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: September 30, ~~2020~~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 October ~~21, 2020~~25, 2021
Common Stock, $0.01 par value per share						~~306,589,898~~294,222,760 shares

Table of Contents

CERNER CORPORATION

TABLE OF CONTENTS


Part I.	Financial Information:

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets as of September 30, ~~2020~~2021 (unaudited) and December ~~28, 2019~~31, 2020	1

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~September~~ Sept e mber 30, 2021 and Se ptember 30, 2020 ~~and~~ S ~~eptember~~ 2 8 ~~, 2019~~ (unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the Three and N ~~ine~~Nine Months Ended Septembe r 30, 2021 and Sept ember 30, 2020 ~~and~~ ~~September 28, 2019~~ (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2020~~2021 and September 28 ~~, 2019~~ 30, 2020 (unaudited)	4

	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and Nine Months Ended ~~Septe~~Sept ~~mber~~ember 30, ~~2020~~2021 and September 2 8 ~~, 2019~~30, 2020 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2322

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3937

Item 4.	Controls and Procedures	3937

Part II.	Other Information:

Item 1.	Legal Proceedings	40

~~Item 1A.~~	~~Risk Factors~~	4037

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4138

Item 6.	Exhibits	4239

Signatures

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, ~~2020~~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	$	419,154	$	441,843	Cash and cash equivalents	$	459,540	$	615,615
Short-term investments	Short-term investments	473,323		99,931		Short-term investments	322,634		442,473
Receivables, net	Receivables, net	1,219,227		1,139,595		Receivables, net	1,219,849		1,168,712
Inventory	Inventory	15,768		23,182		Inventory	25,389		23,027
Prepaid expenses and other	Prepaid expenses and other	397,487		392,073		Prepaid expenses and other	412,744		401,160
Total current assets	Total current assets	2,524,959		2,096,624		Total current assets	2,440,156		2,650,987

Property and equipment, net	Property and equipment, net	1,867,600		1,858,772		Property and equipment, net	1,717,630		1,804,083
Right-of-use assets	Right-of-use assets	109,659		123,155		Right-of-use assets	89,619		104,536
Software development costs, net	Software development costs, net	991,649		939,859		Software development costs, net	1,008,440		1,009,349
Goodwill	Goodwill	907,105		883,158		Goodwill	1,126,843		914,520
Intangible assets, net	Intangible assets, net	330,837		364,439		Intangible assets, net	476,067		329,249
Long-term investments	Long-term investments	423,315		419,419		Long-term investments	488,454		510,220
Other assets	Other assets	205,688		209,196		Other assets	195,951		198,152

Total assets	Total assets	$	7,360,812	$	6,894,622	Total assets	$	7,543,160	$	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	$	256,449	$	273,440	Accounts payable	$	311,196	$	235,755
Current installments of long-term debt						Current installments of long-term debt	225,000		—
Deferred revenue	Deferred revenue	320,294		360,025		Deferred revenue	438,063		393,293
Accrued payroll and tax withholdings	Accrued payroll and tax withholdings	328,663		245,843		Accrued payroll and tax withholdings	344,879		309,814
Other current liabilities	Other current liabilities	196,170		148,140		Other current liabilities	232,187		229,764
Total current liabilities	Total current liabilities	1,101,576		1,027,448		Total current liabilities	1,551,325		1,168,626

Long-term debt	Long-term debt	1,336,018		1,038,382		Long-term debt	1,611,205		1,336,069
Deferred income taxes	Deferred income taxes	391,790		377,657		Deferred income taxes	389,843		376,035
Other liabilities	Other liabilities	125,141		133,807		Other liabilities	150,884		157,799
Total liabilities	Total liabilities	2,954,525		2,577,294		Total liabilities	3,703,257		3,038,529

Shareholders' Equity:	Shareholders' Equity:					Shareholders' Equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 372,272,953 shares issued at September 30, 2020 and 367,634,796 shares issued at December 28, 2019		3,723		3,676
Common stock, $0.01 par value, 500,000,000 shares authorized, 378,558,251 shares issued at September 30, 2021 and 373,224,832 shares issued at December 31, 2020						Common stock, $0.01 par value, 500,000,000 shares authorized, 378,558,251 shares issued at September 30, 2021 and 373,224,832 shares issued at December 31, 2020	3,785		3,732
Additional paid-in capital	Additional paid-in capital	2,196,127		1,905,171		Additional paid-in capital	2,598,853		2,288,806
Retained earnings	Retained earnings	6,402,220		5,934,909		Retained earnings	6,656,679		6,475,551
Treasury stock, 65,919,144 shares at September 30, 2020 and 56,723,546 shares at December 28, 2019		(4,057,768)		(3,407,768)
Treasury stock, 82,216,073 shares at September 30, 2021 and 67,371,686 shares at December 31, 2020						Treasury stock, 82,216,073 shares at September 30, 2021 and 67,371,686 shares at December 31, 2020	(5,289,718)		(4,164,718)
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(138,015)		(118,660)		Accumulated other comprehensive loss, net	(129,696)		(120,804)
Total shareholders' equity	Total shareholders' equity	4,406,287		4,317,328		Total shareholders' equity	3,839,903		4,482,567

Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	7,360,812	$	6,894,622	Total liabilities and shareholders' equity	$	7,543,160	$	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 nine months ended September 30, ~~2020~~2021 and September ~~28, 2019~~30, 2020

(unaudited)

Three Months Ended Nine Months Ended
(In thousands, except per share data) 2020 2019 2020 2019
Revenues $ 1,368,673 $ 1,429,428 $ 4,110,763 $ 4,250,366
Costs and expenses:
Costs of revenue 231,889 271,778 698,268 793,655
Sales and client service 625,402 707,743 1,907,138 2,026,825
Software development (Includes amortization of $61,578 and $183,786 for the three and nine months ended September 30, 2020, respectively; and $56,786 and $169,036 for the three and nine months ended September 28, 2019, respectively) 186,826 187,526 551,101 548,934
General and administrative 116,816 152,321 391,000 398,305
Amortization of acquisition-related intangibles 12,789 21,283 43,031 64,809
Total costs and expenses 1,173,722 1,340,651 3,590,538 3,832,528
Gain on sale of businesses 216,869 0 216,869 0
Operating earnings 411,820 88,777 737,094 417,838
Other income, net 48,020 13,535 78,247 44,973
Earnings before income taxes 459,840 102,312 815,341 462,811
Income taxes (103,164) (20,377) (176,758) (87,688)
Net earnings $ 356,676 $ 81,935 $ 638,583 $ 375,123
Basic earnings per share $ 1.17 $ 0.26 $ 2.08 $ 1.17
Diluted earnings per share $ 1.16 $ 0.26 $ 2.07 $ 1.16
Basic weighted average shares outstanding 305,759 315,876 306,759 320,282
Diluted weighted average shares outstanding 308,366 319,113 309,124 323,361


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

Revenues	$	1,467,976	$	1,368,673	$	4,312,509	$	4,110,763
Costs and expenses:
Costs of revenue	251,111		231,889		743,092		698,268
Sales and client service	651,010		625,402		2,004,263		1,907,138
Software development (Includes amortization of $66,222 and $196,319 for the three and nine months ended September 30, 2021, respectively; and $61,578 and $183,786 for the three and nine months ended September 30, 2020, respectively)	202,663		186,826		636,590		551,101
General and administrative	121,395		116,816		390,067		391,000
Amortization of acquisition-related intangibles	16,874		12,789		45,956		43,031

Total costs and expenses	1,243,053		1,173,722		3,819,968		3,590,538

Gain on sale of businesses	—		216,869		—		216,869

Operating earnings	224,923		411,820		492,541		737,094

Other income (loss), net	(5,070)		48,020		(5,542)		78,247

Earnings before income taxes	219,853		459,840		486,999		815,341
Income taxes	(44,058)		(103,164)		(106,245)		(176,758)

Net earnings	$	175,795	$	356,676	$	380,754	$	638,583

Basic earnings per share	$	0.59	$	1.17	$	1.27	$	2.08
Diluted earnings per share	$	0.59	$	1.16	$	1.25	$	2.07
Basic weighted average shares outstanding	296,202		305,759		300,526		306,759
Diluted weighted average shares outstanding	298,714		308,366		303,423		309,124

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 nine months ended September 30, ~~2020~~2021 and September ~~28, 2019~~30, 2020

(unaudited)

Three Months Ended Nine Months Ended
(In thousands) 2020 2019 2020 2019
Net earnings $ 356,676 $ 81,935 $ 638,583 $ 375,123
Foreign currency translation adjustment and other (net of taxes (benefit) of $351 and $688 for the three and nine months ended September 30, 2020; and $(409) and $(413) for the three and nine months ended September 28, 2019, respectively) 9,611 (11,679) (1,738) (9,458)
Unrealized gain (loss) on cash flow hedge (net of taxes (benefit) of $745 and $(5,937) for the three and nine months ended September 30, 2020; and $(1,327) and $(5,396) for the three and nine months ended September 28, 2019, respectively) 2,265 (4,037) (18,050) (16,407)
Unrealized holding gain (loss) on available-for-sale investments (net of taxes (benefit) of $(73) and $142 for the three and nine months ended September 30, 2020; and $5 and $286 for the three and nine months ended September 28, 2019, respectively) (220) 14 433 867
Comprehensive income $ 368,332 $ 66,233 $ 619,228 $ 350,125


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

Net earnings	$	175,795	$	356,676	$	380,754	$	638,583
Foreign currency translation adjustment and other (net of taxes (benefit) of $(151) and $(580) for the three and nine months ended September 30, 2021, and $351 and $688 for the three and nine months ended September 30, 2020, respectively)	(13,259)		9,611		(17,764)		(1,738)
Unrealized gain (loss) on cash flow hedge (net of taxes (benefit) of $748 and $2,993 for the three and nine months ended September 30, 2021, and $745 and $(5,937) for the three and nine months ended September 30, 2020, respectively)	2,273		2,265		9,099		(18,050)
Unrealized holding gain (loss) on available-for-sale investments (net of taxes (benefit) of $5 and $(75) for the three and nine months ended September 30, 2021, and $(73) and $142 for the three and nine months ended September 30, 2020, respectively)	17		(220)		(227)		433

Comprehensive income	$	164,826	$	368,332	$	371,862	$	619,228

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, ~~2020~~2021 and September ~~28, 2019~~

~~(unaudited)~~

Nine Months Ended
(In thousands) 2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 638,583 $ 375,123
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 518,987 509,559
Share-based compensation expense 110,500 73,421
Provision for deferred income taxes 21,554 22,793
Gain on sale of businesses (216,869) 0
Investment gains (75,834) (24,231)
Changes in assets and liabilities (net of businesses acquired):
Receivables, net (78,695) 24,558
Inventory 8,206 1,877
Prepaid expenses and other (36,664) (75,191)
Accounts payable (60,808) (3,346)
Accrued income taxes 33,005 (795)
Deferred revenue (32,071) (89,400)
Other accrued liabilities 94,151 61,156
Net cash provided by operating activities 924,045 875,524
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases (238,053) (388,588)
Capitalized software development costs (224,710) (211,284)
Purchases of investments (511,378) (317,979)
Sales and maturities of investments 213,309 507,258
Purchase of other intangibles (29,698) (25,794)
Sale of businesses 229,471 0
Acquisition of businesses, net of cash acquired (35,766) 0
Net cash used in investing activities (596,825) (436,387)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance 300,000 600,000
Repayment of long-term debt (2,500) 0
Proceeds from exercise of stock options 202,680 188,474
Payments to taxing authorities in connection with shares directly withheld from associates (22,623) (14,994)
Treasury stock purchases (650,000) (1,020,542)
Dividends paid (166,277) (57,293)
Other (6,807) (8,450)
Net cash used in financing activities (345,527) (312,805)
Effect of exchange rate changes on cash and cash equivalents (4,382) (4,028)
Net increase (decrease) in cash and cash equivalents (22,689) 122,304
Cash and cash equivalents at beginning of period 441,843 374,126
Cash and cash equivalents at end of period $ 419,154 $ 496,430
30, 2020

(unaudited)


	Nine Months Ended
(In thousands)	2021		2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	380,754	$	638,583
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	535,816		518,987
Share-based compensation expense	157,165		110,500
Provision for deferred income taxes	3,582		21,554
Gain on sale of businesses	—		(216,869)
Investment gains	—		(75,834)
Asset impairments	117,739		—
Changes in assets and liabilities (net of businesses acquired):
Receivables, net	(33,948)		(78,695)
Inventory	(2,360)		8,206
Prepaid expenses and other	(2,091)		(36,664)
Accounts payable	27,467		(60,808)
Accrued income taxes	13,100		33,005
Deferred revenue	11,053		(32,071)
Other accrued liabilities	46,113		94,151

Net cash provided by operating activities	1,254,390		924,045

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases	(246,813)		(238,053)
Capitalized software development costs	(242,677)		(224,710)
Purchases of investments	(607,390)		(511,378)
Sales and maturities of investments	753,347		213,309
Purchase of other intangibles	(23,197)		(29,698)
Acquisition of businesses, net of cash acquired	(348,179)		(35,766)
Sale of businesses	—		229,471
Disposition of assets held for sale	9,349		—

Net cash used in investing activities	(705,560)		(596,825)

