UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 0-15386

CERNER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

43-1196944

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

2800 ~~Rockcreek~~Rock Creek Parkway

North Kansas City,

64117

(Address of principal executive offices)

(Zip Code)

(816) 221-1024

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Class						Outstanding at ~~July 22, 2020~~April 30, 2021
Common Stock, $0.01 par value per share						~~305,381,551~~301,317,068 shares

Table of Contents

CERNER CORPORATION

TABLE OF CONTENTS


Part I.	Financial Information:

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets as of March ~~June~~ 3 301 , ~~2020~~202 1 (unaudited) and December ~~28, 2019~~31 , 20 20	1

	Condensed Consolidated Statements of Operations for the Three ~~and Six~~Months Ended ~~June 30~~March 3 1 , ~~2020~~202 1 and ~~June 29~~March 31 , ~~2019~~20 20 (unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30~~March ,3 ~~2020 and~~ ~~June 29~~1 , ~~2019~~202 1 and March 31 , 20 20 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June~~ M 30ar ch 3 1 , ~~2020~~202 1 and ~~June 29~~March 31 , ~~2019~~20 20 (unaudited)	4

	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three ~~and Six~~ Months ~~Ended~~ En ~~June 30~~ded March 3 1 , ~~2020 and~~202 1 ~~June 29~~and March 31 , ~~2019~~20 20 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2018

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3428

Item 4.	Controls and Procedures	3429

Part II.	Other Information:

Item 1.	Legal Proceedings	35

~~Item 1A.~~	~~Risk Factors~~	3529

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3730

Item 6.	Exhibits	3831

Signatures

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of ~~June 30, 2020~~March 31, 2021 (unaudited) and December ~~28, 2019~~31, 2020


(In thousands, except share data)	(In thousands, except share data)	2020		2019		(In thousands, except share data)	2021		2020

Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	269,895	$	441,843	Cash and cash equivalents	$	997,861	$	615,615
Short-term investments	Short-term investments	171,123		99,931		Short-term investments	476,362		442,473
Receivables, net	Receivables, net	1,183,988		1,139,595		Receivables, net	1,175,139		1,168,712
Inventory	Inventory	18,525		23,182		Inventory	30,442		23,027
Prepaid expenses and other	Prepaid expenses and other	410,016		392,073		Prepaid expenses and other	375,376		401,160
Total current assets	Total current assets	2,053,547		2,096,624		Total current assets	3,055,180		2,650,987

Property and equipment, net	Property and equipment, net	1,870,779		1,858,772		Property and equipment, net	1,803,027		1,804,083
Right-of-use assets	Right-of-use assets	122,639		123,155		Right-of-use assets	102,871		104,536
Software development costs, net	Software development costs, net	973,060		939,859		Software development costs, net	1,028,513		1,009,349
Goodwill	Goodwill	912,082		883,158		Goodwill	912,043		914,520
Intangible assets, net	Intangible assets, net	346,259		364,439		Intangible assets, net	316,368		329,249
Long-term investments	Long-term investments	388,675		419,419		Long-term investments	492,704		510,220
Other assets	Other assets	212,300		209,196		Other assets	197,704		198,152

Total assets	Total assets	$	6,879,341	$	6,894,622	Total assets	$	7,908,410	$	7,521,096

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

Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	261,540	$	273,440	Accounts payable	$	279,256	$	235,755
Current installments of long-term debt						Current installments of long-term debt	225,000		0
Deferred revenue	Deferred revenue	295,711		360,025		Deferred revenue	407,736		393,293
Accrued payroll and tax withholdings	Accrued payroll and tax withholdings	267,930		245,843		Accrued payroll and tax withholdings	313,184		309,814
Other current liabilities	Other current liabilities	181,621		148,140		Other current liabilities	237,964		229,764
Total current liabilities	Total current liabilities	1,006,802		1,027,448		Total current liabilities	1,463,140		1,168,626

Long-term debt	Long-term debt	1,338,467		1,038,382		Long-term debt	1,611,102		1,336,069
Deferred income taxes	Deferred income taxes	381,926		377,657		Deferred income taxes	372,037		376,035
Other liabilities	Other liabilities	134,130		133,807		Other liabilities	149,694		157,799
Total liabilities	Total liabilities	2,861,325		2,577,294		Total liabilities	3,595,973		3,038,529

Shareholders' Equity:	Shareholders' Equity:					Shareholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 371,186,776 shares issued at June 30, 2020 and 367,634,796 shares issued at December 28, 2019		3,712		3,676
Common stock, $0.01 par value, 500,000,000 shares authorized, 374,048,596 shares issued at March 31, 2021 and 373,224,832 shares issued at December 31, 2020						Common stock, $0.01 par value, 500,000,000 shares authorized, 374,048,596 shares issued at March 31, 2021 and 373,224,832 shares issued at December 31, 2020	3,740		3,732
Additional paid-in capital	Additional paid-in capital	2,120,341		1,905,171		Additional paid-in capital	2,368,227		2,288,806
Retained earnings	Retained earnings	6,101,402		5,934,909		Retained earnings	6,580,612		6,475,551
Treasury stock, 65,919,144 shares at June 30, 2020 and 56,723,546 shares at December 28, 2019		(4,057,768)		(3,407,768)
Treasury stock, 72,276,054 shares at March 31, 2021 and 67,371,686 shares at December 31, 2020						Treasury stock, 72,276,054 shares at March 31, 2021 and 67,371,686 shares at December 31, 2020	(4,514,718)		(4,164,718)
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(149,671)		(118,660)		Accumulated other comprehensive loss, net	(125,424)		(120,804)
Total shareholders' equity	Total shareholders' equity	4,018,016		4,317,328		Total shareholders' equity	4,312,437		4,482,567

Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	6,879,341	$	6,894,622	Total liabilities and shareholders' equity	$	7,908,410	$	7,521,096

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 29, 2019~~

(unaudited)


		Three Months Ended						Six Months Ended							Three Months Ended
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2020		2019		(In thousands, except per share data)	2021		2020

Revenues	Revenues	$	1,330,349	$	1,431,061	$	2,742,090	$	2,820,938	Revenues	$	1,387,778	$	1,411,741
Costs and expenses:	Costs and expenses:									Costs and expenses:
Costs of revenue	Costs of revenue	211,963		268,673		466,379		521,877		Costs of revenue	230,656		254,416
Sales and client service	Sales and client service	645,087		678,895		1,281,736		1,319,082		Sales and client service	622,176		636,649
Software development (Includes amortization of $61,197 and $122,208 for the three and six months ended June 30, 2020, respectively; and $56,005 and $112,250 for the three and six months ended June 29, 2019, respectively)		178,955		181,047		364,275		361,408
Software development (Includes amortization of $64,850 and $61,011, respectively)										Software development (Includes amortization of $64,850 and $61,011, respectively)	192,327		185,320
General and administrative	General and administrative	134,332		149,788		274,184		245,984		General and administrative	112,365		139,852
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	13,114		21,541		30,242		43,526		Amortization of acquisition-related intangibles	12,196		17,128

Total costs and expenses	Total costs and expenses	1,183,451		1,299,944		2,416,816		2,491,877		Total costs and expenses	1,169,720		1,233,365

Operating earnings	Operating earnings	146,898		131,117		325,274		329,061		Operating earnings	218,058		178,376

Other income, net	Other income, net	24,632		23,006		30,227		31,438		Other income, net	1,206		5,595

Earnings before income taxes	Earnings before income taxes	171,530		154,123		355,501		360,499		Earnings before income taxes	219,264		183,971
Income taxes	Income taxes	(36,782)		(27,154)		(73,594)		(67,311)		Income taxes	(47,012)		(36,812)

Net earnings	Net earnings	$	134,748	$	126,969	$	281,907	$	293,188	Net earnings	$	172,252	$	147,159

Basic earnings per share	Basic earnings per share	$	0.44	$	0.40	$	0.92	$	0.91	Basic earnings per share	$	0.57	$	0.48
Diluted earnings per share	Diluted earnings per share	$	0.44	$	0.39	$	0.91	$	0.90	Diluted earnings per share	$	0.56	$	0.47
Basic weighted average shares outstanding	Basic weighted average shares outstanding	304,776		321,280		307,256		322,485		Basic weighted average shares outstanding	304,731		309,657
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	306,717		324,662		309,520		325,498		Diluted weighted average shares outstanding	308,031		312,240

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 29, 2019~~

(unaudited)


		Three Months Ended						Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020

Net earnings	Net earnings	$	134,748	$	126,969	$	281,907	$	293,188	Net earnings	$	172,252	$	147,159
Foreign currency translation adjustment and other (net of taxes (benefit) of $(88) and $337 for the three and six months ended June 30, 2020; and $179 and $(4) for the three and six months ended June 29, 2019, respectively)		9,197		(100)		(11,349)		2,221
Unrealized loss on cash flow hedge (net of tax benefit of $332 and $6,682 for the three and six months ended June 30, 2020; and $4,069 for both the three and six months ended June 29, 2019, respectively)		(1,007)		(12,370)		(20,315)		(12,370)
Unrealized holding gain on available-for-sale investments (net of taxes of $494 and $215 for the three and six months ended June 30, 2020; and $71 and $281 for the three and six months ended June 29, 2019, respectively)		1,502		216		653		853
Foreign currency translation adjustment and other (net of taxes (benefit) of $(679) and $425, respectively)										Foreign currency translation adjustment and other (net of taxes (benefit) of $(679) and $425, respectively)	(8,991)		(20,546)
Unrealized gain (loss) on cash flow hedge (net of taxes (benefit) of $1,509 and $(6,350), respectively)										Unrealized gain (loss) on cash flow hedge (net of taxes (benefit) of $1,509 and $(6,350), respectively)	4,588		(19,308)
Unrealized holding gain (loss) on available-for-sale investments (net of tax benefit of $71 and $279, respectively)										Unrealized holding gain (loss) on available-for-sale investments (net of tax benefit of $71 and $279, respectively)	(217)		(849)

Comprehensive income	Comprehensive income	$	144,440	$	114,715	$	250,896	$	283,892	Comprehensive income	$	167,632	$	106,456

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 29, 2019~~

(unaudited)


		Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020

CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	Net earnings	$	281,907	$	293,188	Net earnings	$	172,252	$	147,159
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:					Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	343,941		336,486		Depreciation and amortization	175,313		172,646
Share-based compensation expense	Share-based compensation expense	72,580		42,884		Share-based compensation expense	47,950		35,031
Provision for deferred income taxes	Provision for deferred income taxes	12,884		15,154		Provision for deferred income taxes	(2,829)		10,449
Investment gains	Investment gains	(26,410)		(15,509)		Investment gains	0		(477)
Changes in assets and liabilities (net of businesses acquired):	Changes in assets and liabilities (net of businesses acquired):					Changes in assets and liabilities (net of businesses acquired):
Receivables, net	Receivables, net	(48,426)		(47,839)		Receivables, net	(12,301)		(22,774)
Inventory	Inventory	5,509		1,875		Inventory	(7,411)		(296)
Prepaid expenses and other	Prepaid expenses and other	(36,431)		(76,048)		Prepaid expenses and other	24,173		(13,681)
Accounts payable	Accounts payable	(31,711)		24,980		Accounts payable	30,118		8,539
Accrued income taxes	Accrued income taxes	26,358		(1,569)		Accrued income taxes	21,378		1,105
Deferred revenue	Deferred revenue	(66,137)		(78,090)		Deferred revenue	14,768		(42,310)
Other accrued liabilities	Other accrued liabilities	8,032		28,564		Other accrued liabilities	(12,977)		(11,885)

Net cash provided by operating activities	Net cash provided by operating activities	542,096		524,076		Net cash provided by operating activities	450,434		283,506

CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases	Capital purchases	(166,296)		(277,874)		Capital purchases	(75,925)		(49,248)
Capitalized software development costs	Capitalized software development costs	(151,393)		(144,902)		Capitalized software development costs	(83,550)		(73,855)
Purchases of investments	Purchases of investments	(91,957)		(140,723)		Purchases of investments	(321,670)		(39,194)
Sales and maturities of investments	Sales and maturities of investments	81,022		289,669		Sales and maturities of investments	306,935		36,112
Purchase of other intangibles	Purchase of other intangibles	(20,656)		(17,457)		Purchase of other intangibles	(7,975)		(9,682)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(35,766)		—		Acquisition of businesses, net of cash acquired	0		(744)

Net cash used in investing activities	Net cash used in investing activities	(385,046)		(291,287)		Net cash used in investing activities	(182,185)		(136,611)

CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance	Long-term debt issuance	300,000		600,000		Long-term debt issuance	500,000		300,000
Proceeds from exercise of stock options	Proceeds from exercise of stock options	156,908		125,000		Proceeds from exercise of stock options	36,514		118,203
Payments to taxing authorities in connection with shares directly withheld from associates	Payments to taxing authorities in connection with shares directly withheld from associates	(14,217)		(4,860)		Payments to taxing authorities in connection with shares directly withheld from associates	(4,897)		(4,517)
Treasury stock purchases	Treasury stock purchases	(650,000)		(620,542)		Treasury stock purchases	(341,715)		(650,000)
Dividends paid	Dividends paid	(111,101)		—		Dividends paid	(67,477)		(56,047)
Other	Other	(4,159)		(4,450)		Other	(5,310)		(3,600)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(322,569)		95,148		Net cash provided by (used in) financing activities	117,115		(295,961)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(6,429)		861		Effect of exchange rate changes on cash and cash equivalents	(3,118)		(7,365)

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	(171,948)		328,798		Net increase (decrease) in cash and cash equivalents	382,246		(156,431)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	441,843		374,126		Cash and cash equivalents at beginning of period	615,615		441,843

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	269,895	$	702,924	Cash and cash equivalents at end of period	$	997,861	$	285,412

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 29, 2019~~

(unaudited)


		Common Stock					Additional Paid-in Capital		Retained Earnings		Treasury Stock				Accumulated Other Comprehensive Loss, Net	Common Stock					Additional Paid-in Capital		Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss, Net
(In thousands)	(In thousands)	Shares	Amount															(In thousands)	Shares											Accumulated Other Comprehensive Loss, Net

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		706	7		11,716		—		—		—

Employee share-based compensation expense		—	—		19,860		—		—		—

Other comprehensive income (loss)		—	—		—		—		—		2,958

Net earnings		—	—		—		166,219		—		—

Balance at March 30, 2019		362,919	3,629		1,591,138		5,742,744		(2,107,768)		(100,594)

Exercise of stock options and vests of restricted shares and share units		1,777	18		108,045		—		—		—

Employee share-based compensation expense		—	—		23,024		—		—		—

Other comprehensive income (loss)		—	—		—		—		—		(12,254)

Treasury stock purchases		—	—		—		—		(600,000)		—

Cash dividends declared ($0.18 per share)		—	—		—		(57,682)		—		—

Net earnings		—	—		—		126,969		—		—

Balance at June 29, 2019		364,696	$	3,647	$	1,722,207	$	5,812,031	$	(2,707,768)	$	(112,848)

