) Property and Equipment

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


(In thousands)	Depreciable Lives (Yrs)			2021		2020

Held and used:
Computer and communications equipment	1	—	5	$	1,981,488	$	1,939,517
Land, buildings and improvements	12	—	50	1,180,042		1,403,835
Leasehold improvements	1	—	15	202,283		208,496
Furniture and fixtures	5	—	12	116,236		146,351
Other equipment	3	—	20	20,444		1,025

				3,500,493		3,699,224

Less accumulated depreciation and leasehold amortization				1,933,623		1,895,141

Property and equipment held and used				1,566,870		1,804,083

Assets held for sale				89,301		—

Property and equipment, net				$	1,656,171	$	1,804,083

Depreciation Expense

Depreciation and leasehold amortization expense for 2021, 2020 and 2019 was $362 million, $365 million and $347 million, respectively.

Real Estate Held For Sale

In connection with our operational improvement initiatives, during 2021, we made certain decisions regarding the continued use of certain of our owned real estate. As a result of those decisions, on July 9, ~~2018.~~2021, we sold office space located in Kansas City, Missouri (known as our Oaks Campus), in April 2021 began the process of marketing office space located in Kansas City, Missouri (known as our Riverport Campus), in June 2021 began the process of marketing office

Table of Content

space located in Kansas City, Kansas (known as our Continuous Campus), and in September 2021 began the process of marketing a portion of our office space located in Malvern, Pennsylvania. At December 31, 2021, these long-lived assets aggregating $89 million were held for sale and presented within our consolidated balance sheets in "Property and equipment, net." In connection with the designation as held for sale, during 2021, we recorded pre-tax charges of $80 million to reduce the amount of such long-lived assets to fair value, less estimated costs to sell. Such ~~investment is presented~~charges are included in ~~long-term investments~~our consolidated statements of operations in "Sales and client service" expense and "General and administrative" expense at $78 million and $2 million, respectively.

(6) Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduced a new accounting model that requires most leases to be reported on the balance sheet. It also established disclosure requirements, which are more extensive than those required under prior U.S. GAAP. The standard required use of the modified retrospective (cumulative effect) transition approach and was effective for the Company in the first quarter of 2019. We selected the effective date of ASU 2016-02 as the date of initial application on transition, as permitted by ASU 2016-02, as amended ("Topic 842"). Under this transition method, the cumulative effect from prior periods upon applying the new guidance to arrangements containing leases was recognized in our consolidated balance sheets as of December 30, 2018. We did not recast comparative periods.

A summary of such cumulative effect adjustment is as follows:


(In thousands)	Increase / (Decrease)

Right-of-use asset	$	129,652
Prepaid expenses and other	3,968
Other current liabilities	22,767
Other liabilities	110,853

Arrangements Containing Leases

The cumulative effect adjustment above, is primarily comprised of arrangements where we are the lessee under operating leases for real estate (office, data center, and warehouse space) and certain dedicated fiber optic lines within our infrastructure. The duration of these agreements ranges from several months to in excess of 20 years. Generally, variable lease payments under these operating lease agreements relate to amounts based on changes to an index or rate (i.e. percentage change in the consumer price index). We do not have any arrangements where we are the lessee, classified as finance leases in our consolidated financial statements.

In addition to the items described above, we also procure hotel stays and rental cars in connection with associate business travel, and the use of certain equipment for trade shows, client presentations, conferences, and internal meetings. We have made the policy election to classify such arrangements as short-term leases, as defined in Topic 842. As such, we have not recognized lease liabilities and right-of-use assets for such arrangements in our consolidated financial statements. The duration of these arrangements is less than one month. Therefore, we do not disclose any short-term lease expense, as permitted by Topic 842. Expense for such items is recognized on a straight-line basis over the term of such arrangements.

Arrangements in which we are the lessor are not significant to our consolidated financial statements.

Amounts Included in the Consolidated Financial Statements

The following table presents a summary of lease liability and right-of-use asset amounts included in our consolidated balance sheets at the end of 2021 and 2020, under operating lease arrangements where we are the lessee:

Table of Content


(In thousands)
Description	Balance Sheet Classification	2021		2020

Right-of-use asset	Right-of-use assets	$	82,940	$	104,536
Lease liability - current	Other current liabilities	27,694		29,913
Lease liability - non-current	Other liabilities	67,160		90,106

Operating lease cost for 2021, 2020 and 2019 was $31 million, $37 million, and $37 million, respectively. Variable lease cost was less than $1 million in each of 2021, 2020 and 2019.

Maturity Analysis

Aggregate future payments under operating lease arrangements where we are the lessee (by fiscal year) are as follows:


(In thousands)	Operating Lease Obligations

2022	$	27,694
2023	20,826
2024	13,824
2025	8,884
2026	5,978
2027 and thereafter	32,031

Aggregate future payments	109,237
Impact of discounting	(14,383)

Aggregate lease liability at December 31, 2021	$	94,854

At December 31, 2021, the weighted-average remaining lease term and weighted-average discount rate for our operating lease arrangements where we are the lessee were 6.97 years and 3.3%, respectively.

(7) Software Development

Our software solutions are offered to our clients both through traditional licenses as well as software as a service delivery models. Development costs associated with the certain solutions offered exclusively through a software as a service model are accounted for in accordance with ASC 350-40, Internal-Use Software. All other client solution development costs, which represent a significant majority of development costs, are accounted for in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed.

Under ASC 985-20, software development costs incurred in creating computer software solutions are expensed until technological feasibility has been established upon completion of a detailed program design. Thereafter, all software development costs incurred through the software's general release date are capitalized and subsequently recorded at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the solution. We amortize capitalized costs over five years.

Under ASC 350-40, software development costs related to preliminary project activities and post-implementation and maintenance activities are expensed as incurred. We capitalize direct costs related to application development activities that are probable to result in additional functionality. Capitalized costs are amortized on a straight-line basis over five years. We test for impairment whenever events or changes in circumstances that could impact recoverability occur.

Table of Content

A summary of software development costs, net is as follows:


	2021				2020
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization

Software to be sold, leased or marketed	$	2,751,960	$	1,985,051	$	2,610,476	$	1,788,019
Software delivered exclusively as a service	474,712		241,264		385,168		198,276

Total	$	3,226,672	$	2,226,315	$	2,995,644	$	1,986,295

Software development costs, net			$	1,000,357			$	1,009,349

Estimated aggregate amortization expense for each of the next five years is as follows:


(In thousands)

2022	$	280,626
2023	247,172
2024	201,507
2025	146,610
2026	90,212

Information regarding our software development costs is included in the following table:


	For the Years Ended
(In thousands)	2021		2020		2019

Software development costs	$	828,502	$	796,971	$	783,593
Capitalized software development costs	(308,026)		(295,277)		(273,871)
Amortization of capitalized software development costs	261,798		247,313		227,414
Net realizable value charges	53,721		—		—

Total software development expense	$	835,995	$	749,007	$	737,136

In 2021, we recorded pre-tax charges of $54 million to reduce the carrying amount of certain capitalized software development costs to estimated net realizable value.

(8) Business Acquisitions

2021 Acquisition

On April 1, 2021, we acquired Kantar Health, a division of Kantar Group. Kantar Health provides data, analytics, commercial research, and consulting services to the life sciences industry. We believe this acquisition complements our existing Data-as-a-Service efforts as it provides a meaningful entry into the pharmaceutical market through Kantar Health's existing clients and their leadership team with important industry experience and relationships. These factors, combined with the synergies and economies of scale expected, are the basis for the acquisition and comprise the resulting goodwill recorded.

Consideration for the acquisition was a base cash purchase price of $375 million. The base purchase price was subject to post-closing adjustments for working capital and certain other adjustments, as specified in the Securities Purchase Agreement dated December 16, 2020, as amended.

Our acquisition of Kantar Health was treated as a purchase in accordance with ASC 805, Business Combinations ("ASC 805"), which requires allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the transaction.

Table of Content

The final allocation of purchase price was as follows:


(In thousands)	Allocation Amount

Cash and cash equivalents	$	15,311
Receivables, net	32,616
Prepaid expenses and other	8,881
Property and equipment, net	1,198
Right-of-use assets	1,939
Goodwill	226,232
Intangible assets, net:
Customer relationships	143,100
Existing technologies	39,700
Trade names	10,200
Other assets	428
Accounts payable	(36,748)
Deferred revenue	(35,698)
Accrued payroll and tax withholdings	(11,172)
Other current liabilities	(3,189)
Deferred income taxes	(11,733)
Other liabilities	(10,250)

Total purchase price	$	370,815

The fair values of the acquired intangible assets were estimated by applying the income approach. Such estimations required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that we estimated would be used by a market participant in valuing these assets, projections of revenues and cash flows, and client attrition rates, among others. The acquired intangible assets are being amortized over a weighted-average period of 13 years. Refer to Note (12) for further information about the fair value level hierarchy.

The goodwill of $226 million was allocated among our Domestic and International operating segments, as shown in Note (10), with approximately $170 million of such goodwill expected to be deductible for tax purposes.

Our consolidated statement of operations for the year ended December 31, 2021 includes revenues of $148 million attributable to the acquired business since the April 1, 2021 acquisition date. The earnings contribution from the acquired business for the year ended December 31, 2021 was not material to our consolidated financial statements. Pro forma results of operations, assuming the acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to our results.

2020 Acquisitions

On April 1, 2020, we acquired a consulting company specializing in providing cybersecurity solutions to clients in the healthcare industry, for cash consideration of $34 million. We believe this acquisition enhanced our resource capabilities and growth opportunities for our cybersecurity solution offerings. These factors, combined with the synergies and economies of scale expected, are the basis for the acquisition and comprise the resulting goodwill recorded.

On October 19, 2020, we acquired a software company that offered a patient referral management solution to clients within the healthcare industry, for cash consideration of $15 million. We believe this acquisition enhanced our portfolio of offerings on our HealtheIntent platform. This factor, combined with the synergies and economies of scale expected, are the basis for the acquisition and comprise the resulting goodwill recorded.

These acquisitions were treated as purchases in accordance with ASC 805, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transactions.

Table of Content

The aggregate final allocation of purchase price for our 2020 acquisitions was as follows:


(In thousands)	Allocation Amount

Receivables, net	$	2,313
Inventory	863
Prepaid expenses and other	331
Property and equipment, net	114
Right-of-use assets	683
Goodwill	33,709
Intangible assets, net	16,510
Other assets	179
Accounts payable	(880)
Deferred revenue	(3,158)
Accrued payroll and tax withholdings	(501)
Other current liabilities	(713)
Deferred income taxes	(374)

Total purchase price	$	49,076

The goodwill was allocated to our Domestic operating segment, with $4 million of such goodwill expected to be deductible for tax purposes. Identifiable intangible assets primarily consist of acquired technology intangible assets and are being amortized over a weighted-average period of 8 years. The operating results from of our 2020 acquisitions were combined with our operating results subsequent to the respective purchase dates. Pro-forma results of operations, assuming these acquisitions were made at the beginning of the earliest period presented, have not been presented because the effect of these acquisitions, both individually and in the aggregate, were not material to our results.

2019 Acquisition

On October 25, 2019, we acquired all of the issued and outstanding membership interests of AbleVets, LLC, a Virginia limited liability company ("AbleVets"), for cash consideration of $76 million. AbleVets is a health IT engineering and consulting company specializing in cybersecurity, cloud and system development solutions for federal organizations. We believe this acquisition enhanced our resource capabilities and growth opportunities within our federal business. These factors, combined with the synergies and economies of scale expected from combining the operations of AbleVets with Cerner, are the basis for the acquisition and comprise the resulting goodwill recorded.

The acquisition of AbleVets was treated as a purchase in accordance with ASC 805, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction.