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance	500,000		300,000
Repayment of long-term debt	—		(2,500)
Proceeds from exercise of stock options	214,577		202,680
Payments to taxing authorities in connection with shares directly withheld from associates	(62,159)		(22,623)
Treasury stock purchases	(1,125,000)		(650,000)
Dividends paid	(202,054)		(166,277)
Other	(18,441)		(6,807)

Net cash used in financing activities	(693,077)		(345,527)

Effect of exchange rate changes on cash and cash equivalents	(11,828)		(4,382)

Net decrease in cash and cash equivalents	(156,075)		(22,689)
Cash and cash equivalents at beginning of period	615,615		441,843

Cash and cash equivalents at end of period	$	459,540	$	419,154

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 nine months ended September 30, ~~2020~~2021 and September ~~28, 2019~~30, 2020

(unaudited)

Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss, Net
(In thousands) Shares Amount
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 2,543 26 114,050 — — —
Employee share-based compensation expense — — 35,031 — — —
Cumulative effect of accounting change (ASU 2016-13) — — — (4,606) — —
Other comprehensive income (loss) — — — — — (40,703)
Treasury stock purchases — — — — (650,000) —
Cash dividends declared ($0.18 per share) — — — (55,206) — —
Net earnings — — — 147,159 — —
Balance at March 31, 2020 370,178 3,702 2,054,252 6,022,256 (4,057,768) (159,363)
Exercise of stock options and vests of restricted shares and share units 1,009 10 28,540 — — —
Employee share-based compensation expense — — 37,549 — — —
Other comprehensive income (loss) — — — — — 9,692
Cash dividends declared ($0.18 per share) — — — (55,602) — —
Net earnings — — — 134,748 — —
Balance at June 30, 2020 371,187 3,712 2,120,341 6,101,402 (4,057,768) $ (149,671)
Exercise of stock options and vests of restricted shares and share units 1,086 11 37,866 — — —
Employee share-based compensation expense — — 37,920 — — —
Other comprehensive income (loss) — — — — — 11,656
Cash dividends declared ($0.18 per share) — — — (55,858) — —
Net earnings — — — 356,676 — —
Balance at September 30, 2020 372,273 $ 3,723 $ 2,196,127 $ 6,402,220 $ (4,057,768) $ (138,015)


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

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	824	8		31,471		—		—		—

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

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

Treasury stock purchases	—	—		—		—		(350,000)		—

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

Net earnings	—	—		—		172,252		—		—

Balance at March 31, 2021	374,049	3,740		2,368,227		6,580,612		(4,514,718)		(125,424)

Exercise of stock options and vests of restricted shares and share units	2,887	29		87,377		—		—		—

Employee share-based compensation expense	—	—		53,941		—		—		—

Other comprehensive income (loss)	—	—		—		—		—		6,697

Treasury stock purchases	—	—		—		—		(400,000)		—

Cash dividends declared ($0.22 per share)	—	—		—		(66,704)		—		—

Net earnings	—	—		—		32,707		—		—

Balance at June 30, 2021	376,936	3,769		2,509,545		6,546,615		(4,914,718)		(118,727)

Exercise of stock options and vests of restricted shares and share units	1,622	16		34,034		—		—		—

Employee share-based compensation expense	—	—		55,274		—		—		—

Other comprehensive income (loss)	—	—		—		—		—		(10,969)

Treasury stock purchases	—	—		—		—		(375,000)		—

Cash dividends declared ($0.22 per share)	—	—		—		(65,731)		—		—

Net earnings	—	—		—		175,795		—		—

Balance at September 30, 2021	378,558	3,785		2,598,853		6,656,679		(5,289,718)		(129,696)

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued)

For the three and nine months ended September 30, ~~2020~~2021 and September ~~28, 2019~~30, 2020

(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								Amount

Balance at December 29, 2018		362,213	$	3,622			$	1,559,562							$	5,576,525			$	(2,107,768)		$	(103,552)
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)

Exercise of stock options and vests of restricted shares and share units	Exercise of stock options and vests of restricted shares and share units	706	7		11,716				—				—				—			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	—	—		19,860				—				—				—			Employee share-based compensation expense	—			—		35,031			—			—			—

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

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—				—				—				(12,254)			Other comprehensive income (loss)	—			—		—			—			—			(40,703)

Treasury stock purchases	Treasury stock purchases	—	—		—				—				(600,000)				—			Treasury stock purchases	—			—		—			—			(650,000)			—

Cash dividends declared ($0.18 per share)	Cash dividends declared ($0.18 per share)	—	—		—				(57,682)				—				—			Cash dividends declared ($0.18 per share)	—			—		—			(55,206)			—			—

Net earnings	Net earnings	—	—		—				126,969				—				—			Net earnings	—			—		—			147,159			—			—

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

Exercise of stock options and vests of restricted shares and share units	Exercise of stock options and vests of restricted shares and share units	1,505	15		54,195				—				—				—			Exercise of stock options and vests of restricted shares and share units	1,009			10		28,540			—			—			—

Employee share-based compensation expense	Employee share-based compensation expense	—	—		30,537				—				—				—			Employee share-based compensation expense	—			—		37,549			—			—			—

Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—				—				—				(15,702)			Other comprehensive income (loss)	—			—		—			—			—			9,692

Treasury stock purchases		—	—		—				—				(400,000)				—
Cash dividends declared ($0.18 per share)																				Cash dividends declared ($0.18 per share)	—			—		—			(55,602)			—			—

Net earnings																				Net earnings	—			—		—			134,748			—			—

Balance at June 30, 2020																				Balance at June 30, 2020	371,187			3,712		2,120,341			6,101,402			(4,057,768)			(149,671)

Exercise of stock options and vests of restricted shares and share units																				Exercise of stock options and vests of restricted shares and share units	1,086			11		37,866			—			—			—

Employee share-based compensation expense																				Employee share-based compensation expense	—			—		37,920			—			—			—

Other comprehensive income (loss)																				Other comprehensive income (loss)	—			—		—			—			—			11,656

Cash dividends declared ($0.18 per share)	Cash dividends declared ($0.18 per share)	—	—		—				(56,982)				—				—			Cash dividends declared ($0.18 per share)	—			—		—			(55,858)			—			—

Net earnings	Net earnings	—	—		—				81,935				—				—			Net earnings	—			—		—			356,676			—			—

Balance at September 28, 2019		366,201	$	3,662	$	1,806,939			$	5,836,984			$	(3,107,768)			$	(128,550)
Balance at September 30, 2020																				Balance at September 30, 2020	372,273			$	3,723	$	2,196,127		$	6,402,220		$	(4,057,768)		$	(138,015)

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 third fiscal quarter ended on the Saturday closest to September 30. The third quarter and year-to-date periods for 2019 presented herein consisted of 91 days and 273 days, respectively, and ended on September 28, 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 third quarter and year-to-date periods for 2020 presented herein consisted of 92 days and 277 days, respectively, and ended on September 30, 2020.

All references to quarters or nine month periods ended 2021 and 2020 in these notes to condensed consolidated financial statements ~~represent~~refer to the respective three and nine month periods ~~described above ending on~~ended September 30, ~~2020~~2021 and September ~~28, 2019,~~30, 2020, unless otherwise noted.

~~Supplemental Disclosures of Cash Flow Information~~

Nine Months Ended
(In thousands) 2020 2019
Cash paid during the period for:
Interest (including amounts capitalized of $12,040 and $12,575, respectively) $ 31,661 $ 20,756
Income taxes, net of refunds 78,519 65,171
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases 24,499 23,129
Capital purchases 17,395 7,600
Employee Separation Costs

~~CARES Act~~

~~Cash flows from operating activities for~~In connection with involuntary separation benefits, we recognized less than $1 million and $6 million of expenses in the third quarters of 2021 and 2020, respectively; and $46 million and $21 million of expenses during the first nine months of 2021 and 2020, ~~include the impact of $56~~respectively.

In connection with voluntary separation benefits, we recognized $24 million and $2 million of ~~certain federal payroll taxes related to pay cycles~~expenses in the ~~second and~~ third quarters of 2021 and 2020, ~~for which we have deferred remittance to~~respectively; and $51 million and $18 million of expenses during 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 endfirst nine months of 2021 and ~~2022,~~2020, respectively.

Such employee separation costs are included in "General and administrative" expense in our condensed consolidated statements of operations.

At September 30, ~~2020, these deferred remittances are~~2021, a liability of $19 million for such obligations is included in "Accrued payroll and tax withholdings" in our condensed consolidated balance sheets.

Real Estate Held For Sale

In connection with our operational improvement initiatives, during the nine months ended September 30, 2021, we made certain decisions regarding the continued use of certain of our owned real estate. As a result of those decisions, on July 9, 2021, we sold office space located in Kansas City, Missouri (known as our Oaks Campus), in April 2021 began the process of marketing office space located in Kansas City, Missouri (known as our Riverport Campus), in June 2021 began the process of marketing office space located in Kansas City, Kansas (known as our Continuous Campus), and in September 2021 began the process of marketing a portion of our office space located in Malvern, Pennsylvania. At September 30, 2021, these long-lived assets aggregating $101 million were held for sale and presented within our condensed consolidated balance sheets in "Property and equipment, net." In connection with the designation as held for sale, during the second quarter of 2021, we recorded a pre-tax charge of $68 million to reduce the amount of such long-lived assets to fair value, less estimated costs to sell. Such charge is included in "Sales and client service" expense in our condensed consolidated statements of operations.

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~~Accounting Pronouncements Adopted~~Software Development Costs

In the second and third quarters of 2021, we recorded pre-tax charges of $48 million and $2 million, respectively, to reduce the carrying amount of certain capitalized software development costs to estimated net realizable value. Such charges are included in ~~2020~~"Software development" expense in our condensed consolidated statements of operations.

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

~~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 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.


	Nine Months Ended
(In thousands)	2021		2020
Cash paid during the period for:
Interest (including amounts capitalized of $8,308 and $12,040, respectively)	$	41,918	$	31,661
Income taxes, net of refunds	95,065		78,519
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases	9,062		24,499
Financed capital purchases	7,255		17,395

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) Business Acquisition

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

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

Our acquisition of Kantar Health is being treated as a purchase in accordance with Accounting Standards Codification Topic ("ASC") 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the transaction. The allocation of purchase price is based on management's judgment after evaluating several factors, including a preliminary valuation assessment. The allocation of purchase price is preliminary and subject to changes, as appraisals of intangible assets are finalized, working capital and certain other adjustments are agreed upon, and additional information becomes available. The following is a summary of the preliminary allocation of purchase price:


(In thousands)	Allocation Amount

Cash and cash equivalents	$	14,992
Receivables, net	31,952
Prepaid expenses and other	11,776
Property and equipment, net	1,147
Right-of-use assets	1,680
Goodwill	217,608
Intangible assets, net:
Customer relationships	143,100
Existing technologies	39,700
Trade names	10,200
Other assets	26
Accounts payable	(36,143)
Deferred revenue	(35,640)
Accrued payroll and tax withholdings	(11,031)
Other current liabilities	(3,777)
Deferred income taxes	(10,169)
Other liabilities	(10,250)

Total purchase price	$	365,171

The fair values of the acquired intangible assets were estimated by applying the income approach. Such estimations required the use of inputs that were unobservable in the marketplace (Level 3), including a discount rate that we estimated would be used by a market participant in valuing these assets, projections of revenues and cash flows, and client attrition rates, among others. The acquired intangible assets are being amortized over a weighted-average period of 13 years. Refer to Note (7) for further information about the fair value level hierarchy.

The goodwill of $218 million was allocated among our Domestic and International operating segments, as shown below, with approximately $160 million of such goodwill expected to be deductible for tax purposes.

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The changes in the carrying amounts of goodwill for the nine months ended September 30, 2021 were as follows:


(In thousands)	Domestic		International		Total

Beginning balance at December 31, 2020	$	854,188	$	60,332	$	914,520
Goodwill recorded in connection with the Kantar Health acquisition	117,047		100,561		217,608
Foreign currency translation adjustment and other	—		(5,285)		(5,285)

Ending balance at September 30, 2021	$	971,235	$	155,608	$	1,126,843

Our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 include revenues of $45 million and $90 million, respectively, attributable to the acquired business since the April 1, 2021 acquisition date. The earnings contribution from the acquired business for the three and nine months ended September 30, 2021 was not material to our condensed consolidated financial statements. Pro forma results of operations, assuming the acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to our results.