Balance at December 28, 2019	Balance at December 28, 2019	367,635	$	3,676	$	1,905,171	$	5,934,909	$	(3,407,768)	$	(118,660)	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	Exercise of stock options and vests of restricted shares and share units	2,543	26		114,050		—		—		—		Exercise of stock options and vests of restricted shares and share units	2,543		26			114,050		—		—				—

Employee share-based compensation expense	Employee share-based compensation expense	—	—		35,031		—		—		—		Employee share-based compensation expense	—		—			35,031		—		—				—

Cumulative effect of accounting change (ASU 2016-13)	Cumulative effect of accounting change (ASU 2016-13)	—	—		—		(4,606)		—		—		Cumulative effect of accounting change (ASU 2016-13)	—		—			—		(4,606)		—				—

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		(40,703)		Other comprehensive income (loss)	—		—			—		—		—				(40,703)

Treasury stock purchases	Treasury stock purchases	—	—		—		—		(650,000)		—		Treasury stock purchases	—		—			—		—		(650,000)				—

Cash dividends declared ($0.18 per share)	Cash dividends declared ($0.18 per share)	—	—		—		(55,206)		—		—		Cash dividends declared ($0.18 per share)	—		—			—		(55,206)		—				—

Net earnings	Net earnings	—	—		—		147,159		—		—		Net earnings	—		—			—		147,159		—				—

Balance at March 31, 2020	Balance at March 31, 2020	370,178	3,702		2,054,252		6,022,256		(4,057,768)		(159,363)		Balance at March 31, 2020	370,178		3,702			2,054,252		6,022,256		(4,057,768)				(159,363)

Balance at December 31, 2020													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	Exercise of stock options and vests of restricted shares and share units	1,009	10		28,540		—		—		—		Exercise of stock options and vests of restricted shares and share units	824		8			31,471		—		—				—

Employee share-based compensation expense	Employee share-based compensation expense	—	—		37,549		—		—		—		Employee share-based compensation expense	—		—			47,950		—		—				—

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—		—		—		9,692		Other comprehensive income (loss)	—		—			—		—		—				(4,620)

Cash dividends declared ($0.18 per share)		—	—		—		(55,602)		—		—
Treasury stock purchases													Treasury stock purchases	—		—			—		—		(350,000)				—

Cash dividends declared ($0.22 per share)													Cash dividends declared ($0.22 per share)	—		—			—		(67,191)		—				—

Net earnings	Net earnings	—	—		—		134,748		—		—		Net earnings	—		—			—		172,252		—				—

Balance at June 30, 2020		371,187	$	3,712	$	2,120,341	$	6,101,402	$	(4,057,768)	$	(149,671)
Balance at March 31, 2021													Balance at March 31, 2021	374,049		$	3,740		$	2,368,227	$	6,580,612	$	(4,514,718)			$	(125,424)

See notes to condensed consolidated financial statements (unaudited).

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CERNER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Interim Statement Presentation

Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Cerner Corporation ("Cerner," the "Company," "we," "us" or "our") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our latest annual report on Form 10-K.

In management's opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows for the periods presented. Our interim results as presented in this quarterly report on Form 10-Q are not necessarily indicative of the operating results for the entire year.

The condensed consolidated financial statements were prepared using GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

~~Fiscal Period End~~

Prior to fiscal year 2020, our second fiscal quarter ended on the Saturday closest to June 30. The second quarter and year-to-date periods for 2019 presented herein consisted of 91 days and 182 days, respectively, and ended on June 29, 2019.

In December 2019, our Board of Directors approved the change of our fiscal year to a calendar year, commencing with fiscal year 2020. Accordingly, the second quarter and year-to-date periods for 2020 presented herein consisted of 91 days and 185 days, respectively, and ended on June 30, 2020.

All references to quarters or three month periods ended 2021 and 2020 in these notes to condensed consolidated financial statements ~~represent~~refer to the respective three month periods ~~described above ending on June 30,~~ended March 31, 2021 and March 31, 2020, ~~and June 29, 2019,~~ unless otherwise noted.

Supplemental Disclosures of Cash Flow Information

Six Months Ended
(In thousands) 2020 2019
Cash paid during the period for:
Interest (including amounts capitalized of $8,831 and $8,164, respectively) $ 16,572 $ 8,907
Income taxes, net of refunds 8,690 47,877
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases 22,270 22,551

~~Accounting Pronouncements Adopted in 2020~~

~~Credit Losses on Financial Instruments.~~ ~~In the first quarter of 2020, we adopted new guidance regarding impairment assessment for certain financial assets. Refer to Notes (3) and (4) for further details.~~

~~Collaborative Arrangements.~~ ~~In November 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 recent revenue standard (Topic 606). Such guidance clarifies revenue recognition and financial

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statement presentation for transactions between collaboration participants. We adopted ASU 2018-18 in the first quarter of 2020. Such guidance did not have an impact on our consolidated financial statements and related disclosures.


	Three Months Ended
(In thousands)	2021		2020
Cash paid during the period for:
Interest (including amounts capitalized of $2,692 and $4,633, respectively)	$	15,549	$	11,811
Income taxes, net of refunds	19,216		2,869
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases	7,745		17,762
Financed capital purchases	1,361		0

Recently Issued Accounting Pronouncements

Reference Rate Reform. ~~In March 2020, the FASB~~The Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which~~ in March 2020 and ASU 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. Such guidance provides optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform, such as the upcoming discontinuance of the London Interbank Offered Rate ("LIBOR"). The accommodations within ~~ASU 2020-04~~this guidance may be applied prospectively from the beginning of our 2020 first quarter through December 31, 2022. We are currently evaluating the effect that ~~ASU 2020-04~~this guidance may have on our contracts that reference LIBOR, specifically, our Third Amended and Restated Credit Agreement (as amended, the "Credit Agreement") and related interest rate swap. As of the date of this filing, we have not elected to apply any of the provisions of this ~~standard.~~guidance.

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(2) Revenue Recognition

Disaggregation of Revenue

The following ~~tables present~~table presents revenues disaggregated by our business models:


		Three Months Ended																							Three Months Ended
		2020										2019									2021						2020
(In thousands)	(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total		(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total

Licensed software	Licensed software	$	138,950	$	13,212	$	152,162	$	181,061	$	16,052	$	197,113	Licensed software	$	148,833	$	12,828	$	161,661	$	146,497	$	11,535	$	158,032
Technology resale	Technology resale	36,376		5,741		42,117		54,851		5,884		60,735		Technology resale	37,891		7,781		45,672		44,449		7,038		51,487
Subscriptions	Subscriptions	85,281		6,771		92,052		83,573		6,197		89,770		Subscriptions	95,383		4,429		99,812		86,936		7,449		94,385
Professional services	Professional services	409,848		51,234		461,082		429,910		55,397		485,307		Professional services	434,162		60,260		494,422		452,784		58,562		511,346
Managed services	Managed services	275,679		31,479		307,158		268,560		29,091		297,651		Managed services	282,076		35,300		317,376		279,736		29,618		309,354
Support and maintenance	Support and maintenance	220,301		53,735		274,036		225,602		50,809		276,411		Support and maintenance	217,499		45,825		263,324		223,416		50,265		273,681
Reimbursed travel	Reimbursed travel	1,778		(36)		1,742		22,555		1,519		24,074		Reimbursed travel	6,148		(637)		5,511		12,597		859		13,456

Total revenues	Total revenues	$	1,168,213	$	162,136	$	1,330,349	$	1,266,112	$	164,949	$	1,431,061	Total revenues	$	1,221,992	$	165,786	$	1,387,778	$	1,246,415	$	165,326	$	1,411,741

Six Months Ended
2020 2019
(In thousands) Domestic Segment International Segment Total Domestic Segment International Segment Total
Licensed software $ 285,447 $ 24,747 $ 310,194 $ 321,506 $ 30,084 $ 351,590
Technology resale 80,825 12,779 93,604 104,009 12,266 116,275
Subscriptions 172,217 14,220 186,437 161,275 12,786 174,061
Professional services 862,632 109,796 972,428 867,139 108,607 975,746
Managed services 555,415 61,097 616,512 545,885 56,159 602,044
Support and maintenance 443,717 104,000 547,717 452,083 101,291 553,374
Reimbursed travel 14,375 823 15,198 45,045 2,803 47,848
Total revenues $ 2,414,628 $ 327,462 $ 2,742,090 $ 2,496,942 $ 323,996 $ 2,820,938

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

Three Months Ended
2020 2019
(In thousands) Domestic
Segment International
Segment Total Domestic
Segment International
Segment Total
Revenue recognized over time $ 1,101,797 $ 151,456 $ 1,253,253 $ 1,124,513 $ 148,092 $ 1,272,605
Revenue recognized at a point in time 66,416 10,680 77,096 141,599 16,857 158,456
Total revenues $ 1,168,213 $ 162,136 $ 1,330,349 $ 1,266,112 $ 164,949 $ 1,431,061


		Six Months Ended																							Three Months Ended
		2020										2019									2021						2020
(In thousands)	(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total		(In thousands)	Domestic Segment		International Segment		Total		Domestic Segment		International Segment		Total

Revenue recognized over time	Revenue recognized over time	$	2,267,312	$	304,900	$	2,572,212	$	2,260,495	$	290,303	$	2,550,798	Revenue recognized over time	$	1,152,849	$	153,868	$	1,306,717	$	1,165,515	$	153,444	$	1,318,959
Revenue recognized at a point in time	Revenue recognized at a point in time	147,316		22,562		169,878		236,447		33,693		270,140		Revenue recognized at a point in time	69,143		11,918		81,061		80,900		11,882		92,782

Total revenues	Total revenues	$	2,414,628	$	327,462	$	2,742,090	$	2,496,942	$	323,996	$	2,820,938	Total revenues	$	1,221,992	$	165,786	$	1,387,778	$	1,246,415	$	165,326	$	1,411,741

Transaction Price Allocated to Remaining Performance Obligations

As of ~~June 30, 2020,~~March 31, 2021, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates ~~$13.66~~$13.07 billion of which we expect to recognize approximately 30% of the revenue over the next 12 months and the remainder thereafter.

Contract Liabilities

Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. Such amounts are classified in our condensed consolidated balance sheets as ~~deferred revenue.~~"Deferred revenue". During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, we recognized ~~$236~~$138 million of revenues that were included in our contract liability balance at the beginning of such period.

Significant Customers

~~A certain customer~~Revenues attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, within our Domestic segment, comprised ~~17%~~20% and ~~12%~~17% of our consolidated revenues for the ~~second quarters of 2020 and 2019, respectively; and 17% and 11% for the~~ first ~~six~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively. Amounts due ~~from this same customer~~in connection with these relationships comprised ~~11%~~16% and 13% of client receivables as of ~~June 30, 2020.~~March 31, 2021 and December 31, 2020, respectively.

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(3) Receivables

A summary of net receivables is as follows:


(In thousands)	(In thousands)	June 30, 2020		December 28, 2019		(In thousands)	March 31, 2021		December 31, 2020

Client receivables	Client receivables	$	1,328,187	$	1,245,670	Client receivables	$	1,351,234	$	1,322,278
Less: Allowance for doubtful accounts		144,199		106,075
Less: Provision for expected credit losses						Less: Provision for expected credit losses	176,095		153,566

Total receivables, net	Total receivables, net	$	1,183,988	$	1,139,595	Total receivables, net	$	1,175,139	$	1,168,712

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

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


~~(In thousands)~~

~~Allowance for doubtful accounts - balance at December 28, 2019~~	$	~~106,075~~
~~Cumulative effect of accounting change (ASU 2016-13)~~	~~4,606~~
~~Additions charged to costs and expenses~~	~~45,861~~
~~Deductions~~	~~(12,343)~~

~~Allowance for doubtful accounts - balance at June 30, 2020~~	$	~~144,199~~

~~During the first six months of 2020 and 2019, we received total client cash collections of $2.66 billion and $2.74 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 condensed 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.~~


(In thousands)	Current		Non-current		Total

Provision for expected credit losses - balance at December 31, 2020	$	153,566	$	38,564	$	192,130
Additions charged to costs and expenses	20,251		0		20,251
Deductions, foreign currency and other	2,278		0		2,278

Provision for expected credit losses - balance at March 31, 2021	$	176,095	$	38,564	$	214,659

Our estimates of expected credit losses for client receivables at both March 31, 2021 and December ~~29, 2019 and June 30,~~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,~~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.

During the first three months of 2021 and 2020, we received total client cash collections of $1.44 billion and $1.37 billion, respectively.

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(4) Investments

Available-for-sale investments at ~~June 30, 2020~~March 31, 2021 were as follows:


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

Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	36,403	$	—	$	—	$	36,403	Money market funds	$	165,667	$	—	$	—	$	165,667
Time deposits	Time deposits	58,407		—		—		58,407		Time deposits	31,588		—		—		31,588
Commercial Paper										Commercial Paper	131,000		—		—		131,000
Government and corporate bonds										Government and corporate bonds	9,709		—		—		9,709
Total cash equivalents	Total cash equivalents	94,810		—		—		94,810		Total cash equivalents	337,964		—		—		337,964

Short-term investments:	Short-term investments:									Short-term investments:
Time deposits	Time deposits	21,445		—		—		21,445		Time deposits	31,192		—		—		31,192
Commercial paper	Commercial paper	10,000		12		(7)		10,005		Commercial paper	252,500		9		(70)		252,439
Government and corporate bonds	Government and corporate bonds	98,598		560		(7)		99,151		Government and corporate bonds	192,606		226		(101)		192,731
Total short-term investments	Total short-term investments	130,043		572		(14)		130,601		Total short-term investments	476,298		235		(171)		476,362

Long-term investments:	Long-term investments:									Long-term investments:
Government and corporate bonds	Government and corporate bonds	62,473		385		(10)		62,848		Government and corporate bonds	105,645		10		(72)		105,583

Total available-for-sale investments	Total available-for-sale investments	$	287,326	$	957	$	(24)	$	288,259	Total available-for-sale investments	$	919,907	$	245	$	(243)	$	919,909

Available-for-sale investments at December ~~28, 2019~~31, 2020 were as follows:


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

Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	185,666	$	—	$	—	$	185,666	Money market funds	$	40,027	$	—	$	—	$	40,027
Time deposits	Time deposits	64,286		—		—		64,286		Time deposits	36,756		—		—		36,756
Commercial Paper										Commercial Paper	61,000		—		—		61,000
Total cash equivalents	Total cash equivalents	249,952		—		—		249,952		Total cash equivalents	137,783		—		—		137,783

Short-term investments:	Short-term investments:									Short-term investments:
Time deposits	Time deposits	2,506		—		—		2,506		Time deposits	28,302		—		—		28,302
Commercial Paper										Commercial Paper	264,000		12		(19)		263,993
Government and corporate bonds	Government and corporate bonds	83,272		52		(11)		83,313		Government and corporate bonds	149,975		247		(44)		150,178
Total short-term investments	Total short-term investments	85,778		52		(11)		85,819		Total short-term investments	442,277		259		(63)		442,473

Long-term investments:	Long-term investments:									Long-term investments:
Government and corporate bonds	Government and corporate bonds	96,186		91		(67)		96,210		Government and corporate bonds	136,983		152		(57)		137,078

Total available-for-sale investments	Total available-for-sale investments	$	431,916	$	143	$	(78)	$	431,981	Total available-for-sale investments	$	717,043	$	411	$	(120)	$	717,334

We sold available-for-sale investments for proceeds of $5 million during the ~~six~~three months ended ~~June 30,~~March 31, 2020, resulting in insignificant losses in the period.