Table of Content

The final allocation of purchase price was as follows:


(In thousands)	Allocation Amount

Cash and cash equivalents	$	471
Receivables, net	11,690
Prepaid expenses and other	911
Property and equipment, net	1,240
Right-of-use assets	8,448
Goodwill	37,815
Intangible assets, net	37,402
Accounts payable	(5,244)
Deferred revenue	(157)
Accrued payroll and tax withholdings	(5,812)
Other current liabilities	(2,994)
Other liabilities	(8,016)

Total purchase price	$	75,754

The fair values of the acquired intangible assets were estimated by applying the income approach. Such estimations required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that we estimated would be used by a market participant in valuing these assets, projections of revenues and cash flows, and client attrition rates, among others. Refer to Note (12) for further information about the fair value level hierarchy.

The goodwill was allocated to our Domestic operating segment and is expected to be deductible for tax purposes. Identifiable intangible assets primarily consist of customer relationship intangible assets and are being amortized over a weighted-average period of 8 years. The operating results of AbleVets were combined with our operating results subsequent to the purchase date of October 25, 2019. Pro-forma results of operations, assuming this acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to our results.

(9) Gain on Sale of Businesses

Germany and Spain

On July 1, 2020, we sold certain of our business operations, primarily conducted in Germany and Spain, to affiliates of CompuGroup Medical SE & Co. KGaA ("CGM"), as a part of our portfolio management strategy. Such operations included the associates, intellectual property, client contracts, other assets, and liabilities related to our medico®, Selene®, Soarian Health Archive®, and Soarian® Integrated Care solution offerings. We received a sale price of $230 million, which was subject to post-closing adjustments for working capital and certain other adjustments.

The following table presents a reconciliation of the sale price to the net gain recognized on the disposed business operations which is included in "Gain on sale of businesses" in our consolidated statements of operations:


(In thousands)

Sale price	$	230,316
Net assets/liabilities removed	(7,934)
Transaction expenses	(5,583)
Foreign currency	1,550

Gain on sale of businesses	$	218,349

Table of Content

The following table presents a reconciliation of the sale price to the cash proceeds received from CGM which are included in "Sale of businesses" in our consolidated statements of cash flows:


(In thousands)

Sale price	$	230,316
Receivable due from CGM	(4,049)
VAT and other transaction taxes, net	(2,142)
Foreign currency	356

Cash received from sale of businesses	$	224,481

Amounts included in our consolidated balance sheets related to the disposed business operations immediately prior to the sale on July 1, 2020 were as follows:


(In thousands)	Asset/(Liability)

Receivables, net	$	8,646
Inventory	65
Prepaid expenses and other	5,993
Property and equipment, net	340
Right-of-use assets	554
Software development costs, net	5,532
Goodwill	7,692
Intangible assets, net	3,687
Accounts payable	(2,763)
Deferred revenue	(16,756)
Accrued payroll and tax withholdings	(4,545)
Other current liabilities	(511)

Net assets/(liabilities)	$	7,934

Revenue Cycle Outsourcing

On August 3, 2020, we sold certain of our revenue cycle outsourcing business operations to affiliates of R1 RCM Inc., as a part of our portfolio management strategy. Such operations included the associates, client contracts, certain other assets, and certain liabilities related to our commercial revenue cycle outsourcing services business. A net gain of $2 million was recognized on the disposed business operations and is included in "Gain on sale of businesses" in our consolidated statements of operations. Amounts included in our consolidated balance sheets related to the disposed business operations immediately prior to the sale on August 3, 2020 were not material to our consolidated financial statements.

Table of Content

(10) Goodwill and Other Intangible Assets

The changes in the carrying amounts of goodwill by segment were as follows:


(In thousands)	Domestic		International		Total

Balance at the end of 2019	$	819,735	$	63,423	$	883,158
Purchase price allocation adjustments for the AbleVets acquisition	744		—		744
Goodwill recorded in connection with 2020 business acquisitions	33,709		—		33,709
Goodwill reduction in connection with divestiture transactions	—		(7,692)		(7,692)
Foreign currency translation adjustment and other	—		4,601		4,601

Balance at the end of 2020	854,188		60,332		914,520
Goodwill recorded in connection with the Kantar Health acquisition	119,709		106,523		226,232
Foreign currency translation adjustment and other	—		(9,631)		(9,631)

Balance at the end of 2021	$	973,897	$	157,224	$	1,131,121

A summary of net intangible assets is as follows:


	2021				2020
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization

Customer lists	$	636,410	$	360,598	$	494,615	$	312,044
Purchased software	396,508		346,381		354,228		337,811
Internal use software	233,438		150,356		207,696		123,280
Trade names	52,883		33,719		42,951		28,961
Other	52,179		21,882		50,535		18,680

Total	$	1,371,418	$	912,936	$	1,150,025	$	820,776

Intangible assets, net			$	458,482			$	329,249

Amortization expense for 2021, 2020 and 2019 was $95 million, $85 million and $114 million, respectively.

Estimated aggregate amortization expense for each of the next five years is as follows:


(In thousands)

2022	$	96,281
2023	86,863
2024	79,985
2025	38,916
2026	20,769

Table of Content

(11) Long-term Debt

The following is a summary of indebtedness outstanding:


(In thousands)	2021		2020

Credit agreement loans due December 30, 2026	$	600,000	$	600,000
Senior notes:
Series 2021-A due March 24, 2026	100,000		—
Series 2021-B due March 24, 2031	400,000		—
Series 2020-A due March 11, 2030	300,000		300,000
Series 2015-A due February 15, 2022	225,000		225,000
Series 2015-B due February 14, 2025	200,000		200,000
Other	11,662		11,662

Total indebtedness	1,836,662		1,336,662
Less: debt issuance costs	(406)		(593)

Indebtedness, net	1,836,256		1,336,069
Less: current installments of long-term debt	(225,000)		—

Long-term debt	$	1,611,256	$	1,336,069

Credit Agreement

On December 30, 2021, we amended and restated our revolving credit facility by entering into a Fourth Amended and Restated Credit Agreement (the "Credit Agreement") with a syndicate of lenders. The Credit Agreement is a five-year revolving credit facility expiring on December 30, 2026, with two one-year extension options that are subject to lender approval. The Credit Agreement includes: (a) a revolving credit loan facility of up to $1.225 billion at any time outstanding, and (b) a letter of credit facility of up to $200 million at any time outstanding (which is a sub-facility of the $1.225 billion revolving credit loan facility). The Credit Agreement also includes an accordion feature allowing an increase of the credit facility of up to an additional $500 million ($1.725 billion in the aggregate) at any time outstanding, subject to lender participation and the satisfaction of specified conditions. Prepayment of borrowings outstanding under the Credit Agreement is permitted at any time. Proceeds may be used for working capital and general corporate purposes, including but not limited to certain business acquisitions and purchases under our share repurchase programs. The Credit Agreement provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends, and contains certain leverage and interest coverage covenants.

Generally, interest on revolving credit loans is payable at a variable rate based on LIBOR, prime, or the U.S. federal funds rate, plus a spread that varies depending on leverage ratios maintained. Unused commitment, letter of credit, and other fees are also payable under the Credit Agreement. At December 31, 2021 and December 31, 2020, the interest rate on revolving credit loans outstanding was 0.90% and 0.95%, respectively, based on LIBOR plus the applicable spread.

As of December 31, 2021, we had outstanding revolving credit loans and letters of credit of $600 million and $18 million, respectively; which reduced our available borrowing capacity to $607 million under the Credit Agreement.

Interest Rate Swap

We are exposed to market risk from fluctuations in the variable interest rates on outstanding indebtedness under our Credit Agreement. In order to manage this exposure, we have entered into an interest rate swap agreement, with an initial notional amount of $600 million, to hedge the variability of cash flows associated with such interest obligations through May 2024. The interest rate swap has an effective start date of May 13, 2019, and is designated as a cash flow hedge, which effectively fixes the interest rate on the hedged indebtedness under our Credit Agreement at 3.06% through May 2024. At December 31, 2021 and December 31, 2020, this swap was in a net liability position with an aggregate fair value of $17 million and $37 million, respectively; which is presented in our consolidated balance sheets in "Other current liabilities". We classify fair value measurements of our interest rate swap as Level 2, as further described in Note (12).

Table of Content

Our interest rate swap agreement is accounted for in accordance with ASC Topic 815, Derivatives and Hedging. Such agreement is designated as a cash flow hedge and considered to be highly effective under hedge accounting principles. Therefore, the ~~cost method~~swap agreement is recognized in our consolidated balance sheets as either an asset or liability, measured at fair value. Changes in the fair value of ~~accounting.~~

~~Concurrently~~the swap agreement are initially recorded in accumulated other comprehensive loss, net and then subsequently recognized in our consolidated statements of operations in the periods in which earnings are affected by the hedged item. All cash flows associated with the ~~execution~~swap agreement are classified as operating activities in our consolidated statements of cash flows.

Series 2021 Senior Notes

We entered into a Master Note Agreement on November 11, 2019, and subsequently amended on October 8, 2020 (collectively and as amended, the ~~SPA, we announced a strategic operating relationship with Lumeris Healthcare Outcomes, LLC ("Lumeris"~~"2019 Shelf Agreement"), ~~a subsidiary of Essence Group,~~ pursuant to which we ~~will collaborate~~may issue and sell up to ~~bring to market an EHR-agnostic offering,~~ ~~Maestro Advantage~~^TM, designed to help providers who participate in value-based arrangements, including Medicare Advantage and provider-sponsored health plans, control costs and improve outcomes. Additionally, we sold certain solutions to Lumeris for an aggregate ~~contract value~~principal amount of ~~$28~~$1.80 billion of unsecured senior promissory notes. In March 2021, we issued $500 million aggregate principal amount of unsecured senior notes (the "Series 2021 Senior Notes"), pursuant to the 2019 Shelf Agreement. The issuance consisted of $100 million of 2.00% Series 2021-A Notes due March 24, 2026 and $400 million of 2.59% Series 2021-B Notes due March 24, 2031. Interest on the Series 2021 Senior Notes is payable semiannually on each March 24 and September 24, commencing September 24, 2021, and the principal balance is due at maturity. The Company may prepay at any time all, or any part of, the outstanding principal amount of the Series 2021 Senior Notes, subject to the payment of a make-whole amount.

2020 Senior Notes

In March 2020, we issued $300 million aggregate principal amount of 2.50% senior unsecured Series 2020-A notes (the "Series 2020-A Notes") due March 11, 2030, pursuant to the 2019 Shelf Agreement. Interest on the Series 2020-A Notes is payable semiannually on each March 11 and September 11, commencing September 11, 2020, and the principal balance is due at maturity. The Company may prepay at any time all, or any part of, the outstanding principal amount of the Series 2020-A Notes, subject to the payment of a make-whole amount.

The Series 2021 Senior Notes and Series 2020-A Notes are subject to the terms of the 2019 Shelf Agreement, which contains customary events of default and covenants related to limitations on indebtedness and transactions with affiliates and the maintenance of certain financial ratios. As of the date of this filing, $1.00 billion remains available for sale under the 2019 Shelf Agreement, which is uncommitted and subject to participation by the purchasers.

2015 Senior Notes

On December 4, 2014, we entered into a Master Note Purchase Agreement (the "Master Note Purchase Agreement") with the Purchasers listed therein, pursuant to which we ~~recognized $5~~may issue and sell up to an aggregate principal amount of $1.50 billion of unsecured senior promissory notes to those Purchasers electing to purchase. In January 2015, we issued $500 million aggregate principal amount of unsecured Senior Notes ("Senior Notes"), pursuant to the Master Note Purchase Agreement. The issuance consisted of $225 million of 3.18% Series 2015-A Notes due February 15, 2022, $200 million of 3.58% Series 2015-B Notes due February 14, 2025, and $75 million in floating rate Series 2015-C Notes due February 15, 2022. Interest is payable semiannually on February 15th and August 15th in each year, commencing on August 15, 2015 for the Series 2015-A Notes and Series 2015-B Notes. The Master Note Purchase Agreement contains certain leverage and interest coverage ratio covenants and provides certain restrictions on our ability to borrow, incur liens, sell assets, and other customary terms. Proceeds from the Senior Notes are available for general corporate purposes. As of the date of this filing, the remaining $1.00 billion available for sale is uncommitted and subject to participation by the Purchasers under the Master Note Purchase Agreement.