~~(2)~~(3) Revenue Recognition

Disaggregation of Revenue

The following tables present 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	$	159,327	$	12,367	$	171,694	$	144,599	$	9,934	$	154,533	Licensed software	$	186,106	$	13,073	$	199,179	$	159,327	$	12,367	$	171,694
Technology resale	Technology resale	45,217		1,896		47,113		65,103		5,072		70,175		Technology resale	35,206		2,378		37,584		45,217		1,896		47,113
Subscriptions	Subscriptions	87,878		5,529		93,407		85,230		6,674		91,904		Subscriptions	87,490		4,281		91,771		87,878		5,529		93,407
Professional services	Professional services	433,127		46,768		479,895		446,562		60,893		507,455		Professional services	472,387		79,361		551,748		433,127		46,768		479,895
Managed services	Managed services	280,827		31,017		311,844		272,933		29,502		302,435		Managed services	286,038		37,094		323,132		280,827		31,017		311,844
Support and maintenance	Support and maintenance	219,682		40,296		259,978		227,131		50,163		277,294		Support and maintenance	210,864		46,161		257,025		219,682		40,296		259,978
Reimbursed travel	Reimbursed travel	4,711		31		4,742		23,705		1,927		25,632		Reimbursed travel	7,397		140		7,537		4,711		31		4,742

Total revenues	Total revenues	$	1,230,769	$	137,904	$	1,368,673	$	1,265,263	$	164,165	$	1,429,428	Total revenues	$	1,285,488	$	182,488	$	1,467,976	$	1,230,769	$	137,904	$	1,368,673


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

Licensed software	$	492,847	$	43,109	$	535,956	$	444,774	$	37,114	$	481,888
Technology resale	124,777		15,339		140,116		126,042		14,675		140,717
Subscriptions	277,095		12,925		290,020		260,095		19,749		279,844
Professional services	1,364,450		218,798		1,583,248		1,295,759		156,564		1,452,323
Managed services	852,872		108,413		961,285		836,242		92,114		928,356
Support and maintenance	640,349		139,675		780,024		663,399		144,296		807,695
Reimbursed travel	22,117		(257)		21,860		19,086		854		19,940

Total revenues	$	3,774,507	$	538,002	$	4,312,509	$	3,645,397	$	465,366	$	4,110,763

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Nine Months Ended
2020 2019
(In thousands) Domestic Segment International Segment Total Domestic Segment International Segment Total
Licensed software $ 444,774 $ 37,114 $ 481,888 $ 466,105 $ 40,018 $ 506,123
Technology resale 126,042 14,675 140,717 169,112 17,338 186,450
Subscriptions 260,095 19,749 279,844 246,505 19,460 265,965
Professional services 1,295,759 156,564 1,452,323 1,313,701 169,500 1,483,201
Managed services 836,242 92,114 928,356 818,818 85,661 904,479
Support and maintenance 663,399 144,296 807,695 679,214 151,454 830,668
Reimbursed travel 19,086 854 19,940 68,750 4,730 73,480
Total revenues $ 3,645,397 $ 465,366 $ 4,110,763 $ 3,762,205 $ 488,161 $ 4,250,366

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


		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

Revenue recognized over time	Revenue recognized over time	$	1,143,515	$	132,891	$	1,276,406	$	1,143,470	$	155,017	$	1,298,487	Revenue recognized over time	$	1,200,015	$	175,440	$	1,375,455	$	1,143,515	$	132,891	$	1,276,406
Revenue recognized at a point in time	Revenue recognized at a point in time	87,254		5,013		92,267		121,793		9,148		130,941		Revenue recognized at a point in time	85,473		7,048		92,521		87,254		5,013		92,267

Total revenues	Total revenues	$	1,230,769	$	137,904	$	1,368,673	$	1,265,263	$	164,165	$	1,429,428	Total revenues	$	1,285,488	$	182,488	$	1,467,976	$	1,230,769	$	137,904	$	1,368,673


		Nine Months Ended													Nine 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	$	3,410,827	$	437,791	$	3,848,618	$	3,403,965	$	445,320	$	3,849,285	Revenue recognized over time	$	3,542,178	$	507,714	$	4,049,892	$	3,410,827	$	437,791	$	3,848,618
Revenue recognized at a point in time	Revenue recognized at a point in time	234,570		27,575		262,145		358,240		42,841		401,081		Revenue recognized at a point in time	232,329		30,288		262,617		234,570		27,575		262,145

Total revenues	Total revenues	$	3,645,397	$	465,366	$	4,110,763	$	3,762,205	$	488,161	$	4,250,366	Total revenues	$	3,774,507	$	538,002	$	4,312,509	$	3,645,397	$	465,366	$	4,110,763

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, ~~2020,~~2021, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates ~~$13.01~~$13.12 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". During the nine months ended September 30, ~~2020,~~2021, we recognized ~~$306~~$340 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 ~~19%~~21% and ~~12%~~19% of our consolidated revenues for the third quarters of ~~2020~~2021 and ~~2019,~~2020, respectively; and ~~17%~~20% and ~~11%~~17% for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. Amounts due ~~from this same customer~~in connection with these relationships comprised ~~14%~~17% and 13% of client receivables as of September 30, ~~2020.~~2021 and December 31, 2020, respectively.

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~~(3)~~(4) Receivables

A summary of net receivables is as follows:


(In thousands)	September 30, 2021		December 31, 2020

Client receivables	$	1,380,794	$	1,322,278
Less: Provision for expected credit losses	160,945		153,566

Total receivables, net	$	1,219,849	$	1,168,712

(In thousands) September 30, 2020 December 28, 2019
Client receivables $ 1,370,394 $ 1,245,670
Less: Provision for expected credit losses 151,167 106,075
Total receivables, net $ 1,219,227 $ 1,139,595

In addition to the client receivables presented above, at September 30, 2021 and December 31, 2020, we had $19 million and $17 million of non-current net client receivables, respectively, which are presented in "Other assets" in our condensed consolidated balance sheets.

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


~~(In thousands)~~

~~Provision for expected credit losses - balance at December 28, 2019~~	$	~~106,075~~
~~Cumulative effect of accounting change (ASU 2016-13)~~	~~4,606~~
~~Additions charged to costs and expenses~~	~~54,636~~
~~Deductions~~	~~(14,150)~~

~~Provision for expected credit losses - balance at September 30, 2020~~	$	~~151,167~~

~~During the first nine months of 2020 and 2019, we received total client cash collections of $4.09 billion and $4.23 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		—		20,251
Deductions, foreign currency and other	2,278		—		2,278

Provision for expected credit losses - balance at March 31, 2021	176,095		38,564		214,659
Additions charged to costs and expenses	5,887		—		5,887
Reclassifications to non-current	(26,480)		26,480		—
Deductions, foreign currency and other	(3,008)		—		(3,008)

Provision for expected credit losses - balance at June 30, 2021	152,494		65,044		217,538
Additions charged to costs and expenses	11,265		—		11,265
Deductions, foreign currency and other	(2,814)		(3,938)		(6,752)

Provision for expected credit losses - balance at September 30, 2021	$	160,945	$	61,106	$	222,051

Our estimates of expected credit losses for client receivables at both ~~December 29, 2019 and~~ September 30, 2021 and December 31, 2020, were primarily based on historical credit loss experience and adjustments for certain asset-specific risk characteristics (i.e. known client financial hardship or bankruptcy). Exposure to credit losses may increase if our clients are adversely affected by changes in healthcare ~~laws,~~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 nine months of 2021 and 2020, we received total client cash collections of $4.46 billion and $4.09 billion, respectively.

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~~(4)~~(5) Investments

Available-for-sale investments at September 30, ~~2020~~2021 were as follows:

(In thousands) Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Cash equivalents:
Money market funds $ 56,855 $ — $ — $ 56,855
Time deposits 19,676 — — 19,676
Commercial Paper 1,600 — — 1,600
Government and corporate bonds 1,150 — — 1,150
Total cash equivalents 79,281 — — 79,281
Short-term investments:
Time deposits 21,248 — — 21,248
Commercial paper 259,000 22 (7) 259,015
Government and corporate bonds 192,536 559 (35) 193,060
Total short-term investments 472,784 581 (42) 473,323
Long-term investments:
Government and corporate bonds 91,605 180 (78) 91,707
Total available-for-sale investments $ 643,670 $ 761 $ (120) $ 644,311


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

Cash equivalents:
Money market funds	$	91,433	$	—	$	—	$	91,433
Time deposits	41,320		—		—		41,320
Total cash equivalents	132,753		—		—		132,753

Short-term investments:
Time deposits	32,439		—		—		32,439
Commercial paper	118,300		10		(2)		118,308
Government and corporate bonds	171,866		48		(27)		171,887
Total short-term investments	322,605		58		(29)		322,634

Long-term investments:
Government and corporate bonds	60,102		—		(41)		60,061

Total available-for-sale investments	$	515,460	$	58	$	(70)	$	515,448

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

(In thousands) Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Cash equivalents:
Money market funds $ 185,666 $ — $ — $ 185,666
Time deposits 64,286 — — 64,286
Total cash equivalents 249,952 — — 249,952
Short-term investments:
Time deposits 2,506 — — 2,506
Government and corporate bonds 83,272 52 (11) 83,313
Total short-term investments 85,778 52 (11) 85,819
Long-term investments:
Government and corporate bonds 96,186 91 (67) 96,210
Total available-for-sale investments $ 431,916 $ 143 $ (78) $ 431,981


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

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

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

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

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

We sold available-for-sale investments for proceeds of $5$400 million and ~~$181~~$5 million during the nine months ended September 30, ~~2020~~2021 and September ~~28, 2019,~~30, 2020, respectively, resulting in insignificant ~~gains/~~losses in each period.

Other Investments

At September 30, ~~2020~~2021 and December ~~28, 2019,~~31, 2020, we had investments in equity securities that do not have readily determinable fair values of ~~$320~~$406 million and ~~$314~~$361 million, respectively, accounted for in accordance with ~~Accounting Standards Codification Topic ("ASC")~~ASC 321, Investments-Equity Securities. Such investments are included in "Long-term investments" in our condensed consolidated balance sheets. We did not record any changes in the measurement of such investments during the nine months ended September 30, ~~2020~~2021 and September ~~28, 2019,~~30, 2020, respectively.

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At ~~June~~September 30, ~~2020~~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 were included in "Short-term investments" in our condensed consolidated balance sheets. Changes in the measurement of such investments favorably impacted "Other income, net" by $49 million and $76 million for the three and nine months ended September 30,31, 2020, ~~respectively, and $9 million for both the three and nine months ended September 28, 2019. In August 2020, we sold these investments for cash proceeds of $90 million.~~

~~At September 30, 2020 and December 28, 2019,~~ we had investments in equity securities reported under the equity method of accounting of ~~$11~~$22 million and $9$12 million, respectively. Such investments are included in "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 nine months ended September 30, 2020, we did not recognize any impairment on our available-for-sale debt securities through net earnings.

~~(5)~~(6) Long-term Debt

The following is a summary of indebtedness outstanding:

(In thousands) September 30, 2020 December 28, 2019
Credit agreement loans due May 5, 2024 $ 600,000 $ 600,000
Senior notes:
Series 2020-A due March 11, 2030 300,000 0
Series 2015-A due February 15, 2022 225,000 225,000
Series 2015-B due February 14, 2025 200,000 200,000
Other 11,662 14,162
Total indebtedness 1,336,662 1,039,162
Less: debt issuance costs (644) (780)
Long-term debt $ 1,336,018 $ 1,038,382


(In thousands)	September 30, 2021		December 31, 2020

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

Total indebtedness	1,836,662		1,336,662
Less: debt issuance costs	(457)		(593)

Indebtedness, net	1,836,205		1,336,069
Less: current installments of long-term debt	(225,000)		—

Long-term debt	$	1,611,205	$	1,336,069

Credit Agreement

As of September 30, ~~2020,~~2021, the interest rate on revolving credit loans outstanding under our Credit Agreement was ~~0.95%~~0.88% 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 September 30, ~~2020~~2021 and December ~~28, 2019,~~31, 2020, this swap was in a net liability position with an aggregate fair value of ~~$41~~$25 million and ~~$17~~$37 million, respectively; which is presented in our condensed consolidated balance sheets in "Other current liabilities".

Series ~~2020-A~~2021 Senior Notes

~~In March 2020, we issued $300 million aggregate principal amount of 2.50% senior unsecured Series 2020-A notes (the "Series 2020-A Notes") due March 11, 2030, pursuant to~~We entered into a Master Note Agreement ~~we entered into in~~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 2021, we issued $500 million aggregate principal amount of unsecured senior notes (the "Series 2021 Senior Notes"), pursuant to the 2019 Shelf Agreement. The issuance consisted of $100 million of 2.00% Series 2021-A Notes due March 24, 2026 and $400 million of 2.59% Series 2021-B Notes due March 24, 2031. Interest on

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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 maintenance of certain financial ratios. As of the date of this filing, ~~$1.50~~$1.00 billion remains available for sale under the 2019 Shelf Agreement, which is uncommitted and subject to participation by the purchasers.

~~(6)~~

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(7) 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 September 30, ~~2020:~~2021:

(In thousands) Fair Value Measurements Using
Description Balance Sheet Classification Level 1 Level 2 Level 3
Money market funds Cash equivalents $ 56,855 $ — $ 0
Time deposits Cash equivalents — 19,676 0
Commercial paper Cash equivalents — 1,600 —
Government and corporate bonds Cash equivalents — 1,150 —
Time deposits Short-term investments — 21,248 0
Commercial paper Short-term investments — 259,015 0
Government and corporate bonds Short-term investments — 193,060 0
Government and corporate bonds Long-term investments — 91,707 0


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

Money market funds	Cash equivalents	$	91,433	$	—	$	—
Time deposits	Cash equivalents	—		41,320		—
Time deposits	Short-term investments	—		32,439		—
Commercial paper	Short-term investments	—		118,308		—
Government and corporate bonds	Short-term investments	—		171,887		—
Government and corporate bonds	Long-term investments	—		60,061		—

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 $ — $ 0
Time deposits Cash equivalents — 64,286 0
Time deposits Short-term investments — 2,506 0
Government and corporate bonds Short-term investments — 83,313 0
Government and corporate bonds Long-term investments — 96,210 0

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


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

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

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

We estimate the fair value of our long-term, fixed rate debt using a Level 3 discounted cash flow analysis based on current borrowing rates for debt with similar maturities. We estimate the fair value of our long-term, variable rate debt using a

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Level 3 discounted cash flow analysis based on LIBOR rate forward curves. The fair value of our long-term debt at September 30, ~~2020~~2021 and December ~~28, 2019~~31, 2020 was approximately ~~$1.34~~$1.84 billion and ~~$1.07~~$1.36 billion, respectively. The carrying amount of such debt at September 30, ~~2020~~2021 and December ~~28, 2019~~31, 2020 was $1.83 billion and $1.33 billion, ~~and $1.03 billion,~~ respectively.