Other Investments

At ~~June 30, 2020~~March 31, 2021 and December ~~28, 2019,~~31, 2020, we had investments in equity securities that do not have readily determinable fair values of ~~$315~~$369 million and ~~$314~~$361 million, respectively, accounted for in accordance with Accounting Standards Codification Topic ("ASC") 321, Investments-Equity Securities. Such investments are included in ~~long-term investments~~ "Long-term investments"

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in our condensed consolidated balance sheets. We did not record any changes in the measurement of such investments during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 29, 2019,~~ respectively.

At ~~June 30, 2020~~March 31, 2021 and December 28, 2019, we had investments in equity securities with readily determinable fair values of $41 million and $14 million, respectively, accounted for in accordance with ASC 321. Such investments are included in

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short-term investments in our condensed consolidated balance sheets. Changes in the measurement of such investments favorably impacted other income, net by $26 million for both the three and six months ended June 30, 2020.

~~At June 30,~~31, 2020, ~~and December 28, 2019,~~ we had investments in equity securities reported under the equity method of accounting of ~~$10~~$18 million and $9$12 million, respectively. Such investments are included in ~~long-term investments~~"Long-term investments" in our condensed 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 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. During the six months ended June 30, 2020, we did not recognize any impairment on our available-for-sale debt securities through net earnings.

(5) Long-term Debt

The following is a summary of indebtedness outstanding:


(In thousands)	(In thousands)	June 30, 2020		December 28, 2019		(In thousands)	March 31, 2021		December 31, 2020

Credit agreement loans due May 5, 2024	Credit agreement loans due May 5, 2024	$	600,000	$	600,000	Credit agreement loans due May 5, 2024	$	600,000	$	600,000
Senior notes:	Senior notes:					Senior notes:
Series 2021-A due March 24, 2026						Series 2021-A due March 24, 2026	100,000		0
Series 2021-B due March 24, 2031						Series 2021-B due March 24, 2031	400,000		0
Series 2020-A due March 11, 2030	Series 2020-A due March 11, 2030	300,000		—		Series 2020-A due March 11, 2030	300,000		300,000
Series 2015-A due February 15, 2022	Series 2015-A due February 15, 2022	225,000		225,000		Series 2015-A due February 15, 2022	225,000		225,000
Series 2015-B due February 14, 2025	Series 2015-B due February 14, 2025	200,000		200,000		Series 2015-B due February 14, 2025	200,000		200,000
Other	Other	14,162		14,162		Other	11,662		11,662

Total indebtedness	Total indebtedness	1,339,162		1,039,162		Total indebtedness	1,836,662		1,336,662
Less: debt issuance costs	Less: debt issuance costs	(695)		(780)		Less: debt issuance costs	(560)		(593)

Indebtedness, net						Indebtedness, net	1,836,102		1,336,069
Less: current installments of long-term debt						Less: current installments of long-term debt	(225,000)		0

Long-term debt	Long-term debt	$	1,338,467	$	1,038,382	Long-term debt	$	1,611,102	$	1,336,069

Credit Agreement

As of ~~June 30, 2020,~~March 31, 2021, the interest rate on revolving credit loans outstanding under our Credit Agreement was ~~0.98%~~0.91% based on LIBOR plus the applicable spread.

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 to hedge the variability of cash flows associated with such interest obligations. The interest rate swap is designated as a cash flow hedge, which effectively fixes the interest rate on the hedged indebtedness under our Credit Agreement at 3.06%. At ~~June 30, 2020~~March 31, 2021 and December ~~28, 2019,~~31, 2020, this swap was in a net liability position with an aggregate fair value of ~~$44~~$31 million and ~~$17~~$37 million, respectively; which is presented in our condensed consolidated balance sheets in ~~other~~"Other current ~~liabilities~~liabilities".

Series ~~2020-A~~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 "2019 Shelf Agreement"), pursuant to which we may issue and sell up to an aggregate principal amount of $1.80 billion of unsecured senior promissory notes. In March ~~2020,~~2021, we issued ~~$300~~$500 million aggregate principal amount of ~~2.50%~~unsecured senior ~~unsecured Series 2020-A~~ notes (the "Series ~~2020-A~~2021 Senior Notes") ~~due March 11, 2030,~~, pursuant to the ~~Master Note Agreement (the "2019~~2019 Shelf ~~Agreement") we entered into in November 2019.~~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 ~~2020-A~~2021 Senior Notes is payable semiannually on each March 1124 and September ~~11,~~24, commencing September ~~11, 2020,~~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 ~~2020-A~~2021 Senior Notes, subject to the payment of a make-whole amount. The Series ~~2020-A~~2021 Senior 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

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maintenance of certain financial ratios. As of ~~June 30, 2020, $750 million~~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.

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(6) 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 investments in available-for-sale debt securities measured and recorded at fair value on a recurring basis at ~~June 30, 2020:~~March 31, 2021:

~~(In thousands)~~

~~Fair Value Measurements Using~~

~~Description~~

~~Balance Sheet Classification~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Money market funds~~

~~Cash equivalents~~

~~36,403~~

—

~~Time deposits~~

~~Cash equivalents~~

—

~~58,407~~

—

~~Time deposits~~

~~Short-term investments~~

—

~~21,445~~

—

~~Commercial paper~~

~~Short-term investments~~

—

~~10,005~~

—

~~Government and corporate bonds~~

~~Short-term investments~~

—

~~99,151~~

—

~~Government and corporate bonds~~

~~Long-term investments~~

—

~~62,848~~

—


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

Money market funds	Cash equivalents	$	165,667	$	—	$	0
Time deposits	Cash equivalents	—		31,588		0
Commercial paper	Cash equivalents	—		131,000		—
Government and corporate bonds	Cash equivalents	—		9,709		—
Time deposits	Short-term investments	—		31,192		0
Commercial paper	Short-term investments	—		252,439		0
Government and corporate bonds	Short-term investments	—		192,731		0
Government and corporate bonds	Long-term investments	—		105,583		0

The following table details our investments in available-for-sale debt securities measured and recorded at fair value on a recurring basis at December ~~28, 2019:~~31, 2020:

~~(In thousands)~~

~~Fair Value Measurements Using~~

~~Description~~

~~Balance Sheet Classification~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Money market funds~~

~~Cash equivalents~~

~~185,666~~

—

~~Time deposits~~

~~Cash equivalents~~

—

~~64,286~~

—

~~Time deposits~~

~~Short-term investments~~

—

~~2,506~~

—

~~Government and corporate bonds~~

~~Short-term investments~~

—

~~83,313~~

—

~~Government and corporate bonds~~

~~Long-term investments~~

—

~~96,210~~

—

Our investments in equity securities with readily determinable fair values accounted for in accordance with ASC 321 are measured and recorded at fair value on a recurring basis using a Level 2 valuation. The fair value of such arrangements is based on quoted prices in active markets, reduced by a percentage reflecting a discount for lack of marketability.


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

Money market funds	Cash equivalents	$	40,027	$	—	$	0
Time deposits	Cash equivalents	—		36,756		0
Commercial paper	Cash equivalents	—		61,000		—
Time deposits	Short-term investments	—		28,302		0
Commercial paper	Short-term investments	—		263,993		—
Government and corporate bonds	Short-term investments	—		150,178		0
Government and corporate bonds	Long-term investments	—		137,078		0

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

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expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are

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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 at ~~June 30, 2020~~March 31, 2021 and December ~~28, 2019~~31, 2020 was approximately ~~$1.34~~$1.85 billion and ~~$1.07~~$1.36 billion, respectively. The carrying amount of such debt at ~~June 30, 2020~~March 31, 2021 and December ~~28, 2019~~31, 2020 was ~~$1.33~~$1.83 billion and ~~$1.03~~$1.33 billion, respectively.

(7) Income Taxes

We determine the tax provision for interim periods using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our effective tax rate was ~~20.7%~~21.4% and ~~18.7%~~20.0% for the first ~~six~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in the effective tax rate in the first ~~six months~~quarter of ~~2020~~2021 is primarily due to a decrease in net excess tax benefits recognized as a component of income tax expense in connection with the exercise of stock options and the vesting of restricted share and share unit awards.

(8) Earnings Per Share

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


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

Basic earnings per share:	Basic earnings per share:											Basic earnings per share:
Income available to common shareholders	Income available to common shareholders	$	134,748	304,776	$	0.44	$	126,969	321,280	$	0.40	Income available to common shareholders	$	172,252	304,731	$	0.57	$	147,159	309,657	$	0.48
Effect of dilutive securities:	Effect of dilutive securities:											Effect of dilutive securities:
Stock options, non-vested shares and share units	Stock options, non-vested shares and share units	—		1,941			—		3,382			Stock options, non-vested shares and share units	—		3,300			—		2,583
Diluted earnings per share:	Diluted earnings per share:											Diluted earnings per share:
Income available to common shareholders including assumed conversions	Income available to common shareholders including assumed conversions	$	134,748	306,717	$	0.44	$	126,969	324,662	$	0.39	Income available to common shareholders including assumed conversions	$	172,252	308,031	$	0.56	$	147,159	312,240	$	0.47

For the three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 29, 2019,~~ options to purchase ~~6.0~~1.1 million and ~~9.4~~4.1 million shares of common stock at per share prices ranging from $52.32 to $76.49 and ~~$53.30~~$56.76 to ~~$73.40,~~$76.49, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive.

Six Months Ended
2020 2019
Earnings Shares Per-Share Earnings Shares Per-Share
(In thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic earnings per share:
Income available to common shareholders $ 281,907 307,256 $ 0.92 $ 293,188 322,485 $ 0.91
Effect of dilutive securities:
Stock options, non-vested shares and share units — 2,264 — 3,013
Diluted earnings per share:
Income available to common shareholders including assumed conversions $ 281,907 309,520 $ 0.91 $ 293,188 325,498 $ 0.90

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For the six months ended June 30, 2020 and June 29, 2019, options to purchase 4.5 million and 12.5 million shares of common stock at per share prices ranging from $52.32 to $76.49 and $51.46 to $73.40, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive.

(9) Share-Based Compensation and Equity

Stock Options

Stock option activity for the ~~six~~three months ended ~~June 30, 2020~~March 31, 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 15,416 $ 56.36
Granted 2 73.01
Exercised (3,159) 49.65
Forfeited and expired (211) 61.40
Outstanding as of June 30, 2020 12,048 58.04 $ 127,611 5.88
Exercisable as of June 30, 2020 7,988 $ 56.55 $ 96,755 5.06

~~The weighted-average assumptions used to estimate the fair value, under the Black-Scholes-Merton pricing model, of stock options granted during the six months ended June 30, 2020 were as follows:~~


~~Expected volatility (%)~~	~~24.5~~		%
~~Expected dividend rate (%)~~	1		%
~~Expected term (yrs)~~	6
~~Risk-free rate (%)~~	~~1.5~~		%
~~Fair value per option~~	$	~~17.53~~


(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
Exercised	(705)	51.57
Forfeited and expired	(41)	58.83
Outstanding as of March 31, 2021	9,458	$	59.11	$	120,781	5.36

Exercisable as of March 31, 2021	5,997	$	57.99	$	83,349	4.53

As of ~~June 30, 2020,~~March 31, 2021, there was ~~$67~~$39 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 ~~2.32~~1.77 years.

Non-vested Shares and Share Units

Non-vested share and share unit activity for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was as follows:


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

Outstanding at beginning of year	Outstanding at beginning of year	2,634	$	65.30	Outstanding at beginning of year	4,131	$	68.05
Granted	Granted	1,969	69.44		Granted	71	73.95
Vested	Vested	(591)	65.71		Vested	(188)	65.89
Forfeited	Forfeited	(49)	66.62		Forfeited	(64)	69.07

Outstanding as of June 30, 2020		3,963	$	67.28
Outstanding as of March 31, 2021					Outstanding as of March 31, 2021	3,950	$	68.24

As of ~~June 30, 2020,~~March 31, 2021, there was ~~$215~~$158 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 ~~2.32~~1.68 years.

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Share-Based Compensation Cost

The following table presents total compensation expense recognized with respect to stock options, non-vested shares and share units, and our associate stock purchase plan:


		Three Months Ended						Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020

Stock option and non-vested share and share unit compensation expense	Stock option and non-vested share and share unit compensation expense	$	37,549	$	23,024	$	72,580	$	42,884	Stock option and non-vested share and share unit compensation expense	$	47,950	$	35,031
Associate stock purchase plan expense	Associate stock purchase plan expense	1,727		1,749		2,828		3,291		Associate stock purchase plan expense	1,548		1,101
Amounts capitalized in software development costs, net of amortization	Amounts capitalized in software development costs, net of amortization	(1,076)		(41)		(1,821)		146		Amounts capitalized in software development costs, net of amortization	(1,663)		(745)

Amounts charged against earnings, before income tax benefit	Amounts charged against earnings, before income tax benefit	$	38,200	$	24,732	$	73,587	$	46,321	Amounts charged against earnings, before income tax benefit	$	47,835	$	35,387

Amount of related income tax benefit recognized in earnings	Amount of related income tax benefit recognized in earnings	$	8,191	$	4,357	$	14,634	$	8,558	Amount of related income tax benefit recognized in earnings	$	10,256	$	6,443

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Treasury Stock

Under our current share repurchase program, which was initially approved by our Board of Directors in May 2017 and most recently amended in December 2019, the Company is authorized to repurchase up to $3.70 billion of shares of our common stock, 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 the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, we repurchased ~~9.2~~4.9 million shares for total consideration of ~~$650~~$350 million under the program. The shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired. As of ~~June 30, 2020, $1.03 billion remains~~March 31, 2021, $577 million remained available for repurchase under the program.