On February 15, 2022, we repaid our $225 million of Series 2015-A Notes due February 15, 2022.

In March 2018, we repaid our $75 million floating rate Series 2015-C Notes due February 15, 2022.

Other

Other indebtedness includes estimated amounts payable through September 1, 2025, under an agreement entered into in September 2015.

Table of Content

Covenant Compliance

As of December 31, 2021, we were in compliance with all debt covenants.

Maturities

Maturities of indebtedness outstanding at the end of 2021 are as ~~revenue in 2018.~~follows:


(In thousands)	Credit Agreement Loans		Senior Notes		Other		Total

2022	$	—	$	225,000	$	—	$	225,000
2023	—		—		—		—
2024	—		—		—		—
2025	—		200,000		11,662		211,662
2026	600,000		100,000		—		700,000
2027 and thereafter	—		700,000		—		700,000

Total	$	600,000	$	1,225,000	$	11,662	$	1,836,662

~~(5)~~

(12) Fair Value Measurements

We determine fair value measurements used in our consolidated financial statements based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

•Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

•Level 3 – Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table details our ~~financial assets~~investments in available-for-sale debt securities measured and recorded at fair value on a recurring basis at the end of ~~2018~~:2021:


(In thousands)
		Fair Value Measurements Using
Description	Balance Sheet Classification	Level 1		Level 2		Level 3

Money market funds	Cash equivalents	$	149,429	$	—	$	—
Time deposits	Cash equivalents	—		35,342		—
Commercial paper	Cash equivalents	—		77,850		—
Government and corporate bonds	Cash equivalents	—		5,000		—
Time deposits	Short-term investments	—		25,598		—
Commercial paper	Short-term investments	—		56,986		—
Government and corporate bonds	Short-term investments	—		170,038		—
Government and corporate bonds	Long-term investments	—		31,018		—

Table of Content

(In thousands)

Fair Value Measurements Using
Description Balance Sheet Classification Level 1 Level 2 Level 3

Money market funds Cash equivalents $ 76,471
$ —
$ —
Time deposits Cash equivalents —
71,461
—
Commercial paper Cash equivalents —
10,000
—
Time deposits Short-term investments —
31,947
—
Commercial paper Short-term investments —
75,354
—
Government and corporate bonds Short-term investments —
293,984
—
Government and corporate bonds Long-term investments —
18,192
—

The following table details our ~~financial assets~~investments in available-for-sale debt securities measured and recorded at fair value on a recurring basis at the end of ~~2017~~:2020:


(In thousands)
		Fair Value Measurements Using
Description	Balance Sheet Classification	Level 1		Level 2		Level 3

Money market funds	Cash equivalents	$	40,027	$	—	$	—
Time deposits	Cash equivalents	—		36,756		—
Commercial paper	Cash equivalents	—		61,000		—
Time deposits	Short-term investments	—		28,302		—
Commercial paper	Short-term investments	—		263,993		—
Government and corporate bonds	Short-term investments	—		150,178		—
Government and corporate bonds	Long-term investments	—		137,078		—

(In thousands)
Fair Value Measurements Using
Description Balance Sheet Classification Level 1 Level 2 Level 3

Money market funds Cash equivalents $ 99,472
$ —
$ —
Time deposits Cash equivalents —
60,226
—
Government and corporate bonds Cash equivalents —
850
—
Time deposits Short-term investments —
40,186
—
Commercial paper Short-term investments —
147,509
—
Government and corporate bonds Short-term investments —
247,149
—
Government and corporate bonds Long-term investments —
184,452
—
Our investments in equity securities with readily determinable fair values accounted for in accordance with ASC 321 were measured and recorded at fair value on a recurring basis using a Level 2 valuation. The fair value of such arrangements was based on quoted prices in active markets, reduced by a percentage reflecting a discount for lack of marketability.

Our interest rate swap agreement is measured and recorded at fair value on a recurring basis using a Level 2 valuation. The fair value of such agreement is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instrument is held, the derivative is classified as Level 2 in the hierarchy.

We estimate the fair value of our long-term, fixed rate debt using a Level 3 discounted cash flow analysis based on current borrowing rates for debt with similar maturities. We estimate the fair value of our long-term, variable rate debt using a Level 3 discounted cash flow analysis based on LIBOR rate forward curves. The fair value of our long-term debt, including current maturities, at the end of ~~2018~~2021 and ~~2017~~2020 was approximately ~~$431 million~~$1.87 billion and ~~$519 million,~~$1.36 billion, respectively. The carrying amount of such debt at the end of ~~2018~~2021 and ~~2017~~2020 was ~~$425 million~~$1.83 billion and ~~$500 million,~~$1.33 billion, respectively.

~~(6) Property and Equipment~~(13) Other Income (Loss)

A summary of ~~property, equipment~~non-operating income and ~~leasehold improvements stated at cost, less accumulated depreciation and amortization,~~expense is as follows:


	For the Years Ended
(In thousands)	2021		2020		2019

Interest income	$	25,975	$	28,901	$	38,227
Interest expense	(43,474)		(29,080)		(14,469)
Gain on sale of equity investment	—		75,834		15,509
Unrealized gain on equity investment	—		—		14,112
Other	8,683		1,251		464

Other income (loss), net	$	(8,816)	$	76,906	$	53,843

(In thousands) Depreciable Lives (Yrs) 2018 2017

Computer and communications equipment 1 — 5 $ 1,686,747
$ 1,511,445
Land, buildings and improvements 12 — 50 1,239,122
1,051,658
Leasehold improvements 1 — 15 214,697
216,586
Furniture and fixtures 5 — 12 132,180
123,945
Capital lease equipment 3 — 5 —
3,197
Other equipment 3 — 20 1,255
1,161

3,274,001
2,907,992

Less accumulated depreciation and leasehold amortization 1,530,426
1,304,673

Total property and equipment, net $ 1,743,575
$ 1,603,319

Table of Content

(14) Income Taxes

~~Depreciation~~

Income tax expense (benefit) for 2021, 2020 and ~~leasehold amortization expense for~~ ~~2018~~, ~~2017~~ ~~and~~ ~~2016~~ ~~was $323 million,~~ ~~$290 million~~ ~~and~~ ~~$246 million, respectively.~~2019 consists of the following:


	For the Years Ended
(In thousands)	2021		2020		2019

Current:
Federal	$	95,526	$	131,741	$	45,575
State	20,968		30,565		13,429
Foreign	20,019		47,577		14,929
Total current expense	136,513		209,883		73,933
Deferred:
Federal	(2,646)		(4,469)		30,353
State	7,568		(96)		11,747
Foreign	2,429		6,067		9,025
Total deferred expense	7,351		1,502		51,125

Total income tax expense	$	143,864	$	211,385	$	125,058

~~(7) Goodwill and Other Intangible Assets~~

~~The changes in~~Temporary differences between the financial statement carrying amounts and tax basis of ~~goodwill were as follows:~~

(In thousands) Domestic Global Total

Balance at the end of 2016 $ 782,664
$ 61,536
$ 844,200
Foreign currency translation adjustment and other —
8,805
8,805

Balance at the end of 2017 782,664
70,341
853,005
Foreign currency translation adjustment and other —
(5,461 ) (5,461 )

Balance at the end of 2018 $ 782,664
$ 64,880
$ 847,544

~~A summary~~assets and liabilities that give rise to significant portions of ~~net intangible assets is as follows:~~

2018 2017
(In thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

Customer lists $ 465,909
$ 229,545
$ 472,697
$ 195,190
Purchased software 361,964
311,738
369,728
282,141
Internal use software 143,520
78,633
114,574
60,924
Trade names 40,025
21,275
41,224
16,961
Other 47,905
12,827
46,581
9,835

Total $ 1,059,323
$ 654,018
$ 1,044,804
$ 565,051

Intangible assets, net $ 405,305
$ 479,753

~~Amortization expense for~~ ~~2018~~, ~~2017~~ ~~and~~ ~~2016~~ ~~was $109 million,~~ ~~$118 million~~ ~~and~~ ~~$118 million, respectively.~~

~~Estimated aggregate amortization expense for each of the next five years is as follows:~~

(In thousands)

2019 $ 113,566
2020 65,184
2021 58,314
2022 53,071
2023 43,927

~~(8) Software Development~~

~~Information regarding our software development costs is included in the following table:~~

For the Years Ended
(In thousands) 2018 2017 2016

Software development costs $ 747,128
$ 705,944
$ 704,882
Capitalized software development costs (273,693 ) (274,148 ) (293,696 )
Amortization of capitalized software development costs 210,228
173,250
140,232

Total software development expense $ 683,663
$ 605,046
$ 551,418

~~Accumulated amortization as of~~deferred income taxes at the end of ~~2018~~2021 and ~~2017~~ ~~was $1.5 billion and~~ ~~$1.3 billion, respectively.~~

~~(9) Long-term Debt and Capital Lease Obligations~~

~~The following is a summary of indebtedness outstanding:~~

(In thousands) 2018 2017

Senior Notes $ 425,000
$ 500,000
Capital lease obligations 4,914
13,068
Other 14,162
14,162

  Debt and capital lease obligations 444,076
527,230
Less: debt issuance costs (360 ) (515 )

  Debt and capital lease obligations, net 443,716
526,715
Less: current portion (4,914 ) (11,585 )

  Long-term debt and capital lease obligations $ 438,802
$ 515,130

~~Senior Notes~~

In January 2015, we issued $500 million aggregate principal amount of unsecured Senior Notes ("Senior Notes"), pursuant to a Master Note Purchase Agreement dated December 4, 2014. The issuance consisted of $225 million of 3.18% Series 2015-A Notes due February 15, 2022, $200 million of 3.58% Series 2015-B Notes due February 14, 2025, and $75 million in floating rate Series 2015-C Notes due February 15, 2022. Interest is payable semiannually on February 15th and August 15th in each year, commencing on August 15, 2015 for the Series 2015-A Notes and Series 2015-B Notes. The debt issuance costs in the table above2020 relate to the ~~issuance~~following:


(In thousands)	2021		2020

Deferred tax assets:
Accrued expenses	$	56,913	$	63,080
Tax credits and separate return net operating losses	12,939		17,976
Contract and service revenues and costs	28,001		9,383
Share-based compensation	30,216		49,650
Lease liability	21,548		23,928
Other	15,070		17,554
Gross deferred tax assets	164,687		181,571
Less: Valuation Allowance	(9,575)		(3,384)
Total deferred tax assets	155,112		178,187

Deferred tax liabilities:
Software development costs	(265,384)		(270,041)
Property and equipment	(204,203)		(204,568)
Prepaid expenses	(39,499)		(37,547)
Lease right-of-use assets	(17,900)		(20,639)
Other	(11,253)		(9,260)
Total deferred tax liabilities	(538,239)		(542,055)

Net deferred tax liability	$	(383,127)	$	(363,868)

At the end of these Senior Notes. The Master Note Purchase Agreement contains certain leverage and interest coverage ratio covenants and provides certain restrictions on our ability to borrow, incur liens, sell assets, and other customary terms. Proceeds2021, we had net operating loss carry-forwards from ~~the Senior Notes~~foreign jurisdictions of $19 million that are available to offset future taxable income with no expiration. In addition, we had a state income tax credit carry-forward of $8 million available to offset income tax liabilities through December 31, 2030. During 2020, we recorded a valuation allowance of $3 million against the net operating loss carry-forward in a foreign jurisdiction due to a change in circumstances. During 2021, we recorded a valuation allowance of $6 million against the state income tax credit carry-forward due to a change in circumstances.

Table of Content

At the end of 2021, we had not provided tax on the cumulative undistributed earnings of certain foreign subsidiaries of approximately $115 million, because it is our intention to reinvest these earnings indefinitely. The unrecognized deferred tax liability relating to these earnings is approximately $6 million.