~~(7) Gain on Sale of Businesses~~

~~Germany and Spain~~

On July 1, 2020, we sold certain of our business operations, primarily conducted in Germany and Spain, to affiliates of CompuGroup Medical SE & Co. KGaA ("CGM"), as a part of our portfolio management strategy. Such operations included the associates, intellectual property, client contracts, other assets, and liabilities related to our medico®~~, Selene~~®~~, Soarian Health Archive~~®~~, and Soarian~~® ~~Integrated Care solution offerings. We received a sale price of $227 million, which is subject to post-closing adjustments for working capital and certain other adjustments.~~

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

~~(In thousands)~~

~~Sale price~~

~~226,623~~

~~Net assets/(liabilities) removed~~

~~(7,617)~~

~~Transaction expenses~~

~~(5,573)~~

~~Foreign currency~~

~~1,263~~

~~Gain on sale of businesses~~

~~214,696~~

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


~~(In thousands)~~

~~Sale price~~	$	~~226,623~~
~~VAT and other transaction taxes, net~~	~~(2,142)~~

~~Cash received from sale of businesses~~	$	~~224,481~~

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


~~(In thousands)~~	~~Asset/(Liability)~~

~~Receivables, net~~	$	~~7,334~~
~~Inventory~~	65
~~Prepaid expenses and other~~	~~5,759~~
~~Property and equipment, net~~	~~336~~
~~Right-of-use assets~~	~~554~~
~~Software development costs, net~~	~~5,532~~
~~Goodwill~~	~~7,692~~
~~Intangible assets, net~~	~~3,687~~
~~Accounts payable~~	~~(1,631)~~
~~Deferred revenue~~	~~(16,655)~~
~~Accrued payroll and tax withholdings~~	~~(4,545)~~
~~Other current liabilities~~	~~(511)~~

~~Net assets/(liabilities)~~	$	~~7,617~~

~~Revenue Cycle Outsourcing~~

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

(8) 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 ~~21.7%~~21.8% and ~~18.9%~~21.7% for the first nine months of 2021 and 2020, ~~and 2019,~~ respectively. The increase in the effective tax rate in the first nine 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. Also contributing to the increase, are taxes associated with the divestiture transactions that closed in the third quarter of 2020, as further discussed in Note (7).

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(9) 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	$	356,676	305,759	$	1.17	$	81,935	315,876	$	0.26	Income available to common shareholders	$	175,795	296,202	$	0.59	$	356,676	305,759	$	1.17
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	—		2,607			—		3,237			Stock options, non-vested shares and share units	—		2,512			—		2,607
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	$	356,676	308,366	$	1.16	$	81,935	319,113	$	0.26	Income available to common shareholders including assumed conversions	$	175,795	298,714	$	0.59	$	356,676	308,366	$	1.16

For the three months ended September 30, ~~2020~~2021 and September ~~28, 2019,~~30, 2020, options to purchase ~~3.9~~0.3 million and ~~7.7~~3.9 million shares of common stock at per share prices ranging from ~~$55.24~~$52.32 to $76.49 and ~~$54.87~~$55.24 to ~~$75.83,~~$76.49, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive.


		Nine Months Ended											Nine 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	$	638,583	306,759	$	2.08	$	375,123	320,282	$	1.17	Income available to common shareholders	$	380,754	300,526	$	1.27	$	638,583	306,759	$	2.08
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	—		2,365			—		3,079			Stock options, non-vested shares and share units	—		2,897			—		2,365
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	$	638,583	309,124	$	2.07	$	375,123	323,361	$	1.16	Income available to common shareholders including assumed conversions	$	380,754	303,423	$	1.25	$	638,583	309,124	$	2.07

For the nine months ended September 30, ~~2020~~2021 and September ~~28, 2019,~~30, 2020, options to purchase ~~4.4~~0.4 million and ~~10.1~~4.4 million shares of common stock at per share prices ranging from $52.32 to $76.49 and ~~$51.87~~$52.32 to ~~$75.83,~~$76.49, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive.

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(10) Share-Based Compensation and Equity

Stock Options

Stock option activity for the nine months ended September 30, ~~2020~~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 3 72.36
Exercised (4,009) 50.67
Forfeited and expired (228) 61.32
Outstanding as of September 30, 2020 11,182 58.31 $ 156,372 5.70
Exercisable as of September 30, 2020 7,248 $ 56.87 $ 111,738 4.85

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


~~Expected volatility (%)~~	~~24.5~~		%
~~Expected dividend rate (%)~~	1		%
~~Expected term (yrs)~~	6
~~Risk-free rate (%)~~	~~1.1~~		%
~~Fair value per option~~	$	~~16.64~~


(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	(3,779)	56.92
Forfeited and expired	(180)	56.49
Outstanding as of September 30, 2021	6,245	$	59.66	$	67,999	4.48

Exercisable as of September 30, 2021	4,748	$	59.06	$	54,598	3.81

As of September 30, ~~2020,~~2021, there was ~~$58~~$20 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 ~~2.12~~1.39 years.

Non-vested Shares and Share Units

Non-vested share and share unit activity for the nine months ended September 30, ~~2020~~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	2,520	69.99		Granted	2,158	77.31
Vested	Vested	(946)	66.30		Vested	(2,386)	67.94
Forfeited	Forfeited	(97)	67.24		Forfeited	(522)	72.40

Outstanding as of September 30, 2020		4,111	$	67.90
Outstanding as of September 30, 2021					Outstanding as of September 30, 2021	3,381	$	73.36

As of September 30, ~~2020,~~2021, there was ~~$223~~$195 million of total unrecognized compensation cost related to non-vested share and share unit awards granted under all plans. That cost is expected to be recognized over a weighted-average period of ~~1.96~~2.13 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				Nine Months Ended					Three Months Ended				Nine Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020

Stock option and non-vested share and share unit compensation expense	Stock option and non-vested share and share unit compensation expense	$	37,920	$	30,537	$	110,500	$	73,421	Stock option and non-vested share and share unit compensation expense	$	55,274	$	37,920	$	157,165	$	110,500
Associate stock purchase plan expense	Associate stock purchase plan expense	1,367		1,321		4,195		4,612		Associate stock purchase plan expense	1,300		1,367		4,461		4,195
Amounts capitalized in software development costs, net of amortization	Amounts capitalized in software development costs, net of amortization	(1,150)		(76)		(2,971)		70		Amounts capitalized in software development costs, net of amortization	(908)		(1,150)		(4,034)		(2,971)

Amounts charged against earnings, before income tax benefit	Amounts charged against earnings, before income tax benefit	$	38,137	$	31,782	$	111,724	$	78,103	Amounts charged against earnings, before income tax benefit	$	55,666	$	38,137	$	157,592	$	111,724

Amount of related income tax benefit recognized in earnings	Amount of related income tax benefit recognized in earnings	$	7,818	$	6,330	$	22,452	$	14,888	Amount of related income tax benefit recognized in earnings	$	11,155	$	7,818	$	31,602	$	22,452

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Treasury Stock

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

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 2017 Share Repurchase Program. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by ~~broker-dealers. No time limit was set for the completion of the program.~~ broker-dealers, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.

During the nine months ended September 30, ~~2020,~~2021, we repurchased ~~9.2~~14.8 million shares for total consideration of ~~$650 million~~$1.12 billion under ~~the program.~~our share repurchase programs. The shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired. The 2017 Share Repurchase Program was completed during the third quarter of 2021. As of September 30, ~~2020, $1.03~~2021, an aggregate of $3.55 billion ~~remains~~remained available for repurchase under the ~~program.~~2021 Share Repurchase Program.

Dividends

On ~~September 10, 2020,~~March 25, 2021, 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 20, 2021 to shareholders of record as of April 6, 2021. On May 19, 2021, our Board of Directors declared a cash dividend of $0.22 per share on our issued and outstanding common stock, which was paid on July 13, 2021 to shareholders of record as of June 28, 2021. On September 9, 2021, our Board of Directors declared a cash dividend of $0.22 per share on our issued and outstanding common stock, which was paid on October ~~13, 2020~~12, 2021 to shareholders of record as of September 25, 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. 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, 2020.27, 2021. In connection with the declaration of such dividends, our non-vested shares and share units are entitled to dividend equivalents, which will be payable to the holder subject to, and upon vesting of, the underlying awards. Our outstanding stock options are not entitled to dividend or dividend equivalents. At ~~both~~ September 30, ~~2020~~2021 and December ~~28, 2019,~~31, 2020, our condensed consolidated balance sheets included liabilities for dividends payable of ~~$56~~$67 million and $69 million, respectively, which are included in "Other current liabilities".

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Accumulated Other Comprehensive Loss, Net (AOCI)

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

Foreign currency translation adjustment and other Unrealized loss on cash flow hedge Unrealized holding gain (loss) on available-for-sale investments Total
(In thousands)
Balance at December 28, 2019 $ (106,347) $ (12,578) $ 265 $ (118,660)
Other comprehensive income (loss) before reclassifications (20,546) (20,430) (849) (41,825)
Amounts reclassified from AOCI 0 1,122 0 1,122
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 0 2,198 0 2,198
Balance at June 30, 2020 (117,696) (32,893) 918 (149,671)
Other comprehensive income (loss) before reclassifications 9,611 (289) (220) 9,102
Amounts reclassified from AOCI 0 2,554 0 2,554
Balance at September 30, 2020 $ (108,085) $ (30,628) $ 698 $ (138,015)

Foreign currency translation adjustment and other Unrealized loss on cash flow hedge Unrealized holding gain (loss) on available-for-sale investments Total
(In thousands)
Balance at December 29, 2018 $ (102,939) $ 0 $ (613) $ (103,552)
Other comprehensive income (loss) before reclassifications 2,321 0 637 2,958
Amounts reclassified from AOCI 0 0 0 0
Balance at March 30, 2019 (100,618) 0 24 (100,594)
Other comprehensive income (loss) before reclassifications (100) (12,223) 216 (12,107)
Amounts reclassified from AOCI 0 (147) 0 (147)
Balance at June 29, 2019 (100,718) (12,370) 240 (112,848)
Other comprehensive income (loss) before reclassifications (11,679) (4,135) 17 (15,797)
Amounts reclassified from AOCI 0 98 (3) 95
Balance at September 28, 2019 $ (112,397) $ (16,407) $ 254 $ (128,550)


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

Balance at December 31, 2020	$	(93,450)	$	(27,788)	$	434	$	(120,804)
Other comprehensive income (loss) before reclassifications	(8,991)		2,061		(217)		(7,147)
Amounts reclassified from AOCI	—		2,527		—		2,527

Balance at March 31, 2021	(102,441)		(23,200)		217		(125,424)
Other comprehensive income (loss) before reclassifications	4,486		(429)		(26)		4,031
Amounts reclassified from AOCI	—		2,667		(1)		2,666

Balance at June 30, 2021	(97,955)		(20,962)		190		(118,727)
Other comprehensive income (loss) before reclassifications	(13,259)		(384)		(23)		(13,666)
Amounts reclassified from AOCI	—		2,657		40		2,697

Balance at September 30, 2021	$	(111,214)	$	(18,689)	$	207	$	(129,696)

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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
(In thousands)

Balance at December 28, 2019	$	(106,347)	$	(12,578)	$	265	$	(118,660)
Other comprehensive income (loss) before reclassifications	(20,546)		(20,430)		(849)		(41,825)
Amounts reclassified from AOCI	—		1,122		—		1,122

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)
Other comprehensive income (loss) before reclassifications	9,611		(289)		(220)		9,102
Amounts reclassified from AOCI	—		2,554		—		2,554

Balance at September 30, 2020	$	(108,085)	$	(30,628)	$	698	$	(138,015)

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

(In thousands) Three Months Ended Nine Months Ended
AOCI Component Location 2020 2019 2020 2019
Unrealized loss on cash flow hedge Other income, net $ (3,213) $ (122) $ (7,383) $ 58
Income taxes 659 24 1,509 (9)
Net of tax (2,554) (98) (5,874) 49
Unrealized holding gain (loss) on available-for-sale investments Other income, net 0 4 0 4
Income taxes 0 (1) 0 (1)
Net of tax 0 3 0 3
Total amount reclassified, net of tax $ (2,554) $ (95) $ (5,874) $ 52


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

Unrealized loss on cash flow hedge	Other income, net	$	(3,322)	$	(3,213)	$	(9,826)	$	(7,383)
	Income taxes	665		659		1,975		1,509
	Net of tax	(2,657)		(2,554)		(7,851)		(5,874)

Unrealized holding gain (loss) on available-for-sale investments	Other income, net	(51)		—		(49)		—
	Income taxes	11		—		10		—
	Net of tax	(40)		—		(39)		—

Total amount reclassified, net of tax		$	(2,697)	$	(2,554)	$	(7,890)	$	(5,874)

(11) 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, to which they have now responded. 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 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 currently scheduled to occur in April 2022.