Dividends

On ~~May 21, 2020,~~March 25, 2021, our Board of Directors declared a cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on July 17, 2020 to shareholders of record as of June 5, 2020. On March 19, 2020, our Board of Directors declared a cash dividend of $0.18$0.22 per share on our issued and outstanding common stock, which was paid on April ~~17, 2020~~20, 2021 to shareholders of record as of April ~~3, 2020.~~6, 2021. In connection with the declaration of such ~~dividends,~~dividend, 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 both ~~June 30, 2020~~March 31, 2021 and December ~~28, 2019,~~31, 2020, our condensed consolidated balance sheets included liabilities for dividends payable of ~~$56~~$69 million, which are included in ~~other~~"Other current ~~liabilities.~~liabilities".

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

Balance at December 28, 2019		$	(106,347)	$	(12,578)	$	265	$	(118,660)
Balance at December 31, 2020										Balance at December 31, 2020	$	(93,450)	$	(27,788)		$	434			$	(120,804)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(20,546)		(20,430)		(849)		(41,825)		Other comprehensive income (loss) before reclassifications	(8,991)		2,061			(217)		(7,147)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	—		1,122		—		1,122		Amounts reclassified from AOCI	0		2,527			0		2,527

Balance at March 31, 2020		(126,893)		(31,886)		(584)		(159,363)
Other comprehensive income (loss) before reclassifications		9,197		(3,205)		1,502		7,494
Amounts reclassified from AOCI		—		2,198		—		2,198

Balance at June 30, 2020		$	(117,696)	$	(32,893)	$	918	$	(149,671)
Balance at March 31, 2021										Balance at March 31, 2021	$	(102,441)	$	(23,200)		$	217	$	(125,424)

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

Balance at December 29, 2018		$	(102,939)	$	—	$	(613)	$	(103,552)
Balance at December 28, 2019										Balance at December 28, 2019	$	(106,347)	$	(12,578)		$	265			$	(118,660)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	2,321		—		637		2,958		Other comprehensive income (loss) before reclassifications	(20,546)		(20,430)			(849)		(41,825)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	—		—		—		—		Amounts reclassified from AOCI	0		1,122			0		1,122

Balance at March 30, 2019		(100,618)		—		24		(100,594)
Other comprehensive income (loss) before reclassifications		(100)		(12,223)		216		(12,107)
Amounts reclassified from AOCI		—		(147)		—		(147)

Balance at June 29, 2019		$	(100,718)	$	(12,370)	$	240	$	(112,848)
Balance at March 31, 2020										Balance at March 31, 2020	$	(126,893)	$	(31,886)		$	(584)	$	(159,363)

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


(In thousands)	(In thousands)		Three Months Ended						Six Months Ended					(In thousands)			Three Months Ended
AOCI Component	AOCI Component	Location	2020		2019		2020		2019		AOCI Component	Location	2021		2020

Unrealized loss on cash flow hedge	Unrealized loss on cash flow hedge	Other income, net	$	(2,798)	$	180	$	(4,170)	$	180	Unrealized loss on cash flow hedge	Other income, net	$	(3,217)	$	(1,372)
		Income taxes	600		(33)		850		(33)			Income taxes	690		250

Total amount reclassified, net of tax	Total amount reclassified, net of tax		$	(2,198)	$	147	$	(3,320)	$	147	Total amount reclassified, net of tax		$	(2,527)	$	(1,122)

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(10) 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"). 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, 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.

As previously disclosed, we continue to be in dispute with Fujitsu Services Limited ("Fujitsu") regarding Fujitsu's obligation to pay amounts to us due upon the termination of a subcontract, including client receivables, in connection with Fujitsu's contract as the prime contractor in the National Health Service ("NHS") initiative to automate clinical processes and digitize medical records in the Southern region of England. The NHS terminated its contract with Fujitsu, which gave rise to the termination of our subcontract with Fujitsu. We filed a request for arbitration with the London Court of International Arbitration on April 22, 2019 seeking damages. On December 30, 2019, Fujitsu filed its Defense and Counterclaim (the "Counterclaim") in response. In its Counterclaim, Fujitsu defends against our claim in full and argues that we are liable to Fujitsu for: (i) £306 million in damages based on our alleged fraudulent misrepresentations inducing Fujitsu to enter into the subcontract; or (ii) alternatively, £173.8 million in damages based on our alleged breaches of the subcontract.

We filed our response to Fujitsu's Counterclaim on May 1, 2020. We believe that Fujitsu's claims are without merit and will vigorously defend against them, and we continue to believe that we have valid and equitable grounds for recovery of the disputed client receivables; however, there can be no assurances as to the outcome of the dispute. As previously

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disclosed, we recorded a pre-tax charge of $45 million in the fourth quarter of 2018 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, which occurred before we filed our request for arbitration. We have not concluded that a loss related to the new claims raised by Fujitsu in the Counterclaim is probable, nor have we accrued a liability related to these claims beyond the previously reported pre-tax charge recorded in the fourth quarter of 2018. Although we believe a loss may 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 Counterclaim given that the dispute is in the early stages of the arbitration process. Arbitration is not currently expected to occur before 2022.

Cerner Health Services, Inc. ("Cerner HS"), a wholly owned subsidiary of Cerner Corporation, filed a lawsuit in the Chester County, Pennsylvania, Court of Common Pleas against NextGen Healthcare Information Systems, LLC ("NextGen") relating to a dispute arising out of a supplier relationship initially established between Siemens Health Services, Inc. and NextGen prior to the acquisition of the assets of Siemens Health Services, Inc. by Cerner HS in 2015. In September 2017, the court issued a preliminary injunction to prevent NextGen from refusing to honor certain contractual obligations to support Cerner HS's clients who use NextGen ambulatory EHR solutions. In September 2018, NextGen filed a counterclaim alleging breach of contract and tortious ~~interference but did not specify its damages. In August 2019,~~interference. NextGen’s expert testified at trial that NextGen ~~provided an expert report alleging~~should be entitled to collect profit disgorgement damages of ~~$135~~$122 million or, ~~alternatively, $30.5~~at least $18 million of ambulatory-related disgorgement damages. Alternatively, he claimed NextGen should recover $26 million in lost profit ~~damages, but the report did not discuss how our actions allegedly caused NextGen's~~ damages. ~~In December 2019, we deposed NextGen's expert, gaining additional clarity on categories of alleged damages but not on the alleged theories of liability.~~ A ~~jury~~remote trial ~~is set to begin~~commenced on January 25, ~~2021.~~2021 and trial continues. We believe NextGen's claims are without merit and ~~will~~are vigorously ~~defend~~defending against them; however, there can be no assurances as to the outcome of the dispute. We have not concluded that a loss related to the claims raised by NextGen in its counterclaim is probable, nor have we accrued a liability related to these claims. Although a loss may be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss in light of the inherent difficulty of predicting the outcome of litigation generally, the wide range of damages presented by NextGen's expert, and the continued lack of clarity on the causal connection between Cerner Corporation's and Cerner HS's actions and any alleged damages.

The terms of our agreements with our clients generally provide for limited indemnification of such clients against losses, expenses and liabilities arising from third party or other claims based on, 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 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 IP 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 corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

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, 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 believe the range of potential losses under any claims to be material to our consolidated financial statements.

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(11) Segment Reporting

We have two operating segments, Domestic and 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 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, certain organizational restructuring and other expense, share-based compensation expense, and certain amortization and depreciation. 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 the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~June 29, 2019:~~March 31, 2020:

(In thousands) Domestic International Other Total
Three Months Ended 2020
Revenues $ 1,168,213 $ 162,136 $ — $ 1,330,349
Costs of revenue 189,779 22,184 — 211,963
Operating expenses 587,674 57,413 326,401 971,488
Total costs and expenses 777,453 79,597 326,401 1,183,451
Operating earnings (loss) $ 390,760 $ 82,539 $ (326,401) $ 146,898


(In thousands)	(In thousands)	Domestic		International		Other		Total		(In thousands)	Domestic		International		Other		Total

Three Months Ended 2019
Three Months Ended 2021										Three Months Ended 2021
Revenues	Revenues	$	1,266,112	$	164,949	$	—	$	1,431,061	Revenues	$	1,221,992	$	165,786	$	—	$	1,387,778

Costs of revenue	Costs of revenue	243,926		24,747		—		268,673		Costs of revenue	205,694		24,962		—		230,656
Operating expenses	Operating expenses	605,636		73,258		352,377		1,031,271		Operating expenses	560,562		61,614		316,888		939,064
Total costs and expenses	Total costs and expenses	849,562		98,005		352,377		1,299,944		Total costs and expenses	766,256		86,576		316,888		1,169,720

Operating earnings (loss)	Operating earnings (loss)	$	416,550	$	66,944	$	(352,377)	$	131,117	Operating earnings (loss)	$	455,736	$	79,210	$	(316,888)	$	218,058


(In thousands)	(In thousands)	Domestic		International		Other		Total		(In thousands)	Domestic		International		Other		Total

Six Months Ended 2020
Three Months Ended 2020										Three Months Ended 2020
Revenues	Revenues	$	2,414,628	$	327,462	$	—	$	2,742,090	Revenues	$	1,246,415	$	165,326	$	—	$	1,411,741

Costs of revenue	Costs of revenue	418,346		48,033		—		466,379		Costs of revenue	228,567		25,849		—		254,416
Operating expenses	Operating expenses	1,157,768		123,968		668,701		1,950,437		Operating expenses	570,094		66,555		342,300		978,949
Total costs and expenses	Total costs and expenses	1,576,114		172,001		668,701		2,416,816		Total costs and expenses	798,661		92,404		342,300		1,233,365

Operating earnings (loss)	Operating earnings (loss)	$	838,514	$	155,461	$	(668,701)	$	325,274	Operating earnings (loss)	$	447,754	$	72,922	$	(342,300)	$	178,376

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(In thousands) Domestic International Other Total
Six Months Ended 2019
Revenues $ 2,496,942 $ 323,996 $ — $ 2,820,938
Costs of revenue 472,485 49,392 — 521,877
Operating expenses 1,177,654 141,427 650,919 1,970,000
Total costs and expenses 1,650,139 190,819 650,919 2,491,877
Operating earnings (loss) $ 846,803 $ 133,177 $ (650,919) $ 329,061

(12) Subsequent Events

Kantar Health

On ~~July~~April 1, ~~2020,~~2021, we ~~sold certain~~acquired Kantar Health, a division of ~~our business operations, primarily conducted in Germany~~Kantar Group, for a base cash purchase price of $375 million. Kantar Health provides data, analytics, commercial research, and ~~Spain,~~consulting services to ~~affiliates of CompuGroup Medical SE & Co. KGaA. We received cash consideration of $224 million, which~~the life sciences industry. The base purchase price is subject to post-closing adjustments for working capital and certain other ~~adjustments. Amounts within our June 30,~~adjustments, as specified in the Securities Purchase Agreement dated December 16, 2020, ~~and December 28, 2019 condensed consolidated balance sheets related~~as amended.

Our acquisition of Kantar Health will be treated as a purchase in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to the ~~disposed business operations were not material~~estimated fair values of assets and liabilities acquired in the transaction. Due to the timing of the acquisition subsequent to our ~~condensed consolidated financial statements.~~first quarter 2021 period-end, certain disclosures, including the preliminary allocation of purchase price, have been omitted from this quarterly report on Form 10-Q because the initial accounting for the business combination is incomplete as of the filing date. We will include necessary disclosures in our quarterly report on Form 10-Q for our second quarter of 2021.

2021 Share Repurchase Program

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 is incremental to our current program originally approved in May 2017. 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.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of Cerner Corporation ("Cerner," the "Company," "we," "us" or "our"). This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to condensed consolidated financial statements ("Notes") found above. Certain statements in this quarterly report on Form 10-Q contain forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995, as amended, regarding our future plans, objectives, beliefs, expectations, representations and projections. See the end of this MD&A for more information on our forward-looking statements, including a discussion of the most significant factors that could cause actual results to differ materially from those in the forward-looking ~~statements, and the information in Part II, "Item 1A. Risk Factors" below.~~statements.

All references to quarters or the three month periods ended 2021 and 2020 in this MD&A represent the respective three ~~or six months~~month periods ended ~~on such dates,~~March 31, 2021 and March 31, 2020, unless otherwise noted. ~~Refer to Note (1) of the Notes for information regarding our fiscal period ends.~~

Management Overview

Our revenues are primarily derived by selling, implementing, operating and supporting software solutions, clinical content, hardware, devices and services that give ~~health care~~healthcare providers and other stakeholders secure access to clinical, administrative and financial data in real or near-real time, helping them to improve quality, safety and efficiency in the delivery of ~~health care.~~healthcare.

Our core strategy is to create organic growth by investing in research and development ~~("R&D")~~ to create solutions and tech-enabled services for the ~~health care~~healthcare industry. We ~~may~~expect to also supplement organic growth with acquisitions or strategic investments and ~~partnerships.~~collaborations.

Cerner's long history of growth has created an important strategic footprint in ~~health care,~~healthcare, with Cerner holding more than 25 percent market share in the U.S. acute care electronic health record ("EHR") market and a leading market share in several non-U.S. regions. Foundational to our growth going forward is delivering value to this core client base, including executing effectively on our large U.S. federal contracts and cross-selling key solutions and services in areas such as revenue cycle. We are also investing in platform modernization, with a focus on delivering a software as a service platform that we expect to lower total cost of ownership, improve clinician experience and patient outcomes, and enable clients to accelerate adoption of new functionality and better leverage third-party innovations.

We also expect to continue driving growth by leveraging our HealtheIntent^® platform, which is the foundation for established and new offerings for both provider and non-provider markets. The EHR-agnostic HealtheIntent platform enables Cerner to become a strategic partner with ~~health care~~healthcare stakeholders and help them improve performance under value-based contracting. The platform, along with our CareAware^® platform, also supports offerings in areas such as long-term care, home care and hospice, rehabilitation, behavioral health, community care, care team communications, health systems operations, consumer and employer, and data-as-a-service.

Beyond our strategy for driving revenue growth, we are also focused on earnings growth. After several years of margin compression related to slowing revenue growth, increased mix of low-margin services, and lower software demand due to the end of direct government incentives for EHR ~~adoptions,~~adoption, Cerner implemented a new operating structure and introduced other initiatives focused on cost optimization and process improvement in 2019. To assist in these efforts, we engaged an outside consulting firm to conduct a review of our operations and cost structure. We have made good progress since we kicked off our transformation in 2019 and expect this progress to be reflected in improved profitability ~~in 2020 and beyond.~~going forward. We are focused on ongoing identification of opportunities to operate more efficiently and on achieving the efficiencies without impacting the quality of our solutions and services and commitments to our clients.

We are also focused on delivering strong levels of cash flow which we expect to accomplish by continuing to grow earnings and prudently managing capital expenditures. We expect to use future cash flow and debt, as appropriate, to meet our capital allocation objectives, which include investing in our business, ~~potential~~entering into acquisitions or other strategic investments to drive profitable growth, and returning capital to shareholders through share repurchases and dividends.