The effective income tax rates for ~~general corporate purposes.~~

~~In March 2018, we repaid our $75 million floating rate Series 2015-C Notes due February 15, 2022.~~

~~Capital Leases~~

~~Our capital lease obligations are primarily related~~2021, 2020, and 2019 were 21%, 21%, and 19%, respectively. A reconciliation of the effective income tax rates to ~~the procurement of hardware and health care devices.~~

~~Other~~

~~Other indebtedness includes estimated amounts payable through September 2025, under an agreement entered into in September 2015.~~

~~Credit Facility~~

In October 2015, we amended and restated our revolving credit facility. The amended facility provides a $100 million unsecured revolving line of credit for working capital purposes, which includes a letter of credit facility, expiring in October 2020. We have the ability to increase the maximum capacity to $200 million at any time during the facility's term, subject to lender participation. Interest is payable at a rate based on prime, LIBOR, or the U.S. federal ~~funds~~statutory rate plus a spread that varies depending on the leverage ratios maintained. The agreement provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends and contains certain cash flow and liquidity covenants. Asof 21% is follows:


	For the Years Ended
(In thousands)	2021		2020		2019

Tax expense at statutory rates	$	146,887	$	208,209	$	137,447
State income tax, net of federal benefit	15,938		24,234		18,561
Tax credits	(19,739)		(21,254)		(22,750)
Foreign rate differential	(8,940)		1,973		(6,328)
Share-based compensation	7,351		(1,303)		(8,090)
Permanent differences	1,053		(6,534)		3,278
Other, net	1,314		6,060		2,940

Total income tax expense	$	143,864	$	211,385	$	125,058

A reconciliation of the ~~end~~beginning and ending amount of ~~2018, we had no outstanding borrowings under this facility; however, we had $30~~unrecognized tax benefit is presented below:


(In thousands)	2021		2020		2019

Unrecognized tax benefit - beginning balance	$	22,204	$	19,125	$	18,688
Gross decreases - tax positions in prior periods	(7,252)		(3,964)		(2,383)
Gross increases - tax positions in prior periods	8,235		312		1,220
Gross increases - tax positions in current year	6,479		6,595		1,607
Gross increases - acquisition of businesses	5,112		—		—
Currency translation	(439)		136		(7)

Unrecognized tax benefit - ending balance	$	34,339	$	22,204	$	19,125

If recognized, $29 million of ~~outstanding letters~~the unrecognized tax benefit will favorably impact our effective tax rate. It is reasonably possible that our unrecognized tax benefits may decrease by up to $12 million within the next twelve months. Our federal returns have been examined by the Internal Revenue Service through 2016. Our federal returns are open for examination for 2017 and thereafter.We have various state and foreign returns under examination.

The ending amounts of ~~credit, which reduced~~accrued interest and penalties related to unrecognized tax benefits were $6 million in 2021 and $5 million in 2020. We classify interest and penalties as income tax expense in our ~~available borrowing capacity~~consolidated statement of operations, and our income tax expense for 2021, 2020, and 2019 each included $1 million of interest and penalties.

The foreign portion of our earnings before income taxes was $136 million, $208 million, and $109 million in 2021, 2020, and 2019 respectively, and the remaining portion was domestic.

Table of Content

(15) Earnings Per Share

A reconciliation of the numerators and the denominators of the basic and diluted per share computations are as follows:


	2021					2020					2019
	Earnings		Shares	Per-Share		Earnings		Shares	Per-Share		Earnings		Shares	Per-Share
(In thousands, except per share data)	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount

Basic earnings per share:
Income available to common shareholders	$	555,596	298,725	$	1.86	$	780,088	306,669	$	2.54	$	529,454	318,229	$	1.66
Effect of dilutive securities:
Stock options, non-vested shares and share units	—		2,548			—		2,467			—		3,006
Diluted earnings per share:
Income available to common shareholders including assumed conversions	$	555,596	301,273	$	1.84	$	780,088	309,136	$	2.52	$	529,454	321,235	$	1.65

Options to ~~$70 million.~~

~~Covenant Compliance~~

Aspurchase 0.4 million, 4.1 million and 9.6 million shares of ~~December 29, 2018, we~~common stock at per share prices ranging from $52.32 to $76.49, $52.32 to $76.49 and $52.32 to $75.83, were ~~in compliance with all debt covenants.~~

~~Minimum annual payments under existing capital lease obligations and maturities of indebtedness~~ outstanding at the end of ~~2018~~2021, 2020 and 2019, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

(16) Share-Based Compensation and Equity

Stock Option and Equity Plans

At the end of 2021, we had two fixed stock option and equity plans in effect for associates and directors. This includes one plan from which we could issue grants, the Cerner Corporation 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"); and one plan from which no new grants are permitted, but some awards remain outstanding (Plan E).

Awards under the Omnibus Plan may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, performance grants and bonus shares. At the end of 2021, 12.5 million shares remain available for awards. Stock options granted under the Omnibus Plan are exercisable at a price not less than fair market value on the date of grant. Stock options under the Omnibus Plan typically vest over a period of 4 or 5 years and are exercisable for periods of up to 10 years.

Stock Options

The fair market value of each stock option award granted in 2020 and 2019 was estimated on the date of grant using the Black-Scholes-Merton ("BSM") pricing model. The pricing model requires the use of the following estimates and assumptions:

•Expected volatilities under the BSM model are based on an equal weighting of implied volatilities from traded options on our common shares and historical volatility.

•The expected term of stock options granted is the period of time for which an option is expected to be outstanding beginning on the grant date. Our calculation of expected term takes into account the contractual term of the option, as well as the effects of employees' historical exercise patterns; groups of associates (executives and non-executives) that have similar historical behavior are considered separately for valuation purposes.

•The risk-free rate is based on the zero-coupon U.S. Treasury bond with a term consistent with the expected term of the awards.

Table of Content

The weighted-average assumptions used to estimate the fair market value of stock options were as follows:


	For the Years Ended
	2020		2019

Expected volatility (%)	24.5	%	25.0	%
Expected dividend rate (%)	1	%	1	%
Expected term (yrs)	6		7
Risk-free rate (%)	1.1	%	2.4	%

Stock option activity for 2021 was as follows:


(In thousands, except per share and term data)	Number of Shares	Weighted- Average Exercise Price (Per Share)		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Yrs)
Outstanding at beginning of year	10,204	$	58.59
Granted	—	—
Exercised	(5,276)	57.75
Forfeited and expired	(258)	57.32
Outstanding at end of year	4,670	59.61		$	155,331	4.64

Exercisable at end of year	3,365	$	58.85	$	114,503	4.02


	For the Years Ended
(In thousands, except for grant date fair values)	2021		2020		2019

Weighted-average grant date fair values	$	—	$	16.64	$	17.51

Total intrinsic value of options exercised	$	110,916	$	115,607	$	155,202

Cash received from exercise of stock options	304,078		253,605		258,036

Tax benefit realized upon exercise of stock options	24,791		27,103		36,629

At the end of 2021, there was $14 million of total unrecognized compensation cost related to stock options granted under all plans. That cost is expected to be recognized over a weighted-average period of 1.20 years.

Non-vested Shares and Share Units

Non-vested shares and share units are valued at fair market value on the date of grant and will vest provided the recipient, if a member of the Board of Directors, has continuously served on the Board of Directors through such vesting date or, in the case of an associate, provided that service and/or performance measures are attained. The expense associated with these grants is recognized over the period from the date of grant to the vesting date.

Table of Content

Non-vested share and share unit activity for 2021 was as follows:


(In thousands, except per share data)	Number of Shares	Weighted-Average Grant Date Fair Value Per Share

Outstanding at beginning of year	4,131	$	68.05
Granted	2,872	76.01
Vested	(2,681)	68.24
Forfeited	(678)	72.53

Outstanding at end of year	3,644	$	73.35


	For the Years Ended
(In thousands, except for grant date fair values)	2021		2020		2019

Weighted average grant date fair values for shares granted during the year	$	76.01	$	70.12	$	66.49

Total fair value of shares vested during the year	$	202,543	$	70,355	$	30,558

At the end of 2021, there was $195 million of total unrecognized compensation cost related to non-vested share and share unit awards granted under all plans. That cost is expected to be recognized over a weighted-average period of 1.99 years.

Associate Stock Purchase Plan

We maintain an associate stock purchase plan ("ASPP"), which qualifies under Section 423 of the Internal Revenue Code. Generally, the ASPP provides our U.S. based associates the opportunity to purchase shares of our common stock at a 15% discount. Purchases of shares are made on the open market and subsequently reissued to participants of the ASPP. The difference between the open market purchase price and the cost to the participants is recognized as compensation expense, as such difference is paid by Cerner, in cash.

Share-Based Compensation Cost

Our stock option and non-vested share and share unit awards qualify for equity classification. The costs of our ASPP, along with participant contributions, are recorded as a liability until open market purchases are completed. The amounts recognized in the consolidated statements of operations with respect to stock options, non-vested shares and share units and ASPP are as follows:


	For the Years Ended
(In thousands)	2021		2020		2019

Stock option and non-vested share and share unit compensation expense	$	195,654	$	153,449	$	103,641
Associate stock purchase plan expense	5,786		5,478		6,053
Amounts capitalized in software development costs, net of amortization	(4,199)		(4,867)		(410)

Amounts charged against earnings, before income tax benefit	$	197,241	$	154,060	$	109,284

Amount of related income tax benefit recognized in earnings	$	38,623	$	30,775	$	20,967

Preferred Stock

At the end of 2021 and 2020, we had 1.0 million shares of authorized but unissued preferred stock, $0.01 par value.

Treasury Stock

Under one of our share repurchase programs, which was initially approved by our Board of Directors on May 23, 2017, and most recently amended on December 12, 2019 (the "2017 Share Repurchase Program"), the Company was authorized to repurchase up to $3.70 billion of shares of our common stock, excluding transaction costs. The repurchases

Table of Content

Capital Lease Obligations
(In thousands) Minimum Lease Payments Less: Interest Principal Senior Notes Other Total

2019 $ 5,057
$ 143
$ 4,914
$ —
$ —
$ 4,914
2020 —
—
—
—
2,500
2,500
2021 —
—
—
—
—
—
2022 —
—
—
225,000
1,100
226,100
2023 —
—
—
—
1,700
1,700
2024 and thereafter —
—
—
200,000
8,862
208,862

Total $ 5,057
$ 143
$ 4,914
$ 425,000
$ 14,162
$ 444,076
were to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers, or any combination thereof. This program was completed in the third quarter of 2021.

On April 23, 2021, our Board of Directors approved a new share repurchase program (the "2021 Share Repurchase Program"), which authorizes the Company to repurchase up to $3.75 billion in the aggregate of shares of our common stock, excluding transaction costs. The 2021 Share Repurchase Program was incremental to our 2017 Share Repurchase Program. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.

~~(10)~~

During 2021, 2020, and 2019, we repurchased 20.0 million, 10.6 million, and 18.8 million shares for total consideration of $1.50 billion, $757 million, and $1.30 billion, respectively, under our share repurchase programs. The shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired. As of December 31, 2021, $3.18 billion remains available for repurchase under the 2021 Share Repurchase Program.

Dividends

Cash dividend activity in 2021, 2020, and 2019 was as follows:

Date Declared

Date of Record

Payment Date

Amount per Share

May 29, 2019

June 18, 2019

July 26, 2019

$0.18

September 10, 2019

September 25, 2019

October 9, 2019

$0.18

December 12, 2019

December 27, 2019

January 9, 2020

$0.18

March 19, 2020

April 3, 2020

April 17, 2020

$0.18

May 21, 2020

June 5, 2020

July 17, 2020

$0.18

September 10, 2020

September 25, 2020

October 13, 2020

$0.18

December 10, 2020

December 28, 2020

January 12, 2021

$0.22

March 25, 2021

April 6, 2021

April 20, 2021

$0.22

May 19, 2021

June 28, 2021

July 13, 2021

$0.22

September 9, 2021

September 27, 2021

October 12, 2021

$0.22

December 9, 2021

December 27, 2021

January 11, 2022

$0.27

In connection with the declaration of such dividends, our non-vested shares and share units are entitled to dividend equivalents, which will be payable to the holder subject to, and upon vesting of, the underlying awards. Our outstanding stock options are not entitled to dividend or dividend equivalents. At December 31, 2021 and December 31, 2020, our consolidated balance sheets included liabilities for dividends payable of $81 million and $69 million, respectively, which are included in "Other current liabilities".