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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

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Services, Inc. ~~("Health Services")~~ and NextGen prior to the acquisition of the assets of Siemens Health Services, Inc. by Cerner HS in 2015. ~~In September 2017,~~The parties have settled the ~~court issued~~matter, and Cerner did not incur 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~~significant loss.

On May 16, 2019, Steward Health Care System LLC ("Steward") filed a lawsuit in the Chancery Court for Davidson County, Tennessee against the Company alleging $210 million in damages. The Company believes Steward's allegations arise out of Steward's disinterest in following the contract between the Company and Steward's predecessor for clinical and financial software and services after Steward closed on its acquisition of the predecessor. The Company has filed a counterclaim ~~alleging breach~~against Steward seeking recovery of ~~contract and tortious interference but did not specify its damages. In August 2019, NextGen provided an expert report alleging profit disgorgement damages of $135 million or, alternatively, $30.5~~more than $42 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 trial is set to begin on January 25, 2021. We believe NextGen's claims are without merit and will vigorously defend against them; however, there can be no assurances asunpaid invoices owed to the ~~outcome~~Company. The Company believes the dispute is in the ordinary course of business and the ~~dispute.~~damages Steward asserts lack both factual and causal support. We have not concluded that a material loss related to the ~~claims raised by NextGen in its counterclaim~~Steward allegations is probable, nor have we accrued a liability related to these claims. Although we believe a loss ~~may~~could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that the dispute is in ~~light~~the discovery process. We will continue to vigorously defend against these claims, and we continue to believe that we have valid grounds for recovery of the ~~inherent difficulty of predicting~~disputed client receivables. However, there can be no assurances as to 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.~~dispute.

On March 22, 2021, Astria Health ("Astria") filed an adversary proceeding in the United States Bankruptcy Court, Eastern District of Washington against the Company. Astria's allegations largely arise out of the Company's provision of revenue cycle services in 2018 and 2019. The Company believes the dispute is in the ordinary course of business and the factual allegations and the damages asserted lack both factual and causal support. We have not concluded that a material loss related to the Astria allegations is probable, nor have we accrued a liability related to these claims beyond reserving certain bankruptcy-related outstanding invoices. Although we believe a loss could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that the dispute is in the early stages of the discovery process. We will continue to vigorously defend against this claim. However, there can be no assurances as to the outcome of the dispute.

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~~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 IPintellectual property infringement, data privacy breaches or system interruptions, the inherent uncertainty stemming from such claims, and the lack of a monetary liability limit for such claims under the terms of the 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.

(12) 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. ~~"Other" also includes gains or losses recognized on the divestiture of businesses.~~ Performance of the segments is assessed at the operating earnings level by our chief operating decision maker, who is our Chief Executive Officer. Items such as interest, income taxes, capital expenditures and total assets are managed at the consolidated level and thus are not included in our operating segment disclosures. Accounting policies for each of the reportable segments are the same as those used on a consolidated basis.

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The following table presents a summary of our operating segments and other expense for the three and nine months ended September 30, ~~2020~~2021 and September ~~28, 2019:~~30, 2020:


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

Three Months Ended 2020
Three Months Ended 2021										Three Months Ended 2021
Revenues	Revenues	$	1,230,769	$	137,904	$	—	$	1,368,673	Revenues	$	1,285,488	$	182,488	$	—	$	1,467,976

Costs of revenue	Costs of revenue	219,938		11,951		—		231,889		Costs of revenue	222,665		28,446		—		251,111
Operating expenses	Operating expenses	566,777		58,626		316,430		941,833		Operating expenses	580,535		70,472		340,935		991,942
Total costs and expenses	Total costs and expenses	786,715		70,577		316,430		1,173,722		Total costs and expenses	803,200		98,918		340,935		1,243,053

Gain on sale of businesses		0		0		216,869		216,869

Operating earnings (loss)	Operating earnings (loss)	$	444,054	$	67,327	$	(99,561)	$	411,820	Operating earnings (loss)	$	482,288	$	83,570	$	(340,935)	$	224,923


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

Three Months Ended 2019
Three Months Ended 2020										Three Months Ended 2020
Revenues	Revenues	$	1,265,263	$	164,165	$	—	$	1,429,428	Revenues	$	1,230,769	$	137,904	$	—	$	1,368,673

Costs of revenue	Costs of revenue	246,634		25,144		—		271,778		Costs of revenue	219,938		11,951		—		231,889
Operating expenses	Operating expenses	639,590		68,153		361,130		1,068,873		Operating expenses	566,777		58,626		316,430		941,833
Total costs and expenses	Total costs and expenses	886,224		93,297		361,130		1,340,651		Total costs and expenses	786,715		70,577		316,430		1,173,722

Gain on sale of businesses										Gain on sale of businesses	—		—		216,869		216,869

Operating earnings (loss)	Operating earnings (loss)	$	379,039	$	70,868	$	(361,130)	$	88,777	Operating earnings (loss)	$	444,054	$	67,327	$	(99,561)	$	411,820


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

Nine Months Ended 2020
Nine Months Ended 2021										Nine Months Ended 2021
Revenues	Revenues	$	3,645,397	$	465,366	$	—	$	4,110,763	Revenues	$	3,774,507	$	538,002	$	—	$	4,312,509

Costs of revenue	Costs of revenue	638,284		59,984		—		698,268		Costs of revenue	660,584		82,508		—		743,092
Operating expenses	Operating expenses	1,724,545		182,594		985,131		2,892,270		Operating expenses	1,797,466		206,794		1,072,616		3,076,876
Total costs and expenses	Total costs and expenses	2,362,829		242,578		985,131		3,590,538		Total costs and expenses	2,458,050		289,302		1,072,616		3,819,968

Gain on sale of businesses		0		0		216,869		216,869

Operating earnings (loss)	Operating earnings (loss)	$	1,282,568	$	222,788	$	(768,262)	$	737,094	Operating earnings (loss)	$	1,316,457	$	248,700	$	(1,072,616)	$	492,541


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

Nine Months Ended 2019
Nine Months Ended 2020										Nine Months Ended 2020
Revenues	Revenues	$	3,762,205	$	488,161	$	—	$	4,250,366	Revenues	$	3,645,397	$	465,366	$	—	$	4,110,763

Costs of revenue	Costs of revenue	719,119		74,536		—		793,655		Costs of revenue	638,284		59,984		—		698,268
Operating expenses	Operating expenses	1,817,244		209,580		1,012,049		3,038,873		Operating expenses	1,724,545		182,594		985,131		2,892,270
Total costs and expenses	Total costs and expenses	2,536,363		284,116		1,012,049		3,832,528		Total costs and expenses	2,362,829		242,578		985,131		3,590,538

Gain on sale of businesses										Gain on sale of businesses	—		—		216,869		216,869

Operating earnings (loss)	Operating earnings (loss)	$	1,225,842	$	204,045	$	(1,012,049)	$	417,838	Operating earnings (loss)	$	1,282,568	$	222,788	$	(768,262)	$	737,094

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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 nine month periods ended 2021 and 2020 in this MD&A represent the respective three orand nine ~~months~~month periods ended ~~on such dates,~~September 30, 2021 and September 30, 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 collaborations.

Cerner's long history of growth has created an important strategic footprint in ~~health care,~~healthcare, with Cerner holding ~~more than~~approximately 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 both fee-for-service and 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 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.~~improvement. 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 the first nine 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; mandating vaccines for associates; 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~~A sustained decline in bookings ~~flows through to reduced~~could reduce 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, vaccine mandates 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.~~delayed or strategies evolve.

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 ~~results of operations for~~business was in the second ~~and third quarters of 2020 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,~~ with the ~~largest~~ impact beginning to moderate in ~~the areas~~subsequent periods but still persisting into 2021 due to some ongoing restrictive measures and certain regions dealing with resurgences of ~~reduced bookings and lower licensed software, technology resale, professional services, and reimbursed travel revenues.~~cases.

WeWhile we expect a negative financial impact to continue for the ~~remainder~~rest of ~~2020 and into 2021. However, the~~2021, we do not expect it to be as significant as 2020. 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 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 the sale of certain of our revenue cycle outsourcing business operations in August 2020. We have also made the decision to sell certain of our owned real estate. We expect to continue to evaluate and potentially complete divestiture transactions that are strategic to our operational

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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, asset impairment charges, and other such related expenses. Expenses recognized in the first nine months of 2021 and 2020 ~~are~~ primarily related to professional services fees, ~~and~~ employee separation costs, and asset impairment charges 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 ~~reflect~~reflects the value of executed contracts for software, hardware, professional services and managed services, was $1.81 billion in the third quarter of 2021, which is an increase of 23% compared to $1.47 billion in the third quarter of ~~2020, which is a decrease of 11% compared to $1.65 billion in the third quarter of 2019.~~2020.

Revenues for the third quarter of ~~2020 decreased 4%~~2021 increased 7% to ~~$1.37~~$1.47 billion, compared to ~~$1.43~~$1.37 billion in the third quarter of ~~2019.~~2020.

Net earnings for the third quarter of ~~2020 increased 335%~~2021 decreased 51% to ~~$357~~$176 million, compared to ~~$82~~$357 million in the third quarter of ~~2019.~~2020. Diluted earnings per share ~~increased 346%~~decreased 49% to ~~$1.16,~~$0.59, compared to ~~$0.26~~$1.16 in the third quarter of ~~2019.~~2020.

We had cash collections of receivables of $1.56 billion in the third quarter of 2021, compared to $1.43 billion in the third quarter of ~~2020, compared to $1.50 billion in the third quarter of 2019.~~2020. Days sales outstanding was 8176 days in the third quarter of ~~2020 and~~2021, compared to 77 days for the second quarter of ~~2020, compared to 74~~2021 and 81 days for the third quarter of ~~2019.~~2020. Operating cash flows for the third quarter of ~~2020~~2021 were ~~$382~~$435 million, compared to ~~$351~~$382 million in the third quarter of ~~2019.~~2020.

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Results of Operations

Three Months Ended September 30, ~~2020~~2021 Compared to Three Months Ended September ~~28, 2019~~30, 2020

The following table presents a summary of our operating information for the third 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	$	1,368,673	100	%	$	1,429,428	100	%	(4)	%	Revenues	$	1,467,976	100	%	$	1,368,673	100	%	7	%
Costs of revenue	Costs of revenue	231,889		17	%	271,778		19	%	(15)	%	Costs of revenue	251,111		17	%	231,889		17	%	8	%

Margin	Margin	1,136,784		83	%	1,157,650		81	%	(2)	%	Margin	1,216,865		83	%	1,136,784		83	%	7	%

Operating expenses	Operating expenses											Operating expenses
Sales and client service	Sales and client service	625,402		46	%	707,743		50	%	(12)	%	Sales and client service	651,010		44	%	625,402		46	%	4	%
Software development	Software development	186,826		14	%	187,526		13	%	—	%	Software development	202,663		14	%	186,826		14	%	8	%
General and administrative	General and administrative	116,816		9	%	152,321		11	%	(23)	%	General and administrative	121,395		8	%	116,816		9	%	4	%
Amortization of acquisition-related intangibles	Amortization of acquisition-related intangibles	12,789		1	%	21,283		1	%	(40)	%	Amortization of acquisition-related intangibles	16,874		1	%	12,789		1	%	32	%

Total operating expenses	Total operating expenses	941,833		69	%	1,068,873		75	%	(12)	%	Total operating expenses	991,942		68	%	941,833		69	%	5	%

Total costs and expenses	Total costs and expenses	1,173,722		86	%	1,340,651		94	%	(12)	%	Total costs and expenses	1,243,053		85	%	1,173,722		86	%	6	%

Gain on sale of businesses	Gain on sale of businesses	216,869		16	%	—		—	%			Gain on sale of businesses	—		—	%	216,869		16	%

Operating earnings	Operating earnings	411,820		30	%	88,777		6	%	364	%	Operating earnings	224,923		15	%	411,820		30	%	(45)	%

Other income, net		48,020				13,535
Other income (loss), net												Other income (loss), net	(5,070)				48,020
Income taxes	Income taxes	(103,164)				(20,377)						Income taxes	(44,058)				(103,164)

Net earnings	Net earnings	$	356,676			$	81,935			335	%	Net earnings	$	175,795			$	356,676			(51)	%

Revenues & Backlog

Revenues ~~decreased 4%~~increased 7% to ~~$1.37~~$1.47 billion in the third quarter of ~~2020,~~2021, as compared to ~~$1.43~~$1.37 billion in the same period of ~~2019.~~2020. The ~~decline~~following factors impacted the year-over-year change in ~~revenues is primarily attributable to the following:~~revenues:

•~~The impact of~~Increased implementation activity during the ongoing COVID-19 pandemic on our third quarter 2020 operations, with the largest impact in the areas of technology resale, professional services, and reimbursed travel revenues, as further discussed above.

•~~The~~ third 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.~~

•The third quarter of 2020 includes a $22 million reduction in revenues due to the sale of certain of our business operations primarily conducted in Germany and Spain, as further discussed in Note (7) of the Notes. We expect the disposition of such operations to reduce future International Segment revenues by approximately $83 million on an annualized basis.

•The third quarter of 2020 includes a $20 million reduction in revenues due to the sale of certain of our revenue cycle outsourcing business operations, as further discussed in Note (7) of the Notes. We expect the disposition of such operations to reduce future Domestic Segment revenues by approximately $77 million on an annualized basis.