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COVID-19

Our business and results of operations ~~for~~in the first ~~six~~three months of both 2021 and 2020 were impacted by the ongoing ~~Coronavirus disease ("COVID-19")~~COVID-19 pandemic. It has caused us to modify certain of our business practices, including requiring most of our ~~employees~~associates to work remotely; restricting ~~employee~~associate travel; developing social distancing plans for our associates; and canceling or postponing in person participation in certain meetings, events and conferences. It is not possible to quantify the full financial impact that the COVID-19 pandemic has had on our results of operations, cash flows, or financial condition, due to the uncertainty surrounding the pandemic, the difficulty inherent in identifying and measuring the various impacts that have or may stem from such an event and the fact that there are no comparable recent events that provide guidance as to how to measure or predict the effect the COVID-19 pandemic may have on our business. However, we believe COVID-19 has impacted, and ~~will~~could continue in the near-term to impact, our business results, primarily, but not limited to, in the following areas:

•Bookings, backlog and revenues – A decline in new business bookings as certain client purchasing decisions and projects are delayed to focus on treating patients, procuring necessary medical supplies, administering vaccines, and managing their own organizations through this crisis. This decline in bookings flows through to reduced backlog and lower subsequent revenues.

•Associate productivity – A decline in associate productivity, primarily for our services personnel, as a large amount of work is typically done at client sites, which is being impacted by travel restrictions and our clients' focus on the pandemic. Our clients' focus on the pandemic has also led to pauses on existing projects and postponed start dates for others, which translates into lower professional services revenues and a lower operating margin percentage. We are mitigating this by doing more work remotely than we have in the past, but we cannot fully offset the negative impact.

•Travel – Associate travel restrictions reduce client-related travel, which reduces reimbursed travel revenues and lowers our costs of revenue as a percent of revenues. Such restrictions also reduce non-reimbursable travel, which lowers operating expenses.

•Cash collections -– A delay in client cash collections due to COVID-19's impact on national reimbursement processes, and client focus on managing their own organizations' liquidity during this time. This translates to lower cash flows from operating activities, and a higher days sales outstanding metric. Lower cash flows from operating activities may impact how we execute under our capital allocation strategy.

•Capital expenditures -– A decline in capital spending as certain capital projects are delayed.

We believe the impact of COVID-19 on our results of operations for the first quarter of 2020 was limited, with the largest impact in the areas of reduced bookings and lower technology resale revenue, due to the mid-March 2020 timing of when we implemented changes to our business practices in response to COVID-19, and the nature of the industry in which we operate. We believe the most significant impact of COVID-19 on our business was in the second quarter of 2020, with the impact beginning to moderate in subsequent periods but still persisting into 2021 due to some ongoing restrictive measures and certain regions dealing with resurgences of cases. As a result, we believe the impact of COVID-19 on our results of operations for the ~~second~~first quarter of ~~2020~~2021 was ~~much~~ greater than in the first quarter of 2020 as the pandemic and practices we implemented in mid-March 2020 were ongoing for the full ~~quarter,~~period, with the largest impact in the areas of ~~reduced bookings and~~ lower ~~licensed software,~~ technology resale, professional services, and reimbursed travel revenues.

WeWhile we expect a negative financial impact to continue ~~into the second half of~~in 2021, we do not expect it to be as significant as 2020. ~~However, the~~The impact will continue to be difficult to quantify as there are many factors that continue to be outside of our control, so any forward looking statements that we make regarding our projections of future financial ~~performance,~~performance; new ~~solution, services~~solutions and ~~offering development, and~~services; capital allocation plans; cost optimization and operational improvement initiatives; and the expected benefits of our acquisitions, divestitures or other collaborations ~~will~~are all be subject to increased risks, as discussed further below and in Part II, Item 1A of this quarterly report on Form 10-Q. Additionally, we may make further modifications to our operations or business plans that have a negative financial impact as required by government authorities, our clients or as we determine are in the best interests of our associates, clients and business partners. While we expect COVID-19 to have an impact on our results of operations, cash flows, and financial position in the near-term, we believe the nature of our solutions and services offerings will continue to be in demand, regardless of this pandemic. However, the COVID-19 pandemic and related restrictive measures have created significant economic uncertainty and the duration and magnitude of the impact of the pandemic is unknown at this time; therefore, there can be no assurance that the ultimate impact of the pandemic will not adversely affect our future operational and financial performance.risks.

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Operational Improvement Initiatives

The Company has ~~been focused~~continued to focus on leveraging the impact of our new operating structure ~~which was rolled out in the first quarter of 2019,~~ and identifying additional efficiencies in our business. We continue to be focused on reducing operating expenses and generating other efficiencies that are expected to provide longer-term operating margin expansion. We are continuing our portfolio management, which includes ongoing evaluation of our offerings, exiting certain low-margin businesses, and being more selective as we

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consider new business opportunities. To assist in these efforts, we engaged an outside consulting firm to conduct a review of our operations and cost structure. As part of our portfolio management, we closed on the sale of certain of our business operations, primarily conducted in Germany and Spain, in July 2020, and wethe sale of certain of our revenue cycle outsourcing business operations in August 2020. We expect to continue to evaluate and complete divestiture transactions that are strategic to our operational improvement initiatives. We continue to be focused on ongoing identification of opportunities to operate more efficiently and on achieving the efficiencies without impacting the quality of our solutions and services and commitments to our clients.

In the near term, we expect to ~~continue incurring~~incur expenses in connection with these efforts. Such expenses may include, but are not limited to, consultant and other professional services fees, employee separation costs, contract termination costs, and other such related expenses. Expenses recognized in the first ~~six months~~quarter of 2021 and 2020 primarily related to professional services fees and employee separation costs, which are included in operating expenses in our condensed consolidated statements of operations. We expect to incur additional expenses in connection with these initiatives in future periods, which may be material.

Results Overview

Bookings, which ~~reflects~~reflect the value of executed contracts for software, hardware, professional services and managed services, was ~~$1.34~~$1.23 billion in the ~~second~~first quarter of ~~2020,~~2021, which is ~~a decrease~~an increase of 6%13% compared to ~~$1.43~~$1.09 billion in the ~~second~~first quarter of ~~2019.~~2020.

Revenues for the ~~second~~first quarter of ~~2020~~2021 decreased 7%2% to ~~$1.33~~$1.39 billion, compared to ~~$1.43~~$1.41 billion in the ~~second~~first quarter of ~~2019.~~2020.

Net earnings for the ~~second~~first quarter of ~~2020~~2021 increased 6%17% to ~~$135~~$172 million, compared to ~~$127~~$147 million in the ~~second~~first quarter of ~~2019.~~2020. Diluted earnings per share increased ~~13%~~19% to ~~$0.44,~~$0.56, compared to ~~$0.39~~$0.47 in the ~~second~~first quarter of ~~2019.~~2020.

We had cash collections of receivables of ~~$1.29~~$1.44 billion in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~$1.38~~$1.37 billion in the ~~second~~first quarter of ~~2019.~~2020. Days sales outstanding was 8177 days in the ~~second~~first quarter of ~~2020,~~2021, compared to 76 days for the 2020 fourth quarter and 74 days for the first quarter of ~~2020 and 78 days for the second quarter of 2019.~~2020. Operating cash flows for the ~~second~~first quarter of ~~2020~~2021 were ~~$259~~$450 million, compared to ~~$207~~$284 million in the ~~second~~first quarter of ~~2019.~~2020.

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Results of Operations

Three Months Ended ~~June 30, 2020~~March 31, 2021 Compared to Three Months Ended ~~June 29, 2019~~March 31, 2020

The following table presents a summary of our operating information for the ~~second~~first quarters of ~~2020~~2021 and ~~2019:~~2020:


(In thousands)	(In thousands)	2020		% of Revenue		2019		% of Revenue		% Change		(In thousands)	2021		% of Revenue		2020		% of Revenue		% Change

Revenues	Revenues	$	1,330,349	100	%	$	1,431,061	100	%	(7)	%	Revenues	$	1,387,778	100	%	$	1,411,741	100	%	(2)	%
Costs of revenue	Costs of revenue	211,963		16	%	268,673		19	%	(21)	%	Costs of revenue	230,656		17��	%	254,416		18	%	(9)	%

Margin	Margin	1,118,386		84	%	1,162,388		81	%	(4)	%	Margin	1,157,122		83	%	1,157,325		82	%	—	%

Operating expenses	Operating expenses											Operating expenses
Sales and client service	Sales and client service	645,087		48	%	678,895		47	%	(5)	%	Sales and client service	622,176		45	%	636,649		45	%	(2)	%
Software development	Software development	178,955		13	%	181,047		13	%	(1)	%	Software development	192,327		14	%	185,320		13	%	4	%
General and administrative	General and administrative	134,332		10	%	149,788		10	%	(10)	%	General and administrative	112,365		8	%	139,852		10	%	(20)	%
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	13,114		1	%	21,541		2	%	(39)	%	Amortization of acquisition-related intangibles	12,196		1	%	17,128		1	%	(29)	%

Total operating expenses	Total operating expenses	971,488		73	%	1,031,271		72	%	(6)	%	Total operating expenses	939,064		68	%	978,949		69	%	(4)	%

Total costs and expenses	Total costs and expenses	1,183,451		89	%	1,299,944		91	%	(9)	%	Total costs and expenses	1,169,720		84	%	1,233,365		87	%	(5)	%

Operating earnings	Operating earnings	146,898		11	%	131,117		9	%	12	%	Operating earnings	218,058		16	%	178,376		13	%	22	%

Other income, net	Other income, net	24,632				23,006						Other income, net	1,206				5,595
Income taxes	Income taxes	(36,782)				(27,154)						Income taxes	(47,012)				(36,812)

Net earnings	Net earnings	$	134,748			$	126,969			6	%	Net earnings	$	172,252			$	147,159			17	%

Revenues & Backlog

Revenues decreased 7%2% to ~~$1.33~~$1.39 billion in the ~~second~~first quarter of ~~2020,~~2021, as compared to ~~$1.43~~$1.41 billion in the same period of ~~2019. We believe the~~2020. The decline in revenues is primarily attributable to the following:

•The first quarter of 2021 includes a $23 million reduction in revenues due to the sale of certain of our revenue cycle outsourcing business operations to affiliates of R1 RCM Inc., on August 3, 2020.

•The first quarter of 2021 includes a $21 million reduction in revenues due to the sale of certain of our business operations primarily conducted in Germany and Spain to affiliates of CompuGroup Medical SE & Co. KGaA on July 1, 2020.

•The impact of the ongoing COVID-19 pandemic on our ~~second~~first quarter ~~2020~~2021 operations, with the largest impact in the areas of ~~licensed software,~~ technology resale, professional services, and reimbursed travel revenues, as further discussed above. ~~Additionally, the second quarter of 2020 includes a $42 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019.~~

These declines are partially offset by increased implementation activity within our federal business, inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs. In the ~~second~~first quarter of ~~2020, 17%~~2021, 20% of our total revenues were attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, compared to ~~12%~~17% in the same period of ~~2019.~~2020. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

On July 1, 2020, we disposed of certain of our operations primarily conducted in Germany and Spain in connection with our portfolio management, as further discussed in Note (12) of the Notes. We expect the disposition of such operations to reduce future International Segment revenues by approximately $83 million on an annualized basis.

Backlog, which reflects contracted revenue that has not yet been recognized as revenue, was ~~$13.66~~relatively flat at $13.07 billion at ~~June 30, 2020,~~March 31, 2021, compared to ~~$13.71~~$13.04 billion at December ~~28, 2019. We believe this decline in backlog is primarily attributable to the impact of the ongoing COVID-19 pandemic on our bookings during the first six months of 2020, as further discussed above.~~31, 2020. We expect to recognize 30% of our backlog as revenue over the next 12 months.

We believe that backlog may not necessarily be a comprehensive indicator of future revenue as certain of our arrangements may be canceled (or conversely renewed) at our clients' option; thus contract consideration related to such cancellable periods has been excluded from our calculation of backlog. However, historically our experience has been that such cancellation provisions are rarely exercised. We expect to recognize approximately ~~$751~~$967 million of revenue over the

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next 12 months under currently executed contracts related to such cancellable periods, which is not included in our calculation of backlog.

23Additionally, on April 1, 2021, we completed our acquisition of Kantar Health, as further discussed in Note (12) of the Notes. We expect the acquired business to contribute approximately $125 million of revenues over the remainder of 2021.

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Costs of Revenue

Costs of revenue as a percent of revenues were ~~16%~~17% in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~19%~~18% in the same period of ~~2019.~~2020. The lower costs of revenue as a percent of revenues was primarily driven by lower reimbursed travel revenue, which carries a 100% cost of revenue; ~~a lower mix of technology resale revenue, which carries a higher cost of revenue;~~ and reduced utilization of third-party resources associated with professional services ~~revenue.~~and support and maintenance revenue, inclusive of the impact from the divestiture transactions discussed above.

Costs of revenue include the cost of reimbursed travel expense, sales commissions, ~~third party~~third-party consulting services and subscription content and 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. Such costs, as a percent of revenues, typically have varied as the mix of revenue (software, hardware, devices, maintenance, support, and services) carrying different margin rates changes from period to period. Costs of revenue does not include the costs of our client service personnel who are responsible for delivering our service offerings. Such costs are included in sales and client service expense.

Operating Expenses

Total operating expenses decreased 6%4% to ~~$971~~$939 million in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~$1.03 billion~~$979 million in the same period of ~~2019.~~2020.

•Sales and client service expenses as a percent of revenues were ~~48%~~45% in the ~~second~~first quarter of ~~2020, compared to 47% in the same period of 2019.~~both 2021 and 2020. These expenses decreased 5%2% to ~~$645~~$622 million in the ~~second~~first quarter of ~~2020,~~2021, from ~~$679~~$637 million in the same period of ~~2019.~~2020. Sales and client service expenses include salaries and benefits of sales, marketing, support, and services personnel, depreciation and other expenses associated with our managed services business, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The decrease in sales and client service expenses was primarily driven by ~~a $15 million reduction~~reductions in ~~associate travel~~non-personnel costs, ~~and~~inclusive of the ~~second quarter of 2019 included a $20 million charge in connection with a client dispute.~~impact from our operational improvement initiatives, as discussed above.