Table of Content

Accumulated Other Comprehensive Loss, Net (AOCI)

The components of AOCI, net of tax, were as follows:


	Foreign currency translation adjustment and other		Unrealized loss on cash flow hedge		Unrealized holding gain (loss) on available-for-sale investments		Total
(In thousands)

Balance at December 29, 2018	$	(102,939)	$	—	$	(613)	$	(103,552)
Other comprehensive income (loss) before reclassifications	(3,408)		(13,078)		901		(15,585)
Amounts reclassified from AOCI	—		500		(23)		477

Balance at December 28, 2019	(106,347)		(12,578)		265		(118,660)

Other comprehensive income (loss) before reclassifications	12,897		(23,687)		194		(10,596)
Amounts reclassified from AOCI	—		8,477		(25)		8,452

Balance at December 31, 2020	(93,450)		(27,788)		434		(120,804)

Other comprehensive income (loss) before reclassifications	(21,180)		4,241		(440)		(17,379)
Amounts reclassified from AOCI	—		10,586		39		10,625

Balance at December 31, 2021	$	(114,630)	$	(12,961)	$	33	$	(127,558)

The effects on net earnings of amounts reclassified from AOCI were as follows:


(In thousands)		Years Ended
AOCI Component	Location	2021		2020		2019

Unrealized loss on cash flow hedge	Other income, net	$	(13,150)	$	(10,622)	$	(624)
	Income taxes	2,564		2,145		124

	Net of tax	(10,586)		(8,477)		(500)

Unrealized holding gain (loss) on available-for-sale investments	Other income, net	(48)		31		29
	Income taxes	9		(6)		(6)

	Net of tax	(39)		25		23

Total amount reclassified, net of tax		$	(10,625)	$	(8,452)	$	(477)

Table of Content

(17) Defined Contribution Retirement Plans

We maintain certain defined contribution retirement plans (the "Plans"), which qualify under Section 401(k) of the Internal Revenue Code. Generally, the Plans allow our U.S. associates to make salary contributions to the Plans, subject to annual limitations determined by the Internal Revenue Service. The Plans provide for certain discretionary matches on behalf of the participants for which we recognized expenses of $38 million, $61 million and $59 million in 2021, 2020 and 2019, respectively.

(18) Purchase Obligations

We have purchase commitments with various vendors, under agreements through 2030. Aggregate future payments under these commitments are as follows:


(In thousands)	Purchase Obligations

2022	$	54,308
2023	54,308
2024	40,933
2025	45,819
2026	52,054
2027 and thereafter	368,882

	$	616,304

(19) Contingencies

We accrue estimates for resolution of any legal and other contingencies when losses are probable and reasonably estimable in accordance with ASC 450, Contingencies ("ASC 450").

The terms of our software license agreements with our clients generally provide for a limited indemnification of such clients against losses, expenses and liabilities arising from third party claims based on alleged infringement by our solutions of an intellectual property right of such third party. The terms of such indemnification often limit the scope of and remedies for such indemnification obligations and generally include a right to replace or modify an infringing solution. To date, we have not had to reimburse any of our clients for any judgments or settlements to third parties related to these indemnification provisions pertaining to intellectual property infringement claims. For several reasons, including the lack of a sufficient number of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under the terms of the corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

~~Refer to Note (3) with regard to our dispute with Fujitsu.~~

In addition to commitments and obligations in the ordinary course of business, we are involved in various other legal proceedings and claims that arise in the ordinary course of business, including for example, employment and client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties. Many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages. At this time, we do not believe the range of potential losses under such claims to be material to our consolidated financial statements.

No less than quarterly, and as facts and circumstances change, we review the status of each significant matter underlying a legal proceeding or claim and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is ~~made.~~made, which may prove to be incomplete or inaccurate or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions. Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any one or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our business, results of operations, cash flows or financial condition.

~~(11) Other Income~~

~~A summary~~On May 16, 2019, Steward Health Care System LLC ("Steward") filed a lawsuit in the Chancery Court for Davidson County, Tennessee against the Company. The Company believes Steward's allegations arise out of ~~non-operating income~~Steward's disinterest in following the contract between the Company and ~~expense is as follows:~~

For the Years Ended
(In thousands) 2018 2017 2016

Interest income $ 34,211
$ 18,933
$ 15,252
Interest expense (7,987 ) (8,012 ) (4,479 )
Other (158 ) (4,263 ) (3,352 )

Other income, net $ 26,066
$ 6,658
$ 7,421

~~(12) Income Taxes~~

~~Income tax expense (benefit)~~Steward's predecessor for ~~2018, 2017~~clinical and ~~2016 consists~~financial software and services after Steward closed on its acquisition of the ~~following:~~predecessor. The Company has filed a counterclaim against Steward seeking recovery of more than $42 million in unpaid invoices owed to the Company. The Company believes the dispute is in the ordinary course of business and the damages Steward asserts lack both factual and causal support. Steward has recently asserted that its damages are $300 million and advised the Company that it will seek to treble the damages. We have not concluded that a material loss related to the Steward allegations is probable, nor have we accrued a liability related to these claims. Although we believe a loss could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that the dispute is in the discovery process. We will continue to vigorously defend against these claims, and we continue to believe that we have valid grounds for recovery of the disputed client receivables. However, there can be no assurances as to the outcome of the dispute.

On March 22, 2021, Astria Health ("Astria") filed an adversary proceeding in the United States Bankruptcy Court, Eastern District of Washington against the Company. Astria's allegations largely arise out of the Company's provision of revenue

Table of Content

For the Years Ended
(In thousands) 2018 2017 2016

Current:
Federal $ 89,551
$ 37,708
$ 252,795
State 24,804
4,878
31,642
Foreign 22,009
10,156
9,030
Total current expense 136,364
52,742
293,467
Deferred:
Federal 31,129
13,676
(18,014 )
State 8,144
23,278
(2,103 )
Foreign (4,845 ) 10,455
8,600
Total deferred expense (benefit) 34,428
47,409
(11,517 )

Total income tax expense $ 170,792
$ 100,151
$ 281,950
cycle services in 2018 and 2019. The Company believes the dispute is in the ordinary course of business and the factual allegations and the damages asserted lack both factual and causal support. Astria has recently claimed damages of $96 million. We have not concluded that a material loss related to the Astria allegations is probable, nor have we accrued a liability related to these claims beyond reserving certain bankruptcy-related outstanding invoices. Although we believe a loss could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that expert discovery is not yet complete. We will continue to vigorously defend against this claim. However, there can be no assurances as to the outcome of the dispute.

~~Temporary differences between the financial statement carrying amounts and tax basis~~The terms of ~~assets~~our agreements with our clients generally provide for limited indemnification of such clients against losses, expenses and liabilities ~~that give rise to significant portions of deferred income taxes at the end of 2018 and 2017 relate to the following:~~

(In thousands) 2018 2017

Deferred tax assets:
Accrued expenses $ 31,273
$ 23,295
Tax credits and separate return net operating losses 22,826
26,304
Share-based compensation 60,901
56,263
Other 14,951
17,754
Gross deferred tax assets 129,951
123,616
Less: Valuation Allowance (1,404 ) —
Total deferred tax assets 128,547
123,616

Deferred tax liabilities:
Software development costs (229,624 ) (208,494 )
Depreciation and amortization (131,516 ) (96,492 )
Prepaid expenses (39,154 ) (21,214 )
Contract and service revenues and costs (35,933 ) (65,043 )
Other (6,199 ) (10,400 )
Total deferred tax liabilities (442,426 ) (401,643 )

Net deferred tax liability $ (313,879 ) $ (278,027 )

~~At the end of 2018, we had net operating loss carry-forwards~~arising from foreign jurisdictions of $30 million that are available to offset future taxable income with no expiration. In addition, we had a state income tax credit carry-forward of $12 million available to offset income tax liabilities through 2030. We expect to fully utilize the net operating loss and tax credit carry-forwards in future periods.

~~At the end of 2018, we had not provided tax~~third party or other claims based on, the cumulative undistributed earnings of certain foreign subsidiaries of approximately $69 million, because it is our intention to reinvest these earnings indefinitely. The unrecognized deferred tax liability relating to these earnings is approximately $15 million.

The effective income tax rates for 2018, 2017, and 2016 were 21%, 10%, and 31%, respectively. These effective rates differ from the U.S. federal statutory rate of 21% for 2018 and 35% for 2017 and 2016 as follows:

For the Years Ended
(In thousands) 2018 2017 2016

Tax expense at statutory rates $ 168,179
$ 338,495
$ 321,452
State income tax, net of federal benefit 25,321
22,214
22,644
Tax credits (19,737 ) (17,727 ) (23,881 )
Foreign rate differential (4,851 ) (26,379 ) (16,468 )
Share-based compensation (1,696 ) (62,501 ) —
Change in U.S. tax rate —
(170,999 ) —
Deemed mandatory repatriation —
25,114
—
Permanent differences 6,224
(10,700 ) (20,330 )
Other, net (2,648 ) 2,634
(1,467 )

Total income tax expense $ 170,792
$ 100,151
$ 281,950

~~H.R. 1,~~ ~~An Act to provide for reconciliation pursuant to titles II and V~~ ~~of the concurrent resolution on the budget for fiscal year 2018 ("U.S. Tax Reform"), was enacted on December 22, 2017. U.S. Tax reform provides for,~~ among other things, alleged infringement by our solutions of an intellectual property right of third parties or damages caused by data privacy breaches or system interruptions. The terms of such indemnification often limit the ~~reduction~~scope of and remedies for such indemnification obligations and generally include, as applicable, a right to replace or modify an infringing solution. For several reasons, including the lack of a sufficient number of prior indemnification claims relating to intellectual property infringement, data privacy breaches or system interruptions, the inherent uncertainty stemming from such claims, and the lack of a monetary liability limit for such claims under the terms of the ~~U.S. corporate tax rate from 35%~~corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to ~~21%, effective January 1, 2018. The impact of U.S. Tax Reform on our 2017 tax~~such indemnification provisions.

~~rate includes the impact of the revaluation of our net deferred tax liability~~In addition to ~~the lower enacted tax rate,~~commitments and the impact of mandatory deemed repatriation. U.S. Tax Reform impacts our 2018 tax rate through the reduced federal statutory tax rate, partially offset by the repeal of the permanent domestic production deduction and increases to permanently nondeductible expenses, as well as a new global intangible low-taxed income ("GILTI") inclusion. We have elected to account for GILTIobligations in the ~~period~~ordinary course of business, we are involved in ~~which it is incurred,~~various other legal proceedings and ~~therefore have~~claims that arise in the ordinary course of business, including for example, employment and client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law, breaches of contract and warranties, and compliance audits by various government agencies. Many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages. At this time, we do not ~~provided~~believe the range of potential losses under any ~~deferred tax impacts of GILTI in~~claims to be material to our consolidated financial ~~statements for 2017 or 2018.~~statements.

Relevant accounting guidance provides that the impact of the enactment of U.S. Tax Reform may be provisionally recorded in 2017 and adjusted during a measurement period of up to one year. As of December 30, 2017, we provisionally recorded certain impacts of U.S. Tax Reform including the adjustment to our net deferred tax liability arising from the reduction in the federal tax rate as well as the impact of mandatory deemed repatriation. Adjustments to these provisional amounts that we recorded in 2018 did not have a significant impact on our consolidated financial statements. Our accounting for the effects of the enactment of U.S. Tax Reform is now complete.