~~These declines are partially offset by increased implementation activity~~2021 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 third quarter of ~~2020, 19%~~2021, 21% of our total revenues were attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, compared to ~~12%~~19% in the same period of ~~2019.~~2020.

•The third quarter of 2021 includes a $45 million increase in revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business. We expect the acquired business to contribute approximately $50 million of additional revenues over the remainder of 2021. Refer to Note (2) of the Notes for further information regarding the Kantar Health acquisition.

Refer to Note (3) of the Notes for further information regarding revenues disaggregated by our business models.

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Backlog, which reflects contracted revenue that has not yet been recognized as revenue, was ~~$13.01~~$13.12 billion at September 30, ~~2020,~~2021, compared to ~~$13.71~~$13.04 billion at December 28, 2019. This decline in backlog is primarily attributable to the divestiture transactions discussed above, along with the impact of the ongoing COVID-19 pandemic on our bookings during the first nine 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 ~~$1.16~~$1.27 billion of revenue over the next 12 months under currently executed contracts related to such cancellable periods, which is not included in our calculation of backlog.

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Costs of Revenue

Costs of revenue as a percent of revenues were 17% in the third quarter 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;both 2021 and ~~reduced utilization of third-party resources associated with professional services revenue.~~2020.

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 12%~~increased 5% to ~~$942~~$992 million in the third quarter of ~~2020,~~2021, compared to ~~$1.07 billion~~$942 million in the same period of ~~2019.~~2020.

•Sales and client service expenses as a percent of revenues were ~~46%~~44% in the third quarter of ~~2020,~~2021, compared to ~~50%~~46% in the same period of ~~2019.~~2020. These expenses ~~decreased 12%~~increased 4% to ~~$625~~$651 million in the third quarter of ~~2020,~~2021, from ~~$708~~$625 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~~increase in sales and client service expenses was primarily driven by ~~an $11 million reduction in associate travel costs, and~~expense contributions from the third quarter of 2019 included a $60 million charge in connection with the termination of certain revenue cycle outsourcing contracts, discussed above. The divestiture transactions, as further discussed in Note (7) of the Notes, also contributed to the reduction in expenses.Kantar Health business, which was acquired on April 1, 2021.

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•Software development expenses as a percent of revenues were 14% in the third quarter of ~~2020, compared to 13% in the same period of 2019.~~both 2021 and 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 third 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 third quarters of ~~2020~~2021 and ~~2019~~2020 is as follows:

Three Months Ended
(In thousands) 2020 2019
Software development costs $ 198,565 $ 197,122
Capitalized software costs (71,525) (65,684)
Capitalized costs related to share-based payments (1,792) (698)
Amortization of capitalized software costs 61,578 56,786
Total software development expense $ 186,826 $ 187,526


	Three Months Ended
(In thousands)	2021		2020

Software development costs	$	210,082	$	198,565
Capitalized software costs	(73,773)		(71,525)
Capitalized costs related to share-based payments	(1,796)		(1,792)
Amortization of capitalized software costs	66,222		61,578
Net realizable value charges (see Note (1) of the Notes)	1,928		—

Total software development expense	$	202,663	$	186,826

•General and administrative expenses as a percent of revenues were 9%8% in the third quarter of ~~2020,~~2021, compared to ~~11%~~9% in the same period of ~~2019.~~2020. These expenses ~~decreased 23%~~increased 4% to ~~$117~~$121 million in the third quarter of ~~2020,~~2021, from ~~$152~~$117 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~~increase in general and administrative expenses iswas primarily due to a reduction in expenses incurred in connection with our operational improvement initiatives, discussed above. We expect to incur additional expenses in connection with these efforts in future periods, which may be material. The divestiture transactions,driven by increased employee separation costs, as further discussed in Note ~~(7)~~(1) of the ~~Notes, also contributed to the reduction in expenses.~~Notes.

•Amortization of acquisition-related intangibles as a percent of revenues was 1% in the third quarter of both ~~2020~~2021 and ~~2019.~~2020. These expenses ~~decreased 40%~~increased 32% to ~~$13~~$17 million in the third quarter of ~~2020,~~2021, from ~~$21~~$13 million in the same period in ~~2019.~~2020. Amortization of acquisition-related intangibles includes the amortization of customer relationships, acquired technology, trade names, and non-compete agreements recorded in connection with our business acquisitions. The ~~decrease~~increase in amortization of acquisition-related intangibles is primarily due to amortization of

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intangibles acquired in our April 1, 2021 acquisition of the ~~impact of certain intangible assets from the~~Kantar Health ~~Services acquisition in February 2015 becoming fully amortized in the first quarter of 2020. The divestiture transactions, as further discussed in~~business. Refer to Note ~~(7)~~(2) of the Notes ~~also contributed to~~for further information regarding the ~~reduction in expenses.~~Kantar Health acquisition.

Gain on Sale of Businesses

~~The~~On July 1, 2020, we sold certain of our business operations, primarily conducted in Germany and Spain, to affiliates of CompuGroup Medical SE & Co. KGaA ("CGM"), as a part of our portfolio management strategy. Such operations included the associates, intellectual property, client contracts, other assets, and liabilities related to our medico®, Selene®, Soarian Health Archive®, and Soarian® Integrated Care solution offerings.

In the third quarter of 2020, ~~includes~~we recognized a $217 million gain ~~on sale of businesses. Refer to Note (7) of the Notes for further information regarding~~in connection with these divestiture ~~transactions that closed during the third quarter of 2020.~~transactions.

Non-Operating Items

•Other income (loss), net was ~~$48~~a net loss of $5 million in the third quarter of ~~2020,~~2021, compared to ~~$14~~$48 million of income in the same period of ~~2019.~~2020. The decrease in 2021 is primarily attributable to the third quarter of 2020 ~~includes~~including a $49 million gain recognized on the disposition of one of our equity investments. The third quarter of 2019 includes a $9 million unrealized gain recognized on that same equity investment. The remaining difference is primarily attributable to increased interest expense in the third quarter 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 ~~22.4%~~20.0% for the third quarter of ~~2020,~~2021, compared to ~~19.9%~~22.4% for the same period of ~~2019.~~2020. The ~~increase~~decrease in the effective tax rate inis primarily due to the third quarter of 2020 ~~is primarily due to~~including taxes associated with the divestiture transactions ~~that closed in the third quarter of 2020, as further~~ discussed ~~in Note (7) of the Notes.~~above. Refer to Note (8) of the Notes for further discussion regarding our effective tax rate.

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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 (12) of the Notes for further information regarding our reportable segments.

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The following table presents a summary of our operating segment information for the third 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	$	1,230,769	100%	$	1,265,263	100%	(3)%	Revenues	$	1,285,488	100%	$	1,230,769	100%	4%

Costs of revenue	Costs of revenue	219,938		18%	246,634		19%	(11)%	Costs of revenue	222,665		17%	219,938		18%	1%
Operating expenses	Operating expenses	566,777		46%	639,590		51%	(11)%	Operating expenses	580,535		45%	566,777		46%	2%
Total costs and expenses	Total costs and expenses	786,715		64%	886,224		70%	(11)%	Total costs and expenses	803,200		62%	786,715		64%	2%

Domestic operating earnings	Domestic operating earnings	444,054		36%	379,039		30%	17%	Domestic operating earnings	482,288		38%	444,054		36%	9%

International Segment	International Segment								International Segment
Revenues	Revenues	137,904		100%	164,165		100%	(16)%	Revenues	182,488		100%	137,904		100%	32%

Costs of revenue	Costs of revenue	11,951		9%	25,144		15%	(52)%	Costs of revenue	28,446		16%	11,951		9%	138%
Operating expenses	Operating expenses	58,626		43%	68,153		42%	(14)%	Operating expenses	70,472		39%	58,626		43%	20%
Total costs and expenses	Total costs and expenses	70,577		51%	93,297		57%	(24)%	Total costs and expenses	98,918		54%	70,577		51%	40%

International operating earnings	International operating earnings	67,327		49%	70,868		43%	(5)%	International operating earnings	83,570		46%	67,327		49%	24%

Other costs and expenses, net	Other costs and expenses, net	(316,430)			(361,130)			(12)%	Other costs and expenses, net	(340,935)			(316,430)			8%

Gain on sale of businesses	Gain on sale of businesses	216,869			—				Gain on sale of businesses	—			216,869

Consolidated operating earnings	Consolidated operating earnings	$	411,820		$	88,777		364%	Consolidated operating earnings	$	224,923		$	411,820		(45)%

Domestic Segment

•Revenues ~~decreased 3%~~increased 4% to ~~$1.23~~$1.29 billion in the third quarter of ~~2020,~~2021, from ~~$1.27~~$1.23 billion in the same period of ~~2019.~~2020. The ~~decline~~following factors impacted the year-over-year change in ~~revenues is primarily attributable to the following:~~Domestic revenues:

◦~~The impact of~~Increased implementation activity during the ongoing COVID-19 pandemic on our third quarter 2020 operations, with the largest impact in the areas of technology resale, professional services, and reimbursed travel revenues, as further discussed above.

◦~~The~~ third 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.~~

◦~~The third quarter of 2020 includes a $20 million reduction in revenues due to the sale of certain of our revenue cycle outsourcing business operations, as further discussed in Note (7) of the Notes.~~

~~These declines are partially offset by increased implementation activity~~2021 within our federal ~~business;~~business, inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs.

◦The third quarter of 2021 includes a $21 million increase in revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business.

Refer to Note ~~(2)~~(3) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were ~~18%~~17% in the third 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,~~the mix of revenues for the quarters, inclusive of the third quarter of 2021 containing a higher percentage of licensed software revenues, which ~~carries~~caries a ~~100%~~lower 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.

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•Operating expenses as a percent of revenues were ~~46%~~45% in the third quarter of ~~2020,~~2021, compared to ~~51%~~46% in the same period of ~~2019.~~2020. These expenses ~~decreased 11%~~increased 2% to ~~$567~~$581 million in the third quarter of ~~2020,~~2021, from ~~$640~~$567 million in the same period of ~~2019.~~2020. The ~~decrease~~increase in operating expenses was primarily driven by ~~a $9 million reduction in associate travel costs, and~~expense contributions from the ~~third quarter of 2019 included a $60 million charge in connection with the termination of certain revenue cycle outsourcing contracts, discussed above.~~Kantar Health business, which was acquired on April 1, 2021.

International Segment

•Revenues ~~decreased 16%~~increased 32% to ~~$138~~$182 million in the third quarter of ~~2020, from $164~~2021, compared to $138 million in the same period of ~~2019.~~2020. The ~~decline~~increase in revenues is primarily due to a ~~$22~~$24 million ~~reduction~~increase in revenues due to contributions from our April 1, 2021 acquisition of the ~~sale of certain~~Kantar Health business. The remaining increase is attributable to 2021 revenue growth across the majority of our business operations primarily conducted in Germany and Spain, as further discussed in Note (7) of the Notes. Additionally, we believe the ongoing COVID-19 pandemic has negatively impacted our third quarter 2020 operations, as further discussed above.remaining International Segment operations. Refer to Note ~~(2)~~(3) of the Notes for further information regarding revenues disaggregated by our business models.

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•Costs of revenue as a percent of revenues were 9%16% in the third quarter of ~~2020,~~2021, compared to ~~15%~~9% in the same period of ~~2019.~~2020. The ~~lower~~higher costs of revenue as a percent of revenues was primarily driven by ~~lower reimbursed travel revenue, which carries a 100% cost~~the impact 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 and support and maintenance revenue.the Kantar Health business acquired on April 1, 2021.

•Operating expenses as a percent of revenues were ~~43%~~39% in the third quarter of ~~2020,~~2021, compared to ~~42%~~43% in the same period of ~~2019.~~2020. These expenses ~~decreased 14%~~increased 20% to ~~$59~~$70 million in the third quarter of ~~2020,~~2021, from ~~$68~~$59 million in the same period of ~~2019.~~2020. The ~~decrease~~increase in operating expenses is primarily due to the ~~sale of certain of our business operations in Germany and Spain, as further discussed in Note (7)~~April 1, 2021 acquisition of the ~~Notes.~~Kantar Health business.

Other Costs and Expenses, Net

Operating 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 12%~~increased 8% to ~~$316~~$341 million in the third quarter of ~~2020,~~2021, from ~~$361~~$316 million in the same period of ~~2019.~~2020. The ~~decrease~~increase is primarily due to ~~a reduction~~increased employee separation costs, as further discussed in ~~expenses incurred in connection with our operational improvement initiatives, discussed above.~~

~~Table~~Note (1) of ~~Contents~~

the Notes.