•Software development expenses as a percent of revenues were 14% in the first quarter of 2021, compared to 13% in the ~~second quarter~~same period of ~~both 2020 and 2019.~~2020. Expenditures for software development include ongoing development and enhancement of the Cerner Millennium^® and HealtheIntent platforms, ~~with a focus on supporting~~as well as other key initiatives to enhance physician experience, revenue cycle, population health management, and health network solutions. In addition, the second quarter of 2020 includes costs incurred in connection with our efforts to modernize our platforms,such as platform modernization, with a focus on development of a software as a service platform. A summary of our total software development expense in the ~~second~~first quarters of ~~2020~~2021 and ~~2019~~2020 is as follows:


		Three Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020

Software development costs	Software development costs	$	195,296	$	195,393	Software development costs	$	211,027	$	198,164
Capitalized software costs	Capitalized software costs	(75,850)		(69,675)		Capitalized software costs	(81,155)		(72,504)
Capitalized costs related to share-based payments	Capitalized costs related to share-based payments	(1,688)		(676)		Capitalized costs related to share-based payments	(2,395)		(1,351)
Amortization of capitalized software costs	Amortization of capitalized software costs	61,197		56,005		Amortization of capitalized software costs	64,850		61,011

Total software development expense	Total software development expense	$	178,955	$	181,047	Total software development expense	$	192,327	$	185,320

•General and administrative expenses as a percent of revenues were 8% in the first quarter of 2021, compared to 10% in the ~~second quarter~~same period of ~~both 2020 and 2019.~~2020. These expenses decreased ~~10%~~20% to ~~$134~~$112 million in the ~~second~~first quarter of ~~2020,~~2021, from ~~$150~~$140 million in the same period of ~~2019.~~2020. General and administrative expenses include salaries and benefits for corporate, financial and administrative staffs, utilities, communications expenses, professional fees, depreciation and amortization, transaction gains or losses on foreign currency, expense for share-based payments, certain organizational restructuring and other expense. ~~The decrease in~~In the first quarter of 2021, general and administrative expenses ~~is primarily due to a reduction in~~include $20 million of expenses incurred in connection with our operational improvement initiatives, discussed ~~above.~~above, compared to $40 million in the same period of 2020. We expect to incur additional expenses in connection with these efforts in future periods, which may be material.

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•Amortization of acquisition-related intangibles as a percent of revenues was 1% in the ~~second~~first quarter of ~~2020, compared to 2% in the same period of 2019.~~both 2021 and 2020. These expenses decreased ~~39%~~29% to ~~$13~~$12 million in the ~~second~~first quarter of ~~2020,~~2021, from ~~$22~~$17 million in the same period in ~~2019.~~2020. Amortization of acquisition-related intangibles includes the

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amortization of customer relationships, acquired technology, trade names, and non-compete agreements recorded in connection with our business acquisitions. The decrease in amortization of acquisition-related intangibles ~~includes~~is primarily due to the impact of certain intangible assets from the Health Services acquisition in February 2015 becoming fully amortized in the first quarter of 2020.

Non-Operating Items

•Other income, net was ~~$25~~$1 million in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~$23~~$6 million in the same period of ~~2019.~~2020. The second quarter of 2020 includes a $26 million unrealized gain recognized in connection with the measurement of one of our equity investments. The second quarter of 2019 includes a $16 million gain recognized on the disposition of one of our equity investments. The remaining differencedecrease is primarily attributable to ~~increased~~a reduction in capitalized interest, ~~expense in~~inclusive of the ~~second quarter of 2020,~~impact from the ~~$600 million~~completion of ~~revolving credit loans we borrowed under~~construction on the most recent phases of our ~~Credit Agreement~~Innovations Campus in ~~May 2019, and the $300 million of Series 2020-A Notes we issued in March~~ 2020.

•Our effective tax rate was 21.4% for the ~~second~~first quarter of ~~2020,~~2021, compared to ~~17.6%~~20.0% for the same period of ~~2019.~~2020. The increase in the effective tax rate in the ~~second~~first quarter of ~~2020~~2021 is primarily due to a decrease in net excess tax benefits recognized as a component of income tax expense in connection with the exercise of stock options and the vesting of restricted share and share unit awards. Refer to Note (7) of the Notes for further discussion regarding our effective tax rate.

Operations by Segment

We have two operating segments: Domestic and International. The Domestic segment includes revenue contributions and expenditures associated with business activity in the United States. The International segment includes revenue contributions and expenditures linked to business activity outside the United States, primarily from Australia, Canada, Europe, and the Middle East. Refer to Note (11) of the Notes for further information regarding our reportable segments.

The following table presents a summary of our operating segment information for the ~~second~~first quarters of ~~2020~~2021 and ~~2019:~~2020:


(In thousands)	(In thousands)	2020		% of Revenue	2019		% of Revenue	% Change	(In thousands)	2021		% of Revenue	2020		% of Revenue	% Change

Domestic Segment	Domestic Segment								Domestic Segment
Revenues	Revenues	$	1,168,213	100%	$	1,266,112	100%	(8)%	Revenues	$	1,221,992	100%	$	1,246,415	100%	(2)%

Costs of revenue	Costs of revenue	189,779		16%	243,926		19%	(22)%	Costs of revenue	205,694		17%	228,567		18%	(10)%
Operating expenses	Operating expenses	587,674		50%	605,636		48%	(3)%	Operating expenses	560,562		46%	570,094		46%	(2)%
Total costs and expenses	Total costs and expenses	777,453		67%	849,562		67%	(8)%	Total costs and expenses	766,256		63%	798,661		64%	(4)%

Domestic operating earnings	Domestic operating earnings	390,760		33%	416,550		33%	(6)%	Domestic operating earnings	455,736		37%	447,754		36%	2%

International Segment	International Segment								International Segment
Revenues	Revenues	162,136		100%	164,949		100%	(2)%	Revenues	165,786		100%	165,326		100%	—%

Costs of revenue	Costs of revenue	22,184		14%	24,747		15%	(10)%	Costs of revenue	24,962		15%	25,849		16%	(3)%
Operating expenses	Operating expenses	57,413		35%	73,258		44%	(22)%	Operating expenses	61,614		37%	66,555		40%	(7)%
Total costs and expenses	Total costs and expenses	79,597		49%	98,005		59%	(19)%	Total costs and expenses	86,576		52%	92,404		56%	(6)%

International operating earnings	International operating earnings	82,539		51%	66,944		41%	23%	International operating earnings	79,210		48%	72,922		44%	9%

Other, net		(326,401)			(352,377)			(7)%
Other costs and expenses, net									Other costs and expenses, net	(316,888)			(342,300)			(7)%

Consolidated operating earnings	Consolidated operating earnings	$	146,898		$	131,117		12%	Consolidated operating earnings	$	218,058		$	178,376		22%

Domestic Segment

•Revenues decreased 8%2% to ~~$1.17~~$1.22 billion in the ~~second~~first quarter of ~~2020,~~2021, from ~~$1.27~~$1.25 billion in the same period of ~~2019. We believe the~~2020. The decline in revenues is primarily ~~attributable~~due to a $23 million reduction from the ~~impact~~sale of ~~the ongoing COVID-19 pandemic~~certain of our revenue cycle outsourcing business operations to affiliates of R1 RCM Inc., on ~~our second quarter 2020 operations, with~~August 3, 2020. Additionally, we believe the ~~largest impact in the areas of licensed software,~~

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~~technology resale, professional services, and reimbursed travel revenues,~~ongoing COVID-19 pandemic has negatively impacted our operations in the first quarter of 2021, as further discussed above. ~~Additionally, the second quarter of 2020 includes a $42 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019.~~ These declines are partially offset by increased implementation activity within our federal ~~business;~~business, inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were ~~16%~~17% in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~19%~~18% in the same period of ~~2019.~~2020. The lower costs of revenue as a percent of revenues was primarily driven by lower reimbursed travel revenue, which carries a 100% cost of revenue; ~~a lower mix of technology resale revenue, which carries a higher cost of revenue;~~ and reduced utilization of third-party resources associated with professional services ~~revenue.~~revenue, inclusive of the impact from the divestiture transaction discussed above.

•Operating expenses as a percent of revenues were ~~50%~~46% in the ~~second~~first quarter of ~~2020, compared~~both 2021 and 2020. These expenses decreased 2% to ~~48%~~$561 million in the first quarter of 2021, from $570 million in the same period of ~~2019.~~2020. The ~~higher~~decrease in operating expenses ~~as a percent of revenues~~ was primarily driven by reductions in non-personnel costs, inclusive of the ~~absence of a reduction to~~impact from our ~~overall professional services associate base during the second quarter of 2020, while we managed through a period of lower revenues attributable to the ongoing COVID-19 pandemic,~~operational improvement initiatives, as discussed above.

International Segment

•Revenues ~~decreased 2% to $162~~remained relatively flat at $166 million in the ~~second~~first quarter of ~~2020, from~~2021, and $165 million in the same period of ~~2019. We believe the decline~~2020. The first quarter of 2021 includes a $21 million reduction in revenues isfrom the sale of certain of our business operations primarily ~~attributable~~conducted in Germany and Spain to affiliates of CompuGroup Medical SE & Co. KGaA on July 1, 2020. This decline was offset by 2021 revenue growth across the ~~impact~~majority of ~~the ongoing COVID-19 pandemic on~~ our ~~second quarter 2020 operations, as further discussed above.~~remaining International Segment operations. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue ~~as a percent of revenues were 14%~~remained relatively flat at $25 million in the ~~second~~first quarter of ~~2020, compared to 15%~~2021, and $26 million in the same period of ~~2019. The lower costs of revenue as a percent of revenues was primarily driven by lower reimbursed travel revenue, which carries a 100% cost of revenue.~~2020.

•Operating expenses as a percent of revenues were ~~35%~~37% in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~44%~~40% in the same period of ~~2019.~~2020. These expenses decreased 7% to $62 million in the first quarter of 2021, from $67 million in the same period of 2020. The ~~lower~~decrease in operating expenses is primarily due to the sale of certain of our business operations in Germany and Spain, as ~~a percent of revenues was primarily driven by a $5 million reduction in personnel expenses and a $4 million reduction in associate travel costs.~~further discussed above.

Other ~~net~~Costs and Expenses, Net

Operating ~~results~~costs and expenses not attributed to an operating segment include expenses such as software development, general and administrative expenses, share-based compensation expense, certain amortization and depreciation, certain organizational restructuring and other expense. These expenses decreased 7% to ~~$326~~$317 million in the ~~second~~first quarter of ~~2020,~~2021, from ~~$352~~$342 million in the same period of ~~2019.~~2020. The decrease is primarily due to a reduction in expenses incurred in connection with our operational improvement initiatives, discussed above.

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~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 29, 2019~~

~~The following table presents a summary of our operating information for the first six months of 2020 and 2019:~~

(In thousands) 2020 % of
Revenue 2019 % of
Revenue % Change
Revenues $ 2,742,090 100 % $ 2,820,938 100 % (3) %
Costs of revenue 466,379 17 % 521,877 19 % (11) %
Margin 2,275,711 83 % 2,299,061 81 % (1) %
Operating expenses
Sales and client service 1,281,736 47 % 1,319,082 47 % (3) %
Software development 364,275 13 % 361,408 13 % 1 %
General and administrative 274,184 10 % 245,984 9 % 11 %
Amortization of acquisition-related intangibles 30,242 1 % 43,526 2 % (31) %
Total operating expenses 1,950,437 71 % 1,970,000 70 % (1) %
Total costs and expenses 2,416,816 88 % 2,491,877 88 % (3) %
Operating earnings 325,274 12 % 329,061 12 % (1) %
Other income, net 30,227 31,438
Income taxes (73,594) (67,311)
Net earnings $ 281,907 $ 293,188 (4) %

~~Revenues~~

Revenues decreased 3% to $2.74 billion in the first six months of 2020, as compared to $2.82 billion in the same period of 2019. We believe the decline in revenues is primarily attributable to the impact of the ongoing COVID-19 pandemic on our operations during the first six months of 2020, with the largest impact in the areas of licensed software, technology resale, professional services, and reimbursed travel revenues, as further discussed above. Additionally, the first six months of 2020 includes an $84 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019. These declines are partially offset by increased implementation activity within our federal business; inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs. In the first six months of 2020, 17% of our total revenues were attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, compared to 11% in the same period of 2019. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

~~Costs of Revenue~~

Costs of revenue as a percent of revenues were 17% in the first six months of 2020, compared to 19% in the same period of 2019. The lower costs of revenue as a percent of revenues was primarily driven by lower reimbursed travel revenue, which carries a 100% cost of revenue; a lower mix of technology resale revenue, which carries a higher cost of revenue; and reduced utilization of third-party resources associated with professional services revenue.

~~Operating Expenses~~

~~Total operating expenses decreased 1% to $1.95 billion in the first six months of 2020, compared to $1.97 billion in the same period of 2019.~~

•Sales and client service expenses as a percent of revenues were 47% in the first six months of both 2020 and 2019. These expenses decreased 3% to $1.28 billion in the first six months of 2020, from $1.32 billion in the same period of 2019. The decrease in sales and client service expenses includes a $24 million reduction in associate travel costs, and the first six months of 2019 included a $20 million charge in connection with a client dispute.

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•~~Software development expenses as a percent of revenues were 13% in the first six months of both 2020 and 2019. Expenditures for software development include ongoing development and enhancement of the~~ ~~Cerner Millennium~~^® ~~and~~ ~~HealtheIntent~~ platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle, population health management, and health network solutions. In addition, the first six months of 2020 includes costs incurred in connection with our efforts to modernize our platforms, with a focus on development of a software as a service platform. A summary of our total software development expense in the first six months of 2020 and 2019 is as follows:

Six Months Ended
(In thousands) 2020 2019
Software development costs $ 393,460 $ 394,060
Capitalized software costs (148,354) (143,774)
Capitalized costs related to share-based payments (3,039) (1,128)
Amortization of capitalized software costs 122,208 112,250
Total software development expense $ 364,275 $ 361,408

•General and administrative expenses as a percent of revenues were 10% in the first six months of 2020, compared to 9% in the same period of 2019. These expenses increased 11% to $274 million in the first six months of 2020, from $246 million in the same period of 2019. In the first six months of 2020, general and administrative expenses include $86 million of expenses incurred in connection with our operational improvement initiatives, discussed above, compared to $57 million in the same period of 2019. We expect to incur additional expenses in connection with these efforts in future periods, which may be material.

•Amortization of acquisition-related intangibles as a percent of revenues was 1% in the first six months of 2020, compared to 2% in the same period of 2019. These expenses decreased 31% to $30 million in the first six months of 2020, from $44 million in the same period in2019. The decrease in amortization of acquisition-related intangibles includes the impact of certain intangible assets from the Health Services acquisition in February 2015 becoming fully amortized in the first quarter of 2020.

~~Non-Operating Items~~

•Other income, net was $30 million in the first six months of 2020, compared to $31 million in the same period of 2019. The first six months of 2020 includes a $26 million unrealized gain recognized in connection with the measurement of one of our equity investments. The first six months of 2019 includes a $16 million gain recognized on the disposition of one of our equity investments. The remaining difference is primarily attributable to increased interest expense in the first six months of 2020, from the $600 million of revolving credit loans we borrowed under our Credit Agreement in May 2019, and the $300 million of Series 2020-A Notes we issued in March 2020.

•Our effective tax rate was 20.7% for the first six months of 2020, compared to 18.7% for the same period of 2019. The increase in the effective tax rate in the first six months of 2020 is primarily due to a decrease in net excess tax benefits recognized as a component of income tax expense in connection with the exercise of stock options and the vesting of restricted share and share unit awards. Refer to Note (7) of the Notes for further discussion regarding our effective tax rate.