~~A reconciliation of the beginning and ending amount of unrecognized tax benefit is presented below:~~

(In thousands) 2018 2017 2016

Unrecognized tax benefit - beginning balance $ 15,287
$ 9,769
$ 4,878
Gross decreases - tax positions in prior periods —
(1,734 ) —
Gross increases - tax positions in prior periods 1,591
7,252
—
Gross increases - tax positions in current year 2,370
—
6,945
Settlements (541 ) —
(1,859 )
Currency translation (19 ) —
(195 )

Unrecognized tax benefit - ending balance $ 18,688
$ 15,287
$ 9,769

~~If recognized, $11 million~~Table of the unrecognized tax benefit will favorably impact our effective tax rate. It is reasonably possible that our unrecognized tax benefits may decrease by up to $11 million within the next twelve months. Our federal returns have been examined by the Internal Revenue Service through 2014. Our federal returns are open for examination for 2015 and thereafter, and our 2016 return is currently under examination.~~We have various state and foreign returns under examination.~~

The ending amounts of accrued interest and penalties related to unrecognized tax benefits were $3 million in 2018 and $2 million in 2017. We classify interest and penalties as income tax expense in our consolidated statement of operations, and our income tax expense for 2018 includes $1 million of interest and penalties.

~~The foreign portion of our earnings before income taxes was $89 million, $126 million, and $86 million in 2018, 2017, and 2016 respectively, and the remaining portion was domestic.~~

Content

~~(13) Earnings Per Share~~

~~A reconciliation of the numerators and the denominators of the basic and diluted per share computations are as follows:~~

2018 2017 2016
Earnings Shares Per-Share Earnings Shares Per-Share Earnings Shares Per-Share
(In thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount

Basic earnings per share:
Income available to common shareholders $ 630,059
330,084
$ 1.91
$ 866,978
331,373
$ 2.62
$ 636,484
337,740
$ 1.88
Effect of dilutive securities:
Stock options and non-vested shares —
3,488
—
6,626
—
5,913

Diluted earnings per share:
Income available to common shareholders including assumed conversions $ 630,059
333,572
$ 1.89
$ 866,978
337,999
$ 2.57
$ 636,484
343,653
$ 1.85

Options to purchase 12.9 million, 10.6 million and 9.4 million shares of common stock at per share prices ranging from $50.04 to $73.40, $50.04 to $73.40 and $47.38 to $73.40, were outstanding at the end of 2018, 2017 and 2016, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

~~(14) Share-Based Compensation and Equity~~

~~Stock Option and Equity Plans~~

~~As of the end of~~ ~~2018~~, we had five fixed stock option and equity plans in effect for associates and directors. This includes one plan from which we could issue grants, the Cerner Corporation 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"); and four plans from which no new grants are permitted, but some awards remain outstanding (Plans D, E, F, and G).

Awards under the Omnibus Plan may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, performance grants and bonus shares. At the end of ~~2018~~, 7.4 million shares remain available for awards. Stock options granted under the Omnibus Plan are exercisable at a price not less than fair market value on the date of grant. Stock options under the Omnibus Plan typically vest over a period of ~~five~~ ~~years and are exercisable for periods of up to 10 years.~~

~~Stock Options~~

The fair market value of each stock option award granted in 2018 is estimated on the date of grant using the Black-Scholes-Merton ("BSM") pricing model. The pricing model requires the use of the following estimates and assumptions:

~~Expected volatilities under the BSM model are based on an equal weighting of implied volatilities from traded options on our common shares and historical volatility.~~

The expected term of stock options granted is the period of time for which an option is expected to be outstanding beginning on the grant date. Our calculation of expected term takes into account the contractual term of the option, as well as the effects of employees' historical exercise patterns; groups of associates (executives and non-executives) that have similar historical behavior are considered separately for valuation purposes.

~~The risk-free rate is based on the zero-coupon U.S. Treasury bond with a term consistent with the expected term of the awards.~~

~~The weighted-average assumptions used to estimate the fair market value of stock options were as follows:~~

For the Years Ended
2018 2017 2016

Expected volatility (%) 27.0 % 26.7 % 29.4 %
Expected term (yrs) 7
7
7
Risk-free rate (%) 2.8 % 2.1 % 1.5 %

~~Stock option activity for~~ ~~2018~~ ~~was as follows:~~

(In thousands, except per share data)
Number of
Shares

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic
Value

Weighted-Average
Remaining
Contractual
Term (Yrs)
Outstanding at beginning of year 21,332
$ 49.40

Granted 3,598
58.35

Exercised (2,660 ) 35.37

Forfeited and expired (478 ) 62.46

Outstanding at end of year 21,792
52.31
$ 118,831
6.28

Exercisable at end of year 11,045
$ 44.60
$ 118,054
4.48

For the Years Ended
(In thousands, except for grant date fair values) 2018 2017 2016

Weighted-average grant date fair values $ 20.13
$ 20.50
$ 18.31

Total intrinsic value of options exercised $ 74,530
$ 252,277
$ 177,375

Cash received from exercise of stock options 91,349
76,705
63,794

Tax benefit realized upon exercise of stock options 17,233
85,657
64,347

~~As of the end of~~ ~~2018, there was $148 million of total unrecognized compensation cost related to stock options granted under all plans. That cost is expected to be recognized over a weighted-average period of 3.23 years.~~

~~Non-vested Shares and Share Units~~

Non-vested shares and share units are valued at fair market value on the date of grant and will vest provided the recipient has continuously served on the Board of Directors through such vesting date or, in the case of an associate, provided that service and/or performance measures are attained. The expense associated with these grants is recognized over the period from the date of grant to the vesting date.

~~Non-vested share and share unit activity for~~ ~~2018~~ ~~was as follows:~~

(In thousands, except per share data) Number of Shares
Weighted-Average
Grant Date Fair Value

Outstanding at beginning of year 799
$ 66.76
Granted 537
59.34
Vested (432 ) 65.77
Forfeited (22 ) 62.94

Outstanding at end of year 882
$ 62.82

For the Years Ended
(In thousands, except for grant date fair values) 2018 2017 2016

Weighted average grant date fair values for shares granted during the year $ 59.34
$ 66.97
$ 57.22

Total fair value of shares vested during the year $ 26,264
$ 11,050
$ 12,221

~~As of the end of~~ ~~2018~~, there was $32 million of total unrecognized compensation cost related to non-vested share and share unit awards granted under all plans. That cost is expected to be recognized over a weighted-average period of 1.94 years.

~~Associate Stock Purchase Plan~~

We established an Associate Stock Purchase Plan ("ASPP") in 2001, which qualifies under Section 423 of the Internal Revenue Code. Each individual employed by us and associates of our U.S. based subsidiaries, except as provided below, are eligible to participate in the ASPP ("Participants"). The following individuals are excluded from participation: (a) persons who, as of the beginning of a purchase period under the Plan, have been continuously employed by us or our domestic subsidiaries for less than two weeks; (b) persons who, as of the beginning of a purchase period, own directly or indirectly, or hold options or rights to acquire under any agreement or Company plan, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of Company common stock; and, (c) persons who are customarily employed by us for less than 20 hours per week or for less than five months in any calendar year. Participants may elect to make contributions from 1% to 20% of compensation to the ASPP, subject to annual limitations determined by the Internal Revenue Service. Participants may purchase Company common stock at a ~~15%~~ discount on the last business day of the option period. The purchase of Company common stock is made through the ASPP on the open market and subsequently reissued to Participants. The difference between the open market purchase and the Participant's purchase price is recognized as compensation expense, as such difference is paid by Cerner, in cash.

~~Share-Based Compensation Cost~~

For the Years Ended
(In thousands) 2018 2017 2016

Stock option and non-vested share and share unit compensation expense $ 95,423
$ 83,019
$ 74,536
Associate stock purchase plan expense 6,082
6,277
6,537
Amounts capitalized in software development costs, net of amortization 914
(327 ) (482 )

Amounts charged against earnings, before income tax benefit $ 102,419
$ 88,969
$ 80,591

Amount of related income tax benefit recognized in earnings $ 21,371
$ 25,265
$ 24,749

~~Preferred Stock~~

~~As of the end of~~ ~~2018~~ ~~and 2017, we had 1.0 million shares of authorized but unissued preferred stock, $0.01 par value.~~

~~Treasury Stock~~

In May 2017, our Board of Directors authorized a share repurchase program that allows the Company to repurchase up to $500 million of shares of our common stock, excluding transaction costs. In May 2018, our Board of Directors approved an amendment to the repurchase program that was authorized in May 2017. Under the amendment, the Company was authorized to repurchase up to an additional $500 million of shares of our common stock, for an aggregate of $1 billion, excluding transaction costs. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers. No time limit was set for the completion of the program. During 2018, we repurchased 11.2 million shares for total consideration of $644 million under the program. The shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired. At December 29, 2018, $283 million remains available for repurchase under the outstanding program.

During 2017 and 2016, we repurchased 2.7 million and 13.7 million shares of our common stock for total consideration of $173 million and $700 million, respectively. These shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired.

~~(15) Foundations Retirement Plan~~

The Cerner Corporation Foundations Retirement Plan (the "Plan") was established under Section 401(k) of the Internal Revenue Code. All associates age 18 and older and who are not a member of an excluded class are eligible to participate. Participants may elect to make pre-tax and Roth (post-tax) contributions from 1% to 80% of eligible compensation to the Plan, subject to annual limitations determined by the Internal Revenue Service. Participants may direct contributions into mutual funds, a stable value fund, a Company stock fund, or a self-directed brokerage account. The Plan has a first tier discretionary match that is made on behalf of participants in an amount equal to 33% of the first 6% of the participant's salary contribution. The Plan's first tier discretionary match expenses were $31 million, $29 million and $28 million for 2018~~, 2017 and 2016, respectively.~~

The Plan also provides for a second tier matching contribution that is purely discretionary, the payment of which will depend on overall Company performance and other conditions. If approved by the Compensation Committee, contributions by the Company will be tied to attainment of established financial metric goals, such as earnings per share for the year. Participants who defer 2% of their paid base salary, are actively employed as of the last day of the Plan year and are employed before October 1st of the Plan year are eligible to receive the second tier discretionary match contribution, if any such second tier matching contribution is approved by the Compensation Committee. For the years ended 2018 and 2016 we expensed $10 million and $8 million, respectively, for the second tier discretionary distributions.

~~(16) Commitments~~

~~Leases~~

We are committed under operating leases primarily for office and data center space through December 2029. Rent expense for office and warehouse space for our regional and global offices for 2018, 2017 and 2016 was $31 million, $31 million and $29 million, respectively. Aggregate minimum future payments under these non-cancelable operating leases are as follows:

(In thousands) Operating Lease Obligations

2019 $ 29,739
2020 27,669
2021 22,904
2022 17,240
2023 10,166
2024 and thereafter 17,743

$ 125,461

~~Other Obligations~~

~~We have purchase commitments with various vendors, and minimum funding commitments under collaboration agreements through 2037. Aggregate future payments under these commitments are as follows:~~

(In thousands) Purchase Obligations

2019 $ 138,851
2020 102,773
2021 24,746
2022 15,517
2023 15,486
2024 and thereafter 26,924

$ 324,297

~~(17)~~(20) Segment Reporting

We have two operating segments, Domestic and ~~Global.~~International. Revenues are derived primarily from the sale of clinical, financial and administrative information solutions and services. The cost of revenues includes the cost of ~~third party~~third-party consulting services, computer hardware, devices and sublicensed software purchased from manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers. Operating expenses incurred by the geographic business segments consist of sales and client service expenses including salaries of sales and client service personnel, expenses associated with our managed services business, marketing expenses, communications expenses and unreimbursed travel expenses. "Other" includes expenses that have not been allocated to the operating segments, such as software development, general and administrative expenses, ~~acquisition costs~~certain organizational restructuring and ~~related adjustments,~~other expense, share-based compensation expense, and certain amortization and depreciation. "Other" also includes gains or losses recognized on the divestiture of businesses. Performance of the segments is assessed at the operating earnings level by our chief operating decision maker, who is our Chief Executive Officer. Items such as interest, income taxes, capital expenditures and total assets are managed at the consolidated level and thus are not included in our operating segment disclosures. Accounting policies for each of the reportable segments are the same as those used on a consolidated basis.