Nine Months Ended September 30, ~~2020~~2021 Compared to Nine Months Ended September ~~28, 2019~~30, 2020

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

(In thousands) 2020 % of
Revenue 2019 % of
Revenue % Change
Revenues $ 4,110,763 100 % $ 4,250,366 100 % (3) %
Costs of revenue 698,268 17 % 793,655 19 % (12) %
Margin 3,412,495 83 % 3,456,711 81 % (1) %
Operating expenses
Sales and client service 1,907,138 46 % 2,026,825 48 % (6) %
Software development 551,101 13 % 548,934 13 % — %
General and administrative 391,000 10 % 398,305 9 % (2) %
Amortization of acquisition-related intangibles 43,031 1 % 64,809 2 % (34) %
Total operating expenses 2,892,270 70 % 3,038,873 71 % (5) %
Total costs and expenses 3,590,538 87 % 3,832,528 90 % (6) %
Gain on sale of businesses 216,869 5 % — — %
Operating earnings 737,094 18 % 417,838 10 % 76 %
Other income, net 78,247 44,973
Income taxes (176,758) (87,688)
Net earnings $ 638,583 $ 375,123 70 %

~~Revenues~~


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

Revenues	$	4,312,509	100	%	$	4,110,763	100	%	5	%
Costs of revenue	743,092		17	%	698,268		17	%	6	%

Margin	3,569,417		83	%	3,412,495		83	%	5	%

Operating expenses
Sales and client service	2,004,263		46	%	1,907,138		46	%	5	%
Software development	636,590		15	%	551,101		13	%	16	%
General and administrative	390,067		9	%	391,000		10	%	—	%
Amortization of acquisition-related intangibles	45,956		1	%	43,031		1	%	7	%

Total operating expenses	3,076,876		71	%	2,892,270		70	%	6	%

Total costs and expenses	3,819,968		89	%	3,590,538		87	%	6	%

Gain on sale of businesses	—		—	%	216,869		5	%

Operating earnings	492,541		11	%	737,094		18	%	(33)	%

Other income (loss), net	(5,542)				78,247
Income taxes	(106,245)				(176,758)

Net earnings	$	380,754			$	638,583			(40)	%

Revenues ~~decreased 3%~~& Backlog

Revenues increased 5% to ~~$4.11~~$4.31 billion in the first nine months of ~~2020,~~2021, as compared to ~~$4.25~~$4.11 billion in the same period of ~~2019.~~2020. The ~~decline~~following factors impacted the year-over-year change in ~~revenues is primarily attributable to the following:~~revenues:

•~~The impact of the ongoing COVID-19 pandemic on our operations~~Increased implementation activity during the first nine 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.~~

•~~The first nine months of 2020 includes a $126 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019.~~

•The first nine months of 2020 includes a $22 million reduction in revenues due to the sale of certain of our business operations primarily conducted in Germany and Spain, as further discussed in Note (7) of the Notes.

•The first nine months of 2020 includes a $20 million reduction in revenues due to the sale of certain of our revenue cycle outsourcing business operations, as further discussed in Note (7) of the Notes.

~~These declines are partially offset by increased implementation activity~~2021 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 nine months 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 ~~11%~~17% in the same period of ~~2019.~~2020.

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•The first nine months of 2021 includes a $90 million increase in revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business. Refer to Note (2) of the Notes for further information regarding the Kantar Health acquisition.

•The first nine months of 2021 includes a $44 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 nine months of 2021 includes a $40 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.

Refer to Note (3) 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 nine 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~~

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~~revenue, which carries a 100% cost of revenue; a lower mix of technology resale revenue, which carries a higher cost of revenue;~~both 2021 and ~~reduced utilization of third-party resources associated with professional services and support and maintenance revenue.~~2020.

Operating Expenses

Total operating expenses ~~decreased 5%~~increased 6% to ~~$2.89~~$3.08 billion in the first nine months of ~~2020,~~2021, compared to ~~$3.04~~$2.89 billion in the same period of ~~2019.~~2020.

•Sales and client service expenses as a percent of revenues were 46% in the first nine months of ~~2020, compared to 48% in the same period of 2019.~~both 2021 and 2020. These expenses ~~decreased 6%~~increased 5% to ~~$1.91~~$2.00 billion in the first nine months of ~~2020,~~2021, from ~~$2.03~~$1.91 billion in the same period of ~~2019.~~2020. The ~~decrease~~increase in sales and client service expenses was primarily driven by a ~~$35~~$68 million ~~reduction~~pre-tax charge recorded in ~~associate travel costs;~~ the first nine months of ~~2019 included a $60 million charge~~2021 in connection with the ~~termination~~designation of certain ~~revenue cycle outsourcing contracts, discussed above;~~real estate assets as held for sale. The remaining increase was was primarily driven by expense contributions from the Kantar Health business, which was acquired on April 1, 2021. Refer to Note (1) and ~~the first nine months of 2019 included a $20 million charge in connection with a client dispute. The divestiture transactions, as further discussed in~~ Note ~~(7)~~(2) of the Notes ~~also contributed to the reduction in expenses.~~for further information.

•Software development expenses as a percent of revenues were ~~13%~~15% in the first nine months of ~~both 2020 and 2019.~~2021, compared to 13% in the same period of 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 first nine months 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 first nine months of ~~2020~~2021 and ~~2019~~2020 is as follows:

Nine Months Ended
(In thousands) 2020 2019
Software development costs $ 592,025 $ 591,182
Capitalized software costs (219,879) (209,458)
Capitalized costs related to share-based payments (4,831) (1,826)
Amortization of capitalized software costs 183,786 169,036
Total software development expense $ 551,101 $ 548,934


	Nine Months Ended
(In thousands)	2021		2020

Software development costs	$	633,367	$	592,025
Capitalized software costs	(236,234)		(219,879)
Capitalized costs related to share-based payments	(6,443)		(4,831)
Amortization of capitalized software costs	196,319		183,786
Net realizable value charges (see Note (1) of the Notes)	49,581		—

Total software development expense	$	636,590	$	551,101

•General and administrative expenses as a percent of revenues were ~~10%~~9% in the first nine months of ~~2020,~~2021, compared to 9%10% in the same period of ~~2019.~~2020. These expenses ~~decreased 2% to $391~~were relatively flat at $390 million in the first nine months of ~~2020, from $398~~2021, compared to $391 million in the same period of 2019. The decrease in general and administrative expenses includes the impact of the first nine months of 2019 including a $7 million charge to settle disputes with a former vendor. The divestiture transactions, as further discussed in Note (7) of the Notes, also contributed to the reduction in expenses. In the first nine months of 2020, general2020. General and administrative expenses include ~~$118 million of expenses~~certain charges incurred in connection with our operational improvement initiatives, as further discussed above, ~~compared to $115 million~~and in the ~~same period of 2019.~~Notes. 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 nine months of ~~2020, compared to 2% in the same period of 2019.~~both 2021 and 2020. These expenses ~~decreased 34%~~increased 7% to ~~$43~~$46 million in the first nine months of ~~2020,~~2021, from ~~$65~~$43 million in the same period in ~~2019.~~2020. The ~~decrease~~increase in amortization of acquisition-related intangibles is primarily due to

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amortization of intangibles acquired in our April 1, 2021 acquisition of the ~~impact of certain intangible assets from the~~Kantar Health ~~Services acquisition in February 2015 becoming fully amortized in the first quarter of 2020. The divestiture transactions, as further discussed in~~business. Refer to Note ~~(7)~~(2) of the Notes ~~also contributed to~~for further information regarding the ~~reduction in expenses.~~Kantar Health acquisition.

Gain on Sale of Businesses

The first nine months of 2020 includes a $217 million gain ~~on sale of businesses. Refer to Note (7) of~~recognized in connection with the ~~Notes for further information regarding~~ divestiture transactions ~~that closed during the first nine months of 2020.~~described above.

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Non-Operating Items

•Other income (loss), net was ~~$78~~a net loss of $6 million in the first nine months of ~~2020,~~2021, compared to ~~$45~~$78 million of income in the same period of ~~2019.~~2020. The decrease in 2021 is primarily attributable to the first nine months of 2020 ~~includes~~including a $76 million gain recognized on the disposition of one of our equity investments. The first nine months of 2019 includes a $9 million unrealized gain recognized on that same equity investment. The first nine months of 2019 also includes a $16 million gain recognized on the disposition of another one of our equity investments. The remaining difference is primarily attributable to increased interest expense in the first nine months of ~~2020,~~2021 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.~~2020 and the $500 million of Series 2021 Senior Notes we issued in March 2021.

•Our effective tax rate was ~~21.7%~~relatively flat at 21.8% for the first nine months of ~~2020,~~2021, compared to ~~18.9%~~21.7% for the same period of 2019. The increase in the effective tax rate in the first nine 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. Also contributing to the increase, are taxes associated with the divestiture transactions that closed in the third quarter of 2020, as further discussed in Note (7) of the Notes.2020. Refer to Note (8) of the Notes for further discussion regarding our effective tax rate.

Operations by Segment

The following table presents a summary of our operating segment information for the first nine months 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	$	3,645,397	100%	$	3,762,205	100%	(3)%	Revenues	$	3,774,507	100%	$	3,645,397	100%	4%

Costs of revenue	Costs of revenue	638,284		18%	719,119		19%	(11)%	Costs of revenue	660,584		18%	638,284		18%	3%
Operating expenses	Operating expenses	1,724,545		47%	1,817,244		48%	(5)%	Operating expenses	1,797,466		48%	1,724,545		47%	4%
Total costs and expenses	Total costs and expenses	2,362,829		65%	2,536,363		67%	(7)%	Total costs and expenses	2,458,050		65%	2,362,829		65%	4%

Domestic operating earnings	Domestic operating earnings	1,282,568		35%	1,225,842		33%	5%	Domestic operating earnings	1,316,457		35%	1,282,568		35%	3%

International Segment	International Segment								International Segment
Revenues	Revenues	465,366		100%	488,161		100%	(5)%	Revenues	538,002		100%	465,366		100%	16%

Costs of revenue	Costs of revenue	59,984		13%	74,536		15%	(20)%	Costs of revenue	82,508		15%	59,984		13%	38%
Operating expenses	Operating expenses	182,594		39%	209,580		43%	(13)%	Operating expenses	206,794		38%	182,594		39%	13%
Total costs and expenses	Total costs and expenses	242,578		52%	284,116		58%	(15)%	Total costs and expenses	289,302		54%	242,578		52%	19%

International operating earnings	International operating earnings	222,788		48%	204,045		42%	9%	International operating earnings	248,700		46%	222,788		48%	12%

Other costs and expenses, net	Other costs and expenses, net	(985,131)			(1,012,049)			(3)%	Other costs and expenses, net	(1,072,616)			(985,131)			9%

Gain on sale of businesses	Gain on sale of businesses	216,869			—				Gain on sale of businesses	—			216,869

Consolidated operating earnings	Consolidated operating earnings	$	737,094		$	417,838		76%	Consolidated operating earnings	$	492,541		$	737,094		(33)%

Domestic Segment

•Revenues ~~decreased 3%~~increased 4% to ~~$3.65~~$3.77 billion in the first nine months of ~~2020,~~2021, from ~~$3.76~~$3.65 billion in the same period of ~~2019.~~2020. The ~~decline~~following factors impacted the year-over-year change in ~~revenues is primarily attributable to the following:~~Domestic revenues:

◦~~The impact of the ongoing COVID-19 pandemic on our operations~~Increased implementation activity during the first nine months of ~~2020,~~2021 within our federal business, inclusive of ongoing projects with the ~~largest impact in~~U.S. Department of Defense and the ~~areas~~U.S. Department of ~~licensed software, technology resale, professional services, and reimbursed travel revenues, as further discussed above.~~

◦~~The first nine months of 2020 includes a $126 million reduction in revenues due to the termination of certain revenue cycle outsourcing contracts effective in the fourth quarter of 2019.~~Veterans Affairs.

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◦The first nine months of ~~2020~~2021 includes a ~~$20~~$42 million increase in revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business.

◦The first nine months of 2021 includes a $44 million reduction in revenues due to the sale of certain of our revenue cycle outsourcing business operations ~~as further discussed in Note (7)~~to affiliates of ~~the Notes.~~R1 RCM Inc., on August 3, 2020.

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)~~(3) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were 18% in the first nine 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;both 2021 and ~~reduced utilization of third-party resources associated with professional services and support and maintenance revenue.~~2020.

•Operating expenses as a percent of revenues were ~~47%~~48% in the first nine months of ~~2020,~~2021, compared to ~~48%~~47% in the same period of ~~2019.~~2020. These expenses ~~decreased 5%~~increased 4% to ~~$1.72~~$1.80 billion in the first nine months of ~~2020,~~2021, from ~~$1.82~~$1.72 billion in the same period of ~~2019.~~2020. The ~~decrease~~increase in operating expenses was primarily driven by a ~~$27~~$68 million ~~reduction~~pre-tax charge recorded in ~~associate travel costs;~~ the first nine months of ~~2019 included a $60 million charge~~2021 in connection with the ~~termination~~designation of certain ~~revenue cycle outsourcing contracts, discussed above;~~real estate assets as held for sale. The remaining increase was was primarily driven by expense contributions from the Kantar Health business, which was acquired on April 1, 2021. Refer to Note (1) and Note (2) of the ~~first nine months of 2019 included a $20 million charge in connection with a client dispute.~~Notes for further information.

International Segment

•Revenues ~~decreased 5%~~increased 16% to ~~$465~~$538 million in the first nine months of ~~2020,~~2021, from ~~$488~~$465 million in the same period of ~~2019.~~2020. The ~~decline~~following factors impacted the year-over-year change in International revenues:

◦The first nine months of 2021 includes a $48 million increase in revenues ~~is primarily~~ due to contributions from our April 1, 2021 acquisition of the Kantar Health business.

◦The first nine months of 2021 includes a ~~$22~~$40 million reduction ~~from~~in revenues due to the sale of certain of our business operations primarily conducted in Germany and Spain ~~as further discussed in Note (7)~~to affiliates of CompuGroup Medical SE & Co. KGaA on July 1, 2020.