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~~Operations by Segment~~

~~The following table presents a summary of our operating segment information for the first six months of 2020 and 2019:~~

(In thousands) 2020 % of Revenue 2019 % of Revenue % Change
Domestic Segment
Revenues $ 2,414,628 100% $ 2,496,942 100% (3)%
Costs of revenue 418,346 17% 472,485 19% (11)%
Operating expenses 1,157,768 48% 1,177,654 47% (2)%
Total costs and expenses 1,576,114 65% 1,650,139 66% (4)%
Domestic operating earnings 838,514 35% 846,803 34% (1)%
International Segment
Revenues 327,462 100% 323,996 100% 1%
Costs of revenue 48,033 15% 49,392 15% (3)%
Operating expenses 123,968 38% 141,427 44% (12)%
Total costs and expenses 172,001 53% 190,819 59% (10)%
International operating earnings 155,461 47% 133,177 41% 17%
Other, net (668,701) (650,919) 3%
Consolidated operating earnings $ 325,274 $ 329,061 (1)%

~~Domestic Segment~~

•Revenues decreased 3% to $2.41 billion in the first six months of 2020, from $2.50 billion in the same period of 2019. We believe the decline in revenues is primarily attributable to the impact of the ongoing COVID-19 pandemic on our operations in the first six months of 2020, with the largest impact in the areas of licensed software, technology resale, professional services, and reimbursed travel revenues, as further discussed above. Additionally, the first six months of 2020 includes an $84 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019. These declines are partially offset by increased implementation activity within our federal business; inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were 17% in the first six months of 2020, compared to 19% in the same period of 2019. The lower costs of revenue as a percent of revenues was primarily driven by lower reimbursed travel revenue, which carries a 100% cost of revenue; a lower mix of technology resale revenue, which carries a higher cost of revenue; and reduced utilization of third-party resources associated with professional services revenue.

•Operating expenses as a percent of revenues were 48% in the first six months of 2020, compared to 47% in the same period of 2019. The higher operating expenses as a percent of revenues was primarily driven by the absence of a reduction to our overall professional services associate base during the second quarter of 2020, while we managed through a period of lower revenues attributable to the ongoing COVID-19 pandemic, discussed above.

~~International Segment~~

•Revenues remained relatively flat at $327 million in the first six months of 2020, and $324 million in the same period of 2019. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

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•~~Costs of revenue remained relatively flat at $48 million in the first six months of 2020, and $49 million in the same period of 2019.~~

•Operating expenses as a percent of revenues were 38% in the first six months of 2020, compared to 44% in the same period of 2019. The lower operating expenses as a percent of revenues was primarily driven by a $8 million reduction in personnel expenses and a $5 million reduction in associate travel costs.

~~Other, net~~

These expenses increased 3% to $669 million in the first six months of 2020, from $651 million in the same period of 2019. The increase is primarily due to increased expenses incurred in the first six months of 2020 in connection with our operational improvement initiatives, discussed above.

Liquidity and Capital Resources

Our liquidity is influenced by many factors, including the amount and timing of our revenues, our cash collections from our clients and the amount we invest in software development, acquisitions, capital expenditures, and our share repurchase and dividend programs.

Our principal sources of liquidity are our cash, cash equivalents, which primarily consist of money market funds, ~~and~~ time deposits and commercial paper with original maturities of less than 90 days, short-term investments, ~~and~~ borrowings under our Credit Agreement and other sources of debt financing. At ~~June 30, 2020,~~March 31, 2021, we had cash and cash equivalents of ~~$270~~$998 million and short-term investments of ~~$171~~$476 million, as compared to cash and cash equivalents of ~~$442~~$616 million and short-term investments of ~~$100~~$442 million at December ~~28, 2019.~~31, 2020.

We have entered into a Credit Agreement with a syndicate of lenders that provides for an unsecured $1.00 billion revolving credit loan facility, along with a letter of credit facility up to $100 million (which is a sub-facility of the $1.00 billion revolving credit loan facility). We have the ability to increase the maximum capacity to $1.20 billion at any time during the Credit Agreement's term, subject to lender participation and the satisfaction of specified conditions. The Credit Agreement expires in May 2024. As of ~~June 30, 2020,~~March 31, 2021, we had outstanding revolving credit loans and letters of credit of $600 million and ~~$31~~$33 million, respectively; which reduced our available borrowing capacity to ~~$369~~$367 million under the Credit Agreement.

We have also entered into note purchase agreements pursuant to which we may issue and sell unsecured senior promissory notes to those purchasers electing to purchase. See Note (5) of the Notes for further information.

We believe that our present cash position, together with cash generated from operations, short-term investments and, as appropriate, remaining availability under our Credit Agreement and other sources of debt financing, will be sufficient to meet anticipated cash requirements for the next 12 months.

The following table summarizes our cash flows in the first ~~six~~three months of 2021 and 2020:


	Three Months Ended
(In thousands)	2021		2020

Cash flows from operating activities	$	450,434	$	283,506
Cash flows from investing activities	(182,185)		(136,611)
Cash flows from financing activities	117,115		(295,961)
Effect of exchange rate changes on cash	(3,118)		(7,365)
Total change in cash and cash equivalents	382,246		(156,431)

Cash and cash equivalents at beginning of period	615,615		441,843

Cash and cash equivalents at end of period	$	997,861	$	285,412

Free cash flow (non-GAAP)	$	290,959	$	160,403

Cash from Operating Activities


	Three Months Ended
(In thousands)	2021		2020

Cash collections from clients	$	1,439,319	$	1,366,709
Cash paid to employees and suppliers and other	(954,120)		(1,068,523)
Cash paid for interest	(15,549)		(11,811)
Cash paid for taxes, net of refunds	(19,216)		(2,869)

Total cash from operations	$	450,434	$	283,506

Cash flows from operations increased $167 million in the first three months of 2021 when compared to the same period of 2020, due primarily to a reduction in cash used to fund working capital requirements. Days sales outstanding was 77 days in the first quarter of 2021, compared to 76 for the 2020 fourth quarter and ~~2019:~~

Six Months Ended
(In thousands) 2020 2019
Cash flows from operating activities $ 542,096 $ 524,076
Cash flows from investing activities (385,046) (291,287)
Cash flows from financing activities (322,569) 95,148
Effect of exchange rate changes on cash (6,429) 861
Total change in cash and cash equivalents (171,948) 328,798
Cash and cash equivalents at beginning of period 441,843 374,126
Cash and cash equivalents at end of period $ 269,895 $ 702,924
Free cash flow (non-GAAP) $ 224,407 $ 101,300
74 days for the first quarter of 2020.

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Cash from ~~Operating Activities~~

Six Months Ended
(In thousands) 2020 2019
Cash collections from clients $ 2,658,956 $ 2,738,223
Cash paid to employees and suppliers and other (2,091,598) (2,157,363)
Cash paid for interest (16,572) (8,907)
Cash paid for taxes, net of refunds (8,690) (47,877)
Total cash from operations $ 542,096 $ 524,076

Cash flows from operations increased $18 million in the first six months of 2020 when compared to the same period of 2019, due primarily to an increase in cash impacting earnings. This increase includes the impact of $29 million of certain federal payroll taxes related to pay cycles in the second quarter of 2020, for which we have deferred remittance to the taxing authority as permitted under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). We expect to continue to defer the remittance of such payroll taxes for the remainder of 2020, as permitted by the CARES Act, for which the remittances to the taxing authority are to be paid in equal amounts at the end of 2021 and 2022, respectively. Days sales outstanding was 81 days in the second quarter of 2020, compared to 74 days for the first quarter of 2020 and 78 days for the second quarter of 2019.

~~Cash from~~ Investing Activities


		Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020

Capital purchases	Capital purchases	$	(166,296)	$	(277,874)	Capital purchases	$	(75,925)	$	(49,248)
Capitalized software development costs	Capitalized software development costs	(151,393)		(144,902)		Capitalized software development costs	(83,550)		(73,855)
Purchases of investments, net of sales and maturities	Purchases of investments, net of sales and maturities	(10,935)		148,946		Purchases of investments, net of sales and maturities	(14,735)		(3,082)
Purchases of other intangibles	Purchases of other intangibles	(20,656)		(17,457)		Purchases of other intangibles	(7,975)		(9,682)
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(35,766)		—		Acquisition of businesses, net of cash acquired	—		(744)

Total cash flows from investing activities	Total cash flows from investing activities	$	(385,046)	$	(291,287)	Total cash flows from investing activities	$	(182,185)	$	(136,611)

Cash flows from investing activities consist primarily of capital spending, investment, acquisition, and ~~acquisition~~divestiture activities.

Our capital spending in the first ~~six~~three months of ~~2020~~2021 was driven by capitalized equipment purchases primarily to support growth in our managed services business ~~investments in a cloud infrastructure to support cloud-based solutions, building and improvement purchases to support our facilities requirements~~ and capitalized spending to support our ongoing software development initiatives. Capital purchases for the remainder of ~~2020~~2021 are expected to ~~continue to~~ be below ~~2019~~2020 levels, primarily driven by reduced purchases to support our facilities requirements, reflective of the ~~expected~~ completion of construction on the ~~current~~most recent phases of our Innovations Campus in the third quarter of 2020.

Short-term investment activity historically consists of the investment of cash generated by our business in excess of what is necessary to fund operations. ~~The~~Both the 2021 and 2020 activity is impacted by excess cash primarily being used to execute on our capital allocation strategy, including the share repurchases and cash dividends discussed below. ~~The 2019 activity was impacted by changes made to our investment mix, such that our excess funds were more heavily held in cash and cash equivalents versus short-term and long-term investments.~~

~~In the second quarter of 2020,~~On April 1, 2021, we paid ~~$35~~$365 million of purchase price consideration in connection with our acquisition of ~~a consulting company specializing~~Kantar Health, as further discussed in ~~providing cybersecurity solutions to clients in~~Note (12) of the healthcare industry. In the first quarter of 2020, we paid $1 million of purchase price consideration in connection with our October 2019 acquisition of AbleVets, LLC, upon finalization of working capital adjustments.Notes. We expect to continue seeking and completing strategic business acquisitions, investments, and relationships that are complementary to our business.

On July 1, 2020, we sold certain of our business operations, primarily conducted in Germany and Spain, for cash consideration of $224 million. Refer to Note (12) of the Notes for further information regarding this divestiture. We expect

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~~to continue to evaluate and complete divestiture transactions that are strategic to our operational improvement initiatives discussed above.~~

Cash from Financing Activities


		Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020

Long-term debt issuance	Long-term debt issuance	$	300,000	$	600,000	Long-term debt issuance	$	500,000	$	300,000
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)	Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)	142,691		120,140		Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)	31,617		113,686
Treasury stock purchases	Treasury stock purchases	(650,000)		(620,542)		Treasury stock purchases	(341,715)		(650,000)
Dividends paid	Dividends paid	(111,101)		—		Dividends paid	(67,477)		(56,047)
Other	Other	(4,159)		(4,450)		Other	(5,310)		(3,600)

Total cash flows from financing activities	Total cash flows from financing activities	$	(322,569)	$	95,148	Total cash flows from financing activities	$	117,115	$	(295,961)

In March 2021, we issued $500 million aggregate principal amount of Series 2021 Senior Notes. In March 2020, we issued $300 million aggregate principal amount of ~~2.50% senior unsecured~~ Series 2020-A notes. ~~In May 2019, we borrowed $600 million of revolving credit loans under our Credit Agreement.~~ Refer to Note (5) of the Notes for further information regarding these, as well as our other debt obligations.

We may incur additional indebtedness in the next 12 months, which will primarily be dependent on cash flows from operations, ~~as well as~~market interest rates, and the timing of business acquisition and capital allocation activity. The proceeds from such indebtedness would be deployed in accordance with our ~~current~~ capital allocation strategy, which may include share repurchases and dividend payments (as discussed further below), as well as for general corporate purposes, including acquisitions and investments. The terms and availability of any such debt financing may be impacted by economic and financial market conditions, as well as our financial condition and results of operations at the time we seek such financing, and there can be no assurances that we would be able to obtain such financing on terms that will be acceptable or advantageous to us.

Cash inflows from stock option exercises are dependent on a number of factors, including the price of our common stock, grant activity under our stock option and equity plans, and overall market volatility. We expect net cash inflows from stock

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option exercises to continue throughout ~~2020~~2021 based on the number of exercisable options as of ~~June 30, 2020~~March 31, 2021 and our current stock price.

During the first ~~six~~three months of ~~2020~~2021 and ~~2019,~~2020, we repurchased 4.9 million shares of our common stock for total consideration of $350 million and 9.2 million shares of our common stock for total consideration of $650 million, ~~and 8.7 million shares of our common stock for total consideration of $600 million,~~ respectively. As of ~~June 30, 2020, $1.03 billion remains~~March 31, 2021, $577 million remained available for repurchase under our share repurchase program. On April 23, 2021, our Board of Directors approved a new 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, and which is incremental to our existing share repurchase program. We ~~may~~will continue to repurchase shares under ~~this program in 2020,~~our share repurchase programs, but the amount and timing of such repurchases will be dependent on a number of factors, including the price of our common stock and other cash flow needs. ~~Although we may continue to repurchase shares, there~~There is no assurance that we will repurchase up to the full amount remaining under our programs. Refer to Notes (9) and (12) of the ~~program.~~Notes for further information regarding our share repurchase programs.

~~On December 12, 2019, our Board~~During the first three months of ~~Directors~~both 2021 and 2020, we declared aand paid quarterly cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on January 9, 2020 to shareholders of record as of December 27, 2019. On March 19, 2020, our Board of Directors declared a cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on April 17, 2020 to shareholders of record as of April 3, 2020. On May 21, 2020, our Board of Directors declared a cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on July 17, 2020 to shareholders of record as of June 5, 2020.dividends. Subject to declaration by our Board of Directors, we expect to continue paying quarterly cash dividends as a part of our current capital allocation strategy. Future dividends will be subject to the determination, declaration and discretion of our Board of Directors and compliance with covenants under our outstanding debt agreements. Refer to Note (9) of the Notes for further information regarding our cash dividend activity.