The following table presents a summary of our operating segments and other expense for ~~2018~~, ~~2017~~2021, 2020 and ~~2016~~:2019:


(In thousands)	Domestic		International		Other		Total

2021
Revenues	$	5,044,629	$	720,195	$	—	$	5,764,824

Costs of revenue	887,343		113,674		—		1,001,017
Operating expenses	2,358,897		277,308		1,419,326		4,055,531
Total costs and expenses	3,246,240		390,982		1,419,326		5,056,548

Operating earnings (loss)	$	1,798,389	$	329,213	$	(1,419,326)	$	708,276

(In thousands) Domestic Global Other Total

2018
Revenues $ 4,730,266
$ 636,059
$ —
$ 5,366,325

Costs of revenue 827,904
109,444
—
937,348
Operating expenses 2,164,465
321,116
1,168,611
3,654,192
Total costs and expenses 2,992,369
430,560

1,168,611
4,591,540

Operating earnings (loss) $ 1,737,897
$ 205,499
$ (1,168,611 ) $ 774,785


(In thousands)	Domestic		International		Other		Total

2020
Revenues	$	4,879,769	$	626,019	$	—	$	5,505,788

Costs of revenue	854,574		78,367		—		932,941
Operating expenses	2,339,624		242,991		1,296,188		3,878,803
Total costs and expenses	3,194,198		321,358		1,296,188		4,811,744

Gain on sale of businesses	—		—		220,523		220,523

Operating earnings (loss)	$	1,685,571	$	304,661	$	(1,075,665)	$	914,567


(In thousands)	Domestic		International		Other		Total

2019
Revenues	$	5,038,127	$	654,471	$	—	$	5,692,598

Costs of revenue	967,035		104,006		—		1,071,041
Operating expenses	2,398,422		276,914		1,345,552		4,020,888
Total costs and expenses	3,365,457		380,920		1,345,552		5,091,929

Operating earnings (loss)	$	1,672,670	$	273,551	$	(1,345,552)	$	600,669

(In thousands) Domestic Global Other Total

2017
Revenues $ 4,575,171
$ 567,101
$ —
$ 5,142,272

Costs of revenue 755,729
98,362
—
854,091
Operating expenses 1,998,544
264,196
1,064,970
3,327,710
Total costs and expenses 2,754,273
362,558
1,064,970
4,181,801

Operating earnings (loss) $ 1,820,898
$ 204,543
$ (1,064,970 ) $ 960,471

(In thousands) Domestic Global Other Total

2016
Revenues $ 4,245,097
$ 551,376
$ —
$ 4,796,473

Costs of revenue 676,437
102,679
—
779,116
Operating expenses 1,774,146
246,243
1,085,955
3,106,344
Total costs and expenses 2,450,583
348,922
1,085,955
3,885,460

Operating earnings (loss) $ 1,794,514
$ 202,454
$ (1,085,955 ) $ 911,013

~~(18) Quarterly Results (unaudited)~~

~~Selected quarterly financial data for~~ ~~2018~~ ~~and~~ ~~2017~~ ~~is set forth below:~~

(In thousands, except per share data) Revenues Earnings Before Income Taxes Net Earnings Basic Earnings Per Share Diluted Earnings Per Share

2018

First Quarter $ 1,292,861
$ 200,079
$ 160,001
$ 0.48
$ 0.48

Second Quarter 1,367,727
214,884
169,357
0.51
0.51

Third Quarter 1,340,073
214,099
169,381
0.51
0.51

Fourth Quarter^(a)
1,365,664
171,789
131,320
0.40
0.40

Total $ 5,366,325
$ 800,851
$ 630,059

(a) Fourth quarter results include a pre-tax charge of $45 million to provide an allowance against certain client receivables with Fujitsu, as further discussed in Note (3).

(In thousands, except per share data) Revenues Earnings Before Income Taxes Net Earnings Basic Earnings Per Share Diluted Earnings Per Share

2017

First Quarter $ 1,260,486
$ 243,010
$ 173,213
$ 0.52
$ 0.52

Second Quarter 1,291,994
252,049
179,683
0.54
0.53

Third Quarter 1,276,007
250,415
177,424
0.53
0.52

Fourth Quarter ^(b)
1,313,785
221,655
336,658
1.02
1.00

Total $ 5,142,272
$ 967,129
$ 866,978

(b) Fourth quarter results include the impact of certain U.S. income tax reform enacted in December 2017 as further described in Note (12).



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CERN	The Nasdaq Stock Market LLC ~~(Nasdaq Global Select Market)~~



Class						Outstanding at ~~January 28, 2019~~February 10, 2022
Common Stock, $0.01 par value per share						~~324,360,908~~293,344,090 shares


Part I
Item 1.			Business		1
Item 1A.			Risk Factors		11
Item 1B.			Unresolved Staff Comments		24
Item 2.			Properties		24
Item 3.			Legal Proceedings		24
Item 4.			Mine Safety Disclosures		25

Part III
~~Item 1.~~			~~Business~~	1
~~Item 1A.~~	~~Risk Factors~~	9
~~Item 1B.~~	~~Unresolved Staff Comments~~	23
~~Item 2.~~	~~Properties~~	24
~~Item 3.~~	~~Legal Proceedings~~	24
~~Item 4.~~	~~Mine Safety Disclosures~~	24

~~Part II~~
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			25
Item 6.			~~Selected Financial Data~~[Reserved]		2625
Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations		2725
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk		3839
Item 8.			Financial Statements and Supplementary Data		3839
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		3839
Item 9A.			Controls and Procedures		3839
Item 9B.			Other Information		3940
Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		40
~~Part III~~
Part III
Item 10.			Directors, Executive Officers and Corporate Governance		40
Item 11.			Executive Compensation		4041
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		4041
Item 13.			Certain Relationships and Related Transactions, and Director Independence		41
Item 14.			Principal Accountant Fees and Services		4142

Part IV
Item 15.			Exhibits, Financial Statement Schedules		4142

Item 16.	Form 10-K Summary			4546

Signatures					4647



Ÿ Allscripts Healthcare Solutions, Inc.			Ÿ ~~InterSystems~~Epic Systems Corporation
Ÿ ~~athenahealth, Inc.~~Arcadia Solutions, LLC			Ÿ ~~MEDHOST,~~Health Catalyst, Inc.
Ÿ athenahealth, Inc.			InterSystems Corporation
Capsule Technologies, Inc.			Innovaccer, Inc.
Computer Programs and Systems, Inc.			Ÿ Medical Information Technology, Inc. (MEDITECH)
Ÿ eClinicalWorks, LLC			Ÿ Optum, Inc.
Ÿ ~~Epic Systems Corporation~~



(In thousands, except per share data)	2018⁽¹⁾		2017⁽²⁾		2016		2015⁽³⁾		2014

Statement of Operations Data:
Revenues	$	5,366,325	$	5,142,272	$	4,796,473	$	4,425,267	$	3,402,703
Operating earnings	774,785		960,471		911,013		781,136		763,084
Earnings before income taxes	800,851		967,129		918,434		781,380		774,174
Net earnings	630,059		866,978		636,484		539,362		525,433

Earnings per share:
Basic	1.91		2.62		1.88		1.57		1.54
Diluted	1.89		2.57		1.85		1.54		1.50

Weighted average shares outstanding:
Basic	330,084		331,373		337,740		343,178		342,150
Diluted	333,572		337,999		343,653		350,908		350,386

Balance Sheet Data:
Working capital	$	1,356,114	$	1,590,632	$	773,960	$	1,049,967	$	1,714,471
Total assets	6,708,636		6,469,311		5,629,963		5,561,984		4,530,565
Long-term debt and capital lease obligations, excl. current installments	438,802		515,130		537,552		563,353		62,868
Shareholders' equity	4,928,389		4,785,348		3,927,947		3,870,384		3,565,968



Document						Parts into Which Incorporated
Portions of the registrant's Proxy Statement for the 2022 Annual Shareholders' Meeting ~~to be held May 30, 2019~~						Part III



	2018						2017

	High		Low		Last		High		Low		Last

First Quarter	$	73.43	$	56.49	$	58.00	$	59.83	$	47.09	$	58.85
Second Quarter	63.22		52.05		59.79		69.28		58.09		66.47
Third Quarter	67.57		59.49		64.41		72.27		61.53		71.32
Fourth Quarter	65.44		48.78		52.01		73.86		62.86		67.39



	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b)
Period	Total Number of Shares Purchased (a)	Average Price Paid per Share
September 30, 2018 - October 27, 2018	—	$	—	—	$	581,522,399
October 28, 2018 - November 24, 2018	1,722,734	58.05		1,722,124	481,556,844
November 25, 2018 - December 29, 2018	3,745,917	52.96		3,745,917	283,172,767
Total	5,468,651	$	54.56	5,468,041


~~(1)~~	~~In 2018, we adopted new revenue recognition guidance as further discussed in Note (2) of the notes to consolidated financial statements.~~


~~(2)~~	~~Includes the impact of certain U.S. income tax reform, as further described in Note (12) of the notes to consolidated financial statements.~~


~~(3)~~	~~In 2015, we acquired our Health Services business from Siemens AG.~~


(In thousands)	2021		% of Revenue		2020		% of Revenue		% Change

Revenues	$	5,764,824	100	%	$	5,505,788	100	%	5	%
Costs of revenue	1,001,017		17	%	932,941		17	%	7	%

Margin	4,763,807		83	%	4,572,847		83	%	4	%

Operating expenses
Sales and client service	2,636,205		46	%	2,582,615		47	%	2	%
Software development	835,995		15	%	749,007		14	%	12	%
General and administrative	520,667		9	%	491,586		9	%	6	%
Amortization of acquisition-related intangibles	62,664		1	%	55,595		1	%	13	%

Total operating expenses	4,055,531		70	%	3,878,803		70	%	5	%

Total costs and expenses	5,056,548		88	%	4,811,744		87	%	5	%

Gain on sale of businesses	—		—	%	220,523		4	%

Operating earnings	708,276		12	%	914,567		17	%	(23)	%

Other income (loss), net	(8,816)				76,906
Income taxes	(143,864)				(211,385)

Net earnings	$	555,596			$	780,088			(29)	%


(In thousands)	2021		% of Segment Revenue	2020		% of Segment Revenue	% Change

Domestic Segment
Revenues	$	5,044,629	100%	$	4,879,769	100%	3%
Costs of revenue	887,343		18%	854,574		18%	4%
Operating expenses	2,358,897		47%	2,339,624		48%	1%
Total costs and expenses	3,246,240		64%	3,194,198		65%	2%

Domestic operating earnings	1,798,389		36%	1,685,571		35%	7%

International Segment
Revenues	720,195		100%	626,019		100%	15%
Costs of revenue	113,674		16%	78,367		13%	45%
Operating expenses	277,308		39%	242,991		39%	14%
Total costs and expenses	390,982		54%	321,358		51%	22%

International operating earnings	329,213		46%	304,661		49%	8%

Other costs and expenses, net	(1,419,326)			(1,296,188)			10%

Gain on sale of businesses	—			220,523

Consolidated operating earnings	$	708,276		$	914,567		(23)%


	Payments Due by Period															Payments Due by Period
(In thousands)	2019		2020		2021		2022		2023		2024 and thereafter		Total		(In thousands)	2022		2023		2024		2025		2026		2027 and thereafter		Total

Balance sheet obligations^(a):															Balance sheet obligations(a):
Long-term debt obligations	$	—	$	2,500	$	—	$	226,100	$	1,700	$	208,862	$	439,162	Long-term debt obligations	$	225,000	$	—	$	—	$	211,662	$	700,000	$	700,000	$	1,836,662
Interest on long-term debt obligations	14,315		14,315		14,315		10,738		7,160		10,740		71,583		Interest on long-term debt obligations	39,193		41,265		42,412		38,718		34,388		72,870		268,846
Capital lease obligations	4,914		—		—		—		—		—		4,914
Interest on capital lease obligations	143		—		—		—		—		—		143