◦The remaining difference is attributable to 2021 revenue growth across the ~~Notes. Additionally, we believe the ongoing COVID-19 pandemic has negatively impacted~~majority of our ~~operations for the first nine months of 2020, as further discussed above.~~ remaining International Segment operations.

Refer to Note ~~(2)~~(3) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were ~~13%~~15% in the first nine months of ~~2020,~~2021, compared to ~~15%~~13% in the same period of ~~2019.~~2020. The ~~lower~~higher costs of revenue as a percent of revenues was primarily driven by ~~lower reimbursed travel revenue, which carries a 100% cost~~the impact 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 and support and maintenance revenue.the Kantar Health business acquired on April 1, 2021.

•Operating expenses as a percent of revenues were ~~39%~~38% in the first nine months of ~~2020,~~2021, compared to ~~43%~~39% in the same period of ~~2019.~~2020. These expenses ~~decreased~~increased 13% to ~~$183~~$207 million in the first nine months of ~~2020,~~2021, from ~~$210~~$183 million in the same period of ~~2019.~~2020. The ~~decrease~~increase in operating expenses is primarily due to the ~~sale of certain of our business operations in Germany and Spain, as further discussed in Note (7)~~April 1, 2021 acquisition of the ~~Notes.~~Kantar Health business.

Other Costs and Expenses, ~~net~~Net

These expenses ~~decreased 3%~~increased 9% to ~~$985 million~~$1.07 billion in the first nine months of ~~2020,~~2021, from ~~$1.01 billion~~$985 million in the same period of ~~2019.~~2020. The ~~decrease~~increase is primarily due to ~~decreased expenses incurred~~pre-tax charges of $50 million recorded in the first nine months of ~~2020~~2021 to reduce the carrying amount of certain capitalized software development costs to estimated net realizable value, as ~~a result~~further discussed in Note (1) of ~~our operational improvement initiatives, discussed above.~~the Notes.

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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, collaborations, capital expenditures, and our share repurchase and dividend programs.

Our principal sources of liquidity are our cash, cash equivalents ~~which~~(which primarily consist of money market funds, ~~and~~ time deposits and commercial paper with original maturities of less than 90 ~~days,~~days), short-term investments, ~~and~~ borrowings under our Credit Agreement and other sources of debt financing. At September 30, ~~2020,~~2021, we had cash and cash equivalents of ~~$419~~$460 million and short-term investments of ~~$473~~$323 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.

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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 September 30, ~~2020,~~2021, we had outstanding revolving credit loans and letters of credit of $600 million and $30 million, respectively; which reduced our available borrowing capacity to $370 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)~~(6) 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 nine months of ~~2020~~2021 and ~~2019:~~

Nine Months Ended
(In thousands) 2020 2019
Cash flows from operating activities $ 924,045 $ 875,524
Cash flows from investing activities (596,825) (436,387)
Cash flows from financing activities (345,527) (312,805)
Effect of exchange rate changes on cash (4,382) (4,028)
Total change in cash and cash equivalents (22,689) 122,304
Cash and cash equivalents at beginning of period 441,843 374,126
Cash and cash equivalents at end of period $ 419,154 $ 496,430
Free cash flow (non-GAAP) $ 461,282 $ 275,652
2020:


	Nine Months Ended
(In thousands)	2021		2020

Cash flows from operating activities	$	1,254,390	$	924,045
Cash flows from investing activities	(705,560)		(596,825)
Cash flows from financing activities	(693,077)		(345,527)
Effect of exchange rate changes on cash	(11,828)		(4,382)
Total change in cash and cash equivalents	(156,075)		(22,689)

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

Cash and cash equivalents at end of period	$	459,540	$	419,154

Free cash flow (non-GAAP)	$	764,900	$	461,282

Cash from Operating Activities

Nine Months Ended
(In thousands) 2020 2019
Cash collections from clients $ 4,085,527 $ 4,233,269
Cash paid to employees and suppliers and other (3,051,302) (3,271,818)
Cash paid for interest (31,661) (20,756)
Cash paid for taxes, net of refunds (78,519) (65,171)
Total cash from operations $ 924,045 $ 875,524


	Nine Months Ended
(In thousands)	2021		2020

Cash collections from clients	$	4,464,651	$	4,085,527
Cash paid to employees and suppliers and other	(3,073,278)		(3,051,302)
Cash paid for interest	(41,918)		(31,661)
Cash paid for taxes, net of refunds	(95,065)		(78,519)

Total cash from operations	$	1,254,390	$	924,045

Cash flows from operations increased ~~$49~~$330 million in the first nine months of ~~2020~~2021 when compared to the same period of ~~2019,~~2020, due primarily to ~~an increase in cash impacting earnings. This increase also includes the impact~~increased collections of $56 million of certain federal payroll taxes related to pay cycles in the second and third quarters 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.client receivables. Days sales outstanding was 8176 days in the third quarter of ~~2020 and~~2021, compared to 77 days for the second quarter of ~~2020, compared to 74~~2021 and 81 days for the third quarter of ~~2019.~~2020.

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Cash from Investing Activities

Nine Months Ended
(In thousands) 2020 2019
Capital purchases $ (238,053) $ (388,588)
Capitalized software development costs (224,710) (211,284)
Purchases of investments, net of sales and maturities (298,069) 189,279
Purchases of other intangibles (29,698) (25,794)
Sale of businesses 229,471 —
Acquisition of businesses, net of cash acquired (35,766) —
Total cash flows from investing activities $ (596,825) $ (436,387)


	Nine Months Ended
(In thousands)	2021		2020

Capital purchases	$	(246,813)	$	(238,053)
Capitalized software development costs	(242,677)		(224,710)
Sales and maturities of investments, net of purchases	145,957		(298,069)
Purchases of other intangibles	(23,197)		(29,698)
Acquisition of businesses, net of cash acquired	(348,179)		(35,766)
Sale of businesses	—		229,471
Disposition of assets held for sale	9,349		—

Total cash flows from investing activities	$	(705,560)	$	(596,825)

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

Our capital spending in the first nine 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~~full year 2021 are expected to continue to be below 2019 levels, primarily driven by reduced purchases to support our facilities requirements, reflective of the completion of construction on the current phases of our Innovations Campus in the third quarter of 2020.approximate 2020 levels.

Short-term investment activity historically consists of the investment of cash generated by our business in excess of what is necessary to fund operations. Both the 2021 and 2020 activity is impacted by excess cash primarily being used to execute on our capital allocation strategy, including the acquisition of businesses, share repurchases and cash dividends, as discussed below. The 2020 activity includes the investment of proceeds from the sale of certain business operations in the third quarter of 2020, as 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.~~

~~Investment activity also includes~~During the ~~sale~~first nine months of ~~one of our equity investments in August 2020 for cash proceeds of $90 million. Refer to Note (4) of the Notes for further information regarding this investment.~~

~~In the second quarter of 2020,~~2021, we paid ~~$35~~$363 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 (2) 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,~~During the first nine months of 2020, we ~~sold certain of our business operations, primarily conducted in Germany and Spain, for cash~~received proceeds of ~~$224 million. We also sold~~$229 million in connection with certain ~~of our revenue cycle outsourcing~~ business ~~operations on August 3, 2020. Refer to Note (7) of the Notes for further information regarding these sales.~~divestitures discussed above. We expect to continue to evaluate and complete divestiture transactions that are strategic to our operational improvement initiatives discussed above.

During the first nine months of 2021, we received proceeds of $9 million in connection with the sale of our Oaks Campus. We expect future proceeds from the disposition of real estate held for sale, however, the amount and timing of such proceeds are dependent upon economic and market conditions which are not within our control. Refer to Note (1) of the Notes for further information regarding real estate held for sale.

Cash from Financing Activities

Nine Months Ended
(In thousands) 2020 2019
Long-term debt issuance $ 300,000 $ 600,000
Repayment of long-term debt (2,500) —
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates) 180,057 173,480
Treasury stock purchases (650,000) (1,020,542)
Dividends paid (166,277) (57,293)
Other (6,807) (8,450)
Total cash flows from financing activities $ (345,527) $ (312,805)


	Nine Months Ended
(In thousands)	2021		2020

Long-term debt issuance	$	500,000	$	300,000
Repayment of long-term debt	—		(2,500)
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)	152,418		180,057
Treasury stock purchases	(1,125,000)		(650,000)
Dividends paid	(202,054)		(166,277)
Other	(18,441)		(6,807)

Total cash flows from financing activities	$	(693,077)	$	(345,527)

~~Table~~In March 2021, we issued $500 million aggregate principal amount of ~~Contents~~

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)~~(6) of the Notes for further information regarding these, as well as our other debt obligations.

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

During the first nine months of ~~2020~~2021 and ~~2019,~~2020, we repurchased 14.8 million shares of our common stock for total consideration of $1.12 billion and 9.2 million shares of our common stock for total consideration of $650 million, ~~and 14.4 million shares of our common stock for total consideration of $1.0 billion,~~ respectively. As of September 30, ~~2020, $1.03~~2021, an aggregate of $3.55 billion ~~remains~~remained available for repurchase under our share repurchase program. We ~~may~~will continue to repurchase shares under ~~this~~our share repurchase program, ~~in 2020,~~ 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. There is no assurance that we will repurchase up to the full amount remaining under our program. Refer to Note (10) of the Notes for further information regarding our share repurchase program.

~~On December 12, 2019, our Board~~During the first nine 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. On September 10, 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 October 13, 2020 to shareholders of record as of September 25, 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 (10) 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 (10) of the Notes for further information regarding our share repurchase and dividend programs.~~

Free Cash Flow (Non-GAAP)

Three Months Ended Nine Months Ended
(In thousands) 2020 2019 2020 2019
Cash flows from operating activities (GAAP) $ 381,949 $ 351,448 $ 924,045 $ 875,524
Capital purchases (71,757) (110,714) (238,053) (388,588)
Capitalized software development costs (73,317) (66,382) (224,710) (211,284)
Free cash flow (non-GAAP) $ 236,875 $ 174,352 $ 461,282 $ 275,652


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

Cash flows from operating activities (GAAP)	$	434,821	$	381,949	$	1,254,390	$	924,045
Capital purchases	(47,532)		(71,757)		(246,813)		(238,053)
Capitalized software development costs	(75,569)		(73,317)		(242,677)		(224,710)

Free cash flow (non-GAAP)	$	311,720	$	236,875	$	764,900	$	461,282

Free cash flow increased ~~$186~~$304 million in the first nine 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

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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~~

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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. 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," ~~"estimate" or "predict"~~"estimated," "objectives", 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 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

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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.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

No material changes.

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) promulgated under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")) 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 September 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. On April 1, 2021, we completed the acquisition of Kantar Health. As permitted by Securities and Exchange Commission staff interpretative guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at September 30, 2021 does not include Kantar Health.

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.

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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 annual report on Form 10-K (the "Form 10-K"), as supplemented by our quarterly reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. 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;~~

•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

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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. 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."

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 third fiscal quarter of ~~2020.~~2021.

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share~~

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)~~

~~Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a)~~

~~Period~~

~~July 1, 2020 - July 31, 2020~~

—

~~1,033,733,300~~

~~August 1, 2020 - August 31, 2020~~

—

~~1,033,733,300~~

~~September 1, 2020 - September 30, 2020~~

—

~~1,033,733,300~~

~~Total~~

—


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a)
Period
July 1, 2021 - July 31, 2021	4,760,503	$	78.75	4,760,503	$	3,552,109,673
August 1, 2021 - August 31, 2021	—	—		—	3,552,109,673
September 1, 2021 - September 30, 2021	—	—		—	3,552,109,673

Total	4,760,503	$	78.75	4,760,503

(a) 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 "2017 Share Repurchase Program") the Company iswas authorized to repurchase up to $3.70 billion of shares of our common stock, excluding transaction costs. The repurchases were to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers, or any combination thereof. This program was completed in the third quarter of 2021.

On April 23, 2021, our Board of Directors approved (and announced on May 5, 2021) a new share repurchase program (as amended, 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 2017 Share Repurchase Program. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by ~~broker-dealers. No time limit was set for the completion of the program.~~ broker-dealers, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.

During the nine months ended September 30, ~~2020,~~2021, we repurchased ~~9.2~~14.8 million shares for total consideration of ~~$650 million~~$1.12 billion under ~~the program~~our share repurchase programs pursuant to Rule 10b5-1 plans. As of September 30, ~~2020, $1.03~~2021, an aggregate of $3.55 billion ~~remains~~remained available for repurchase under the ~~program. Refer to Note (10) of the Notes for further information regarding our share repurchase program.~~2021 Share Repurchase Program.

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Item 6. Exhibits


(a)						Exhibits

~~10.1~~10.1*						~~First Amendment to Master Note~~Executive Employment Agreement ~~dated October 8, 2020,~~ between Cerner Corporation and ~~the Purchasers listed therein, incorporated by reference to Exhibit 10.1 to the Company’s current report on Form 8-K filed October 9, 2020~~David T. Feinberg

10.2*						Time Sharing Agreement between Cerner Corporation ~~2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Unit Agreement~~and David T. Feinberg

10.3*						Separation Agreement between Cerner Corporation ~~2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Unit Agreement~~and Donald Trigg

31.1						Certification of ~~Brent Shafer~~David T. Feinberg pursuant to Section 302 of Sarbanes-