The source of funds for such repurchases and dividends may include cash generated from operations, liquidation of investment holdings and other dispositions of assets, and the incurrence of indebtedness. ~~Refer to Note (9) of the Notes for further information regarding our share repurchase and dividend programs.~~

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Free Cash Flow (Non-GAAP)


		Three Months Ended						Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020

Cash flows from operating activities (GAAP)	Cash flows from operating activities (GAAP)	$	258,590	$	206,810	$	542,096	$	524,076	Cash flows from operating activities (GAAP)	$	450,434	$	283,506
Capital purchases	Capital purchases	(117,048)		(158,613)		(166,296)		(277,874)		Capital purchases	(75,925)		(49,248)
Capitalized software development costs	Capitalized software development costs	(77,538)		(70,351)		(151,393)		(144,902)		Capitalized software development costs	(83,550)		(73,855)

Free cash flow (non-GAAP)	Free cash flow (non-GAAP)	$	64,004	$	(22,154)	$	224,407	$	101,300	Free cash flow (non-GAAP)	$	290,959	$	160,403

Free cash flow increased ~~$123~~$131 million in the first ~~six~~three months of ~~2020~~2021 compared to the same period in ~~2019,~~2020, primarily due to ~~reduced~~increased cash from operations, partially offset by an increase in capital ~~expenditures.~~spending. Free cash flow is a non-GAAP financial measure used by management, along with GAAP results, to analyze our earnings quality and overall cash generation of the business, and for management compensation purposes. We define free cash flow as cash flows from operating activities reduced by capital purchases and capitalized software development costs. The table above sets forth a reconciliation of free cash flow to cash flows from operating activities, which we believe is the GAAP financial measure most directly comparable to free cash flow. The presentation of free cash flow is not meant to be considered in isolation, nor as a substitute for, or superior to, GAAP results, and investors should be aware that non-GAAP measures have inherent limitations and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Free cash flow may also be different from similar non-GAAP financial measures used by other companies and may not be comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe free cash flow is important to enable investors to better understand and evaluate our ongoing operating results and allows for greater transparency in the review and understanding of our overall financial, operational and economic performance, because free cash flow takes into account certain capital expenditures necessary to operate our business.

Forward Looking Statements

All statements contained in this quarterly report on Form 10-Q that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are based on the current beliefs, expectations and assumptions of Cerner's management with respect to future events and are subject to a number of significant risks and uncertainties. It is important to note that Cerner's performance, and actual results, financial condition or business could differ materially from those expressed in such forward-looking statements. The words "will," "believe," "plans," "may," "expect," "expected," "anticipated," ~~"mitigate,"~~ "strategy,~~" "continue,~~" "opportunities," ~~"future,~~

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"future," "estimate" "objectives", or "predict" or the negative of these words, variations thereof or similar expressions are intended to identify such forward-looking statements. For example, our forward-looking statements include statements regarding our expectations, opportunities or plans for growth; our operational improvement initiatives and the results expected to be realized from those initiatives; our expectations with respect to realizing revenue from backlog; our anticipated expenses, cash requirements and sources of liquidity; the expected impact of the COVID-19 pandemic on our results of operations, financial condition, business and operations; the expected revenue contributions of acquired businesses; and our capital allocation strategies and plans. These statements involve a number of risks, uncertainties and other factors that could cause or contribute to actual results differing materially, including without limitation: the ~~possibility~~extent to which the COVID-19 pandemic and measures taken in response thereto could adversely affect our financial condition, future bookings and results of ~~significant costs and reputational harm related to product and services-related liabilities; potential claims for system errors and warranties;~~operations; the possibility of interruption at our data centers or client support facilities, or those of third parties with whom we have contracted (such as public cloud providers), that could expose us to significant costs and reputational harm; the possibility of increased expenses, exposure to legal claims and regulatory actions and reputational harm associated with a cyberattack or other breach in our IT security or the IT security of third parties on which we rely; potential claims for system errors and warranties or significant costs and reputational harm related to product and service-related liabilities; our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or may be infringed or misappropriated by others, or subject to claims related to open source licenses; material adverse resolution of legal proceedings or other claims or reputational harm stemming from negative publicity related to such claims or legal proceedings; risks associated with our global operations, including without limitation greater difficulty in collecting accounts receivable; risks associated with fluctuations in foreign currency exchange rates; changes in tax laws, regulations or guidance that could adversely affect our tax position and/or challenges to our tax positions in the U.S. and non-U.S. countries; the uncertainty surrounding the impact of the departure of the United Kingdom from the European Union on our global business; risks associated with the unexpected loss or recruitment and retention of key personnel or the failure to successfully develop and execute succession planning to assure transitions of key associates and their knowledge, relationships and expertise; risks related to our dependence on strategic relationships and third party suppliers, including any impact to the business of such suppliers resulting from the COVID-19 pandemic; risks inherent with business acquisitions or strategic investments

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and the failure to achieve projected synergies; risks associated with volatility and disruption resulting from global economic or market conditions, including any impact thereon resulting from events such as the COVID-19 pandemic; significant competition and our ability to anticipate or respond quickly to market changes, changing technologies and evolving pricing and deployment methods and to bring competitive new solutions, devices, features and services to market in a timely fashion; risks inherent with business acquisitions, strategic investments, collaborations and the failure to achieve projected synergies, or divestitures; managing growth in the new markets in which we offer solutions, ~~health care~~healthcare devices or services; long sales cycles for our solutions and services; risks related to our dependence on strategic relationships and third party suppliers, including any impact to such supplier’s business resulting from the COVID-19 pandemic; risks associated with the loss or recruitment and retention of key personnel or the failure to successfully develop and execute succession planning to assure transitions of key associates and their knowledge, relationships and expertise; inability to achieve expected operating efficiencies and sustain or improve operating expense reductions or business disruptions or adverse tax consequences associated with restructuring, realignment and costs reduction activities; changing political, economic and regulatory influences, which could impact the purchasing practices and operations of our clients and increase costs to deliver compliant solutions and services; non-compliance with laws, regulations or certain industry initiatives or failure to deliver solutions or services that enable our clients to comply with laws or regulations applicable to their businesses; risks inherent in contracting with government clients, including without limitation, complying with strict compliance and disclosure obligations, navigating complex procurement rules and processes, and defending against bid protests; volatility and disruption resulting from global economic or market conditions, including the impact from the COVID-19 pandemic; risks associated with our outstanding and future indebtedness, such as compliance with restrictive covenants, which may limit our flexibility to operate our business; ~~impact of~~risk that our capital allocation strategy will not be fully implemented or enhance long-term shareholder value; changes in tax laws, regulations or guidance that could adversely affect our tax position and/or challenges to our tax positions in the ~~phase-out of the London Interbank Offered Rate (LIBOR) on the interest rates under our financing agreements~~U.S. and ~~the related interest rate swap related to the outstanding indebtedness under our Credit Agreement;~~non-U.S. countries; the potential for losses resulting from asset impairment charges; changing political, economic, regulatory and judicial influences, which could impact the purchasing practices and operations of our clients and increase costs to deliver compliant solutions and services; non-compliance with laws, government regulation or certain industry initiatives or failure to deliver solutions or services that enable our clients to comply with laws or regulations applicable to their businesses; variations in our quarterly operating results; potential variations in our sales forecasts compared to actual sales; volatility in the trading price of our common stock and the timing and volume of market activity, including volatility resulting from the COVID-19 pandemic; inability to achieve expected operating efficiencies and sustain or improve operating expense reductions; risks that ~~Cerner's~~our revenue growth may be lower than anticipated and/or that the mix of revenue shifts to low margin revenue; ~~risks that~~variations in our ~~capital allocation strategy will not be fully implemented or enhance long-term shareholder value; risks that Cerner's business may be negatively affected as a result~~quarterly operating results; volatility in the trading price of ~~future proxy fights or the actions of activist shareholders;~~our common stock and the ~~extent to which the COVID-19 pandemic~~timing and ~~measures taken in response thereto could adversely affect our financial condition, future bookings and results~~volume of ~~operations, including~~market activity; risks associated with fluctuations in foreign currency exchange rates; and our directors’ authority to issue preferred stock and the ~~impact of the COVID-19 pandemic on collecting accounts receivable.~~anti-takeover provisions in our corporate governance documents. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in our filings with the Securities and Exchange Commission, including those under the caption "Risk Factors" in our latest annual report on Form 10-K, ~~and in this quarterly report on Form 10-Q,~~ or in materials incorporated herein or therein by reference. Forward-looking statements are not guarantees of future performance or results. The reader should not place undue reliance on forward-looking statements since the statements speak only as of the date that they are made. 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 or financial condition over time.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

No material changes.

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Item 4. Controls and Procedures

a)Evaluation of Disclosure Controls and Procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q (the "Evaluation Date"). Based upon that evaluation, our CEO and CFO have concluded that, as of the Evaluation Date, our disclosure controls and procedures were designed, and were effective, to provide reasonable assurance that the information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and forms and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

b)Changes in Internal Control over Financial Reporting.

There were no changes in our internal controls over financial reporting during the fiscal quarter ended ~~June 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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c)Limitations on Controls.

Our management can provide no assurance that our disclosure controls and procedures or our internal control over financial reporting can prevent all errors and all fraud under all circumstances. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we are involved in litigation which is incidental to our business. There have been no material developments to the legal proceedings previously reported in our ~~2019~~2020 annual report on Form ~~10-K (the "Form 10-K"), as supplemented by our quarterly report on Form 10-Q for the quarter ended March 31, 2020.~~10-K. 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.

~~Item 1A. Risk Factors~~

For information regarding risk factors that could affect our business, results of operations, financial condition or future results, see Part I, "Item 1A. Risk Factors" of the Form 10-K. In addition to the risk factors disclosed therein, we are supplementing those identified in the Form 10-K with the following risk factor, as described below. For further information on our forward-looking statements see Part I, Item 2 of this quarterly report on Form 10-Q.

The extent to which the COVID-19 pandemic and measures taken in response thereto could materially adversely affect our financial condition, future bookings and results of operations will depend on future developments, which are highly uncertain and are difficult to predict. The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in most or all of the regions in which we sell our Solutions and Services and conduct our business operations. It has caused us to modify our business practices (including requiring most of our employees to work remotely and restricting employee travel, developing social distancing plans for our associates and canceling or postponing in person participation in meetings, events and conferences), and we may take further actions as required by government authorities, our clients or as determined to be in the best interests of our employees, clients and business partners. These measures and our clients' focus on the pandemic have also resulted in delays in marketing, selling and implementing our Solutions and Services. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus and our ability to perform critical functions could be harmed.

The magnitude and duration of the disruption and resulting decline in business activity is uncertain. In particular, 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, which includes redirecting development and consulting resources and priorities, and waiving, deferring or reducing fees for COVID-19-related emergency expansions;

•~~Near-term declines in new business bookings as our clients focus on helping their patients during the crisis, rather than making new or expanded purchasing decisions;~~

•~~Longer-term declines in bookings for new Solutions and Services to the extent that the pandemic results in a sustained global or U.S. economic downturn;~~

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•Delays in implementing our Solutions and Services, including delays in the pace of completion of existing projects, such as the MHS Genesis project with the U.S. Department of Defense and the U.S. Department of Veterans Affairs’ Electronic Health Record Modernization project, while client resources are reallocated or dedicated to fighting the COVID-19 pandemic in the United States;

•~~Supply chain interruptions;~~

•~~Financial pressures being put on 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.~~

Accordingly, we expect the COVID-19 pandemic to have a negative impact on our revenues and results of operations from our 2020 second quarter and beyond. The size and duration of this impact is difficult to predict and forward-looking estimates provided by the Company are subject to the risks discussed herein.

The extent to which the COVID-19 pandemic will impact our financial condition and results of operations will depend on future developments, which are highly uncertain and difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, its impact on our strategic investments, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may experience material adverse impacts to our business as a result of the global or U.S. economic impact and any recession that has occurred or may occur in the future. There are no comparable recent events that provide guidance as to the effect the COVID-19 pandemic may have, and, as a result, the ultimate impact of the pandemic on our operations and financial results is highly uncertain and subject to change.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets which has and may continue to impact our stock price and may adversely impact our ability to access capital markets. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described under "Risk Factors" in the Form 10-K, such as those described in our risk factors titled "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," "Volatility and disruption resulting from global economic or market conditions could negatively affect our business, results of operations and financial condition", "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 and Services and features to market in a timely fashion", "Our success depends upon the recruitment and retention of key personnel”, and those under the heading "Risks Related to our Common Stock."

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below provides information with respect to Common Stock purchases by the Company during the ~~second~~first fiscal quarter of ~~2020.~~2021.

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
April 1, 2020 - April 30, 2020 — $ — — $ 1,033,733,300
May 1, 2020 - May 31, 2020 — — — 1,033,733,300
June 1, 2020 - June 30, 2020 2,419 72.59 — 1,033,733,300
Total 2,419 $ 72.59 —


	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
January 1, 2021 - January 31, 2021	59	$	83.30	—	$	926,812,469
February 1, 2021 - February 28, 2021	2,801,451	71.37		2,801,451	726,868,561
March 1, 2021 - March 31, 2021	2,102,917	71.31		2,102,917	576,910,663

Total	4,904,427	$	71.35	4,904,368

(a) ~~All of~~Of the ~~2,419~~4,904,427 shares of common stock, par value $0.01 per share, presented in the table above, 59 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 tax obligations due upon the vesting of restricted stock. Pursuant to the Omnibus Plan, the ~~2,419~~59 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) Under our ~~current~~ 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 Company is authorized to repurchase up to $3.70 billion of shares of our common stock, 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 the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, we repurchased ~~9.2~~4.9 million shares for total consideration of ~~$650~~$350 million under the program pursuant to Rule 10b5-1 plans. As of ~~June 30, 2020, $1.03 billion remains~~March 31, 2021, $577 million remained available for repurchase under the program. On April 23, 2021, our Board of Directors approved a new 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, and which is incremental to our existing share repurchase program. Refer to ~~Note~~Notes (9) and (12) of the Notes for further information regarding our share repurchase ~~program.~~programs.

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Item 6. Exhibits


(a)						Exhibits

~~3.1~~10.1*						~~Third Restated Certificate of Incorporation of Cerner Corporation, incorporated by reference to Exhibit 3(a) to the Company~~'~~s annual report on~~ Form ~~10-K filed February 11, 2015~~2021 Executive Performance Agreement - Section 16 Officer

~~3.2~~10.2*						Certificate of Amendment to the Third Restated Certificate of Incorporation of Cerner Corporation filed on May 27, 2020, incorporated by reference to Exhibit 3.1 to the Company's current report on From 8-K filed May 28, 2020Offer Letter - Mark Erceg

~~3.3~~10.3*						Amended ~~& Restated Bylaws of~~Employment Agreement between Cerner Corporation ~~effective as of May 27, 2020, incorporated by reference to Exhibit 3.2 to the Company's current report on From 8-K filed May 28, 2020~~and Mark Erceg

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

31.2						Certification of ~~Marc G. Naughton~~Mar k J . Erceg pursuant to Section 302 of Sarbanes-Oxley Act of 2002

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

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

101.INS						Inline 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.

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SIGNATURES

Pursuant to the requirements 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

Registrant

Date: ~~July 30, 2020~~May 5, 2021

By:

/s/ ~~Marc G. Naughton~~Mark J. Erceg

~~Marc G. Naughton~~Mark J. Erceg

Executive Vice President and Chief

Financial Officer (duly authorized

officer and principal financial officer)