Other obligations:															Other obligations:
Operating lease obligations	29,739		27,669		22,904		17,240		10,166		17,743		125,461		Operating lease obligations	27,694		20,826		13,824		8,884		5,978		32,031		109,237
Purchase obligations	138,851		102,773		24,746		15,517		15,486		26,924		324,297		Purchase obligations	54,308		54,308		40,933		45,819		52,054		368,882		616,304

Total	$	187,962	$	147,257	$	61,965	$	269,595	$	34,512	$	264,269	$	965,560	Total	$	346,195	$	116,399	$	97,169	$	305,083	$	792,420	$	1,173,783	$	2,831,049


b)	~~Management's Report on Internal Control over Financial Reporting.~~


(In thousands, except per share data)	Securities to be issued upon exercise of outstanding options and rights (1)	Weighted average exercise price per share (2)		Securities available for future issuance(3)
Plan category

Equity compensation plans approved by security holders (4)	8,314	$	59.61	12,497
Equity compensation plans not approved by security holders	—	—		—

Total	8,314			12,497



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit(s)	Filing Date SEC File No./Film No.	Filed Herewith

3.1	Third Restated Certificate of Incorporation of Cerner Corporation	10-K	3(a)	2/11/2015

3.2	Amended & Restated Bylaws of Cerner Corporation (effective March 2, 2018)	8-K	3.1	3/6/2018

4	Specimen stock certificate	10-K	4(a)	2/28/2007 000-15386/07658265

10.1*	2006 Form of Indemnification Agreement for use between the Registrant and its Directors	10-K	10(a)	2/28/2007 000-15386/07658265

10.2*	2010 Form of Indemnification Agreement for use between the Registrant and its Directors and Section 16 Officers	8-K	99.1	6/3/2010 000-15386/10875957

10.3*	Executive Employment Agreement between Cerner Corporation and Brent Shafer	10-K	10.3	2/12/2018

10.4*	Relocation Agreement between Cerner Corporation and Brent Shafer	10-Q	10.2	5/3/2018

10.5*	Amended & Restated Aircraft Time Sharing Agreement between Cerner Corporation and Brent Shafer	10-Q	10.1	10/26/2018

10.6*	Amended & Restated Executive Employment Agreement between Cerner Corporation and Clifford W. Illig	8-K/A	10.1	8/17/2017

10.7*	Amended Employment Agreement between Cerner Corporation and Zane M. Burke	8-K	10.1	9/11/2017

10.8*	Separation Agreement between Cerner Corporation and Zane M. Burke	10-Q	10.2	10/26/2018

10.9*	Amended Employment Agreement between Cerner Corporation and Michael R. Nill	8-K	10.2	9/11/2017

10.10*	Amended Employment Agreement between Cerner Corporation and Jeffrey A. Townsend	8-K	10.3	9/11/2017

10.11*	Relocation Agreement between Cerner Corporation and Jeffrey A. Townsend	10-Q	10.10	10/27/2017

10.12*	Amended Employment Agreement between Cerner Corporation and Marc G. Naughton	8-K	10.4	9/11/2017

10.13*	Amended Employment Agreement between Cerner Corporation and John Peterzalek				X

10.14*	Amended Stock Option Plan D of Registrant dated December 8, 2000	10-K	10(f)	3/30/2001 000-15386/1586224

10.15*	Amended Stock Option Plan E of Registrant dated December 8, 2000	10-K	10(g)	3/30/2001 000-15386/1586224

10.16*	Cerner Corporation Associate Equity Participation Program Non-Qualified Stock Option Agreement				X

10.17*	Cerner Corporation 2001 Long-Term Incentive Plan F	DEF 14A	Annex I	4/16/2001 000-15386/1603080



10.41	Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated August 5, 2014	10-Q	2.1	10/24/2014 000-15386/141172425

10.42	Amendment Agreement to the Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated February 2, 2015	8-K	10.1	2/2/2015

10.43	Master Note Purchase Agreement between Cerner Corporation and the Purchasers listed in Schedule A thereto dated December 4, 2014	8-K	10.1	12/5/2014 000-15386/141269611

10.44	Third Amended and Restated Credit Agreement, dated October 30, 2015, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A. and Commerce Bank, N.A.	8-K	10.1	11/3/2015

21	Subsidiaries of Registrant				X

23	Consent of Independent Registered Public Accounting Firm				X

31.1	Certification of D. Brent Shafer pursuant to Section 302 of Sarbanes-Oxley Act of 2002				X

31.2	Certification of Marc G. Naughton pursuant to Section 302 of Sarbanes-Oxley Act of 2002				X

32.1	Certification of D. Brent Shafer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002				X

32.2	Certification of Marc G. Naughton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002				X

101.INS	XBRL Instance Document				X

101.SCH	XBRL Taxonomy Extension Schema Document				X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				X

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document				X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				X

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				X



	Common Stock			Additional		Retained			Treasury			Accumulated Other
(In thousands)	Shares	Amount		Paid-in Capital		Earnings			Stock			Comprehensive Loss, Net

Balance at January 2, 2016	350,323	$	3,503	$	1,075,782	$	3,457,843		$	(590,390	)	$	(76,354	)

Exercise of stock options (including net-settled option exercises)	3,408	34		27,747		—			—			—

Employee share-based compensation expense	—	—		74,536		—			—			—

Employee share-based compensation net excess tax benefit	—	—		52,848		—			—			—

Other comprehensive income (loss)	—	—		—		—			—			(33,811		)

Treasury stock purchases	—	—		—		—			(700,275		)	—

Net earnings	—	—		—		636,484			—			—

Balance at December 31, 2016	353,731	3,537		1,230,913		4,094,327			(1,290,665		)	(110,165		)

Exercise of stock options (including net-settled option exercises)	5,474	55		66,439		—			—			—

Employee share-based compensation expense	—	—		83,019		—			—			—

Cumulative effect of accounting change (ASU 2016-16)	—	—		—		(22,439		)	—			—

Other comprehensive income (loss)	—	—		—		—			—			36,783

Treasury stock purchases	—	—		—		—			(173,434		)	—

Net earnings	—	—		—		866,978			—			—

Balance at December 30, 2017	359,205	3,592		1,380,371		4,938,866			(1,464,099		)	(73,382		)

Exercise of stock options (including net-settled option exercises)	3,008	30		83,768		—			—			—

Employee share-based compensation expense	—	—		95,423		—			—			—

Cumulative effect of accounting change (ASU 2014-09)	—	—		—		7,600			—			—

Other comprehensive income (loss)	—	—		—		—			—			(30,170		)

Treasury stock purchases	—	—		—		—			(643,669		)	—

Net earnings	—	—		—		630,059			—			—

Balance at December 29, 2018	362,213	$	3,622	$	1,559,562	$	5,576,525		$	(2,107,768	)	$	(103,552	)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss, Net
(In thousands)	Shares	Amount

Balance at December 29, 2018	362,213	$	3,622	$	1,559,562	$	5,576,525	$	(2,107,768)	$	(103,552)

Exercise of stock options and vests of restricted shares and share units	5,422	54		241,968		—		—		—

Employee share-based compensation expense	—	—		103,641		—		—		—

Other comprehensive income (loss)	—	—		—		—		—		(15,108)

Treasury stock purchases	—	—		—		—		(1,300,000)		—

Cash dividends declared	—	—		—		(171,070)		—		—

Net earnings	—	—		—		529,454		—		—

Balance at December 28, 2019	367,635	3,676		1,905,171		5,934,909		(3,407,768)		(118,660)

Exercise of stock options and vests of restricted shares and share units	5,590	56		230,186		—		—		—

Employee share-based compensation expense	—	—		153,449		—		—		—

Cumulative effect of accounting change (ASU 2016-13)	—	—		—		(4,606)		—		—

Other comprehensive income (loss)	—	—		—		—		—		(2,144)

Treasury stock purchases	—	—		—		—		(756,950)		—

Cash dividends declared	—	—		—		(234,840)		—		—

Net earnings	—	—		—		780,088		—		—

Balance at December 31, 2020	373,225	3,732		2,288,806		6,475,551		(4,164,718)		(120,804)

Exercise of stock options and vests of restricted shares and share units	7,008	70		232,784		—		—		—

Employee share-based compensation expense	—	—		195,654		—		—		—

Other comprehensive income (loss)	—	—		—		—		—		(6,754)

Treasury stock purchases	—	—		—		—		(1,500,000)		—

Cash dividends declared	—	—		—		(279,455)		—		—

Net earnings	—	—		—		555,596		—		—

Balance at December 31, 2021	380,233	$	3,802	$	2,717,244	$	6,751,692	$	(5,664,718)	$	(127,558)



	For the Years Ended
	2018						2017⁽¹⁾						2016⁽¹⁾
(In thousands)	Domestic Segment		Global Segment		Total		Domestic Segment		Global Segment		Total		Domestic Segment		Global Segment		Total

Licensed software	$	573,034	$	40,544	$	613,578	$	563,524	$	48,666	$	612,190	$	499,422	$	49,697	$	549,119
Technology resale	208,722		36,354		245,076		248,524		25,069		273,593		246,694		27,781		274,475
Subscriptions	300,555		25,154		325,709		446,426		22,963		469,389		416,311		26,057		442,368
Professional services	1,574,407		237,056		1,811,463		1,393,056		198,793		1,591,849		1,251,726		192,852		1,444,578
Managed services	1,060,081		94,860		1,154,941		970,609		76,523		1,047,132		909,584		71,993		981,577
Support and maintenance	921,336		196,780		1,118,116		856,304		190,352		1,046,656		838,745		177,066		1,015,811
Reimbursed travel	92,131		5,311		97,442		96,728		4,735		101,463		82,615		5,930		88,545

Total revenues	$	4,730,266	$	636,059	$	5,366,325	$	4,575,171	$	567,101	$	5,142,272	$	4,245,097	$	551,376	$	4,796,473

⁽¹⁾As noted above, prior period amounts were not adjusted upon our adoption of Topic 606.



	For the Year Ended
	2018
(In thousands)	Domestic Segment		Global Segment		Total

Revenue recognized over time	$	4,271,934	$	569,780	$	4,841,714
Revenue recognized at a point in time	458,332		66,279		524,611

Total revenues	$	4,730,266	$	636,059	$	5,366,325



(In thousands)	Domestic		Global			Total

Balance at the end of 2016	$	782,664	$	61,536		$	844,200
Foreign currency translation adjustment and other	—		8,805			8,805

Balance at the end of 2017	782,664		70,341			853,005
Foreign currency translation adjustment and other	—		(5,461		)	(5,461		)

Balance at the end of 2018	$	782,664	$	64,880		$	847,544



(In thousands)

2019	$	113,566
2020	65,184
2021	58,314
2022	53,071
2023	43,927



	Capital Lease Obligations
(In thousands)	Minimum Lease Payments		Less: Interest		Principal		Senior Notes		Other		Total

2019	$	5,057	$	143	$	4,914	$	—	$	—	$	4,914
2020	—		—		—		—		2,500		2,500
2021	—		—		—		—		—		—
2022	—		—		—		225,000		1,100		226,100
2023	—		—		—		—		1,700		1,700
2024 and thereafter	—		—		—		200,000		8,862		208,862

Total	$	5,057	$	143	$	4,914	$	425,000	$	14,162	$	444,076



(In thousands, except per share data)	Number of Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Yrs)
Outstanding at beginning of year	21,332		$	49.40
Granted	3,598		58.35
Exercised	(2,660	)	35.37
Forfeited and expired	(478	)	62.46
Outstanding at end of year	21,792		52.31		$	118,831	6.28

Exercisable at end of year	11,045		$	44.60	$	118,054	4.48



(In thousands, except per share data)	Number of Shares		Weighted-Average Grant Date Fair Value

Outstanding at beginning of year	799		$	66.76
Granted	537		59.34
Vested	(432	)	65.77
Forfeited	(22	)	62.94

Outstanding at end of year	882		$	62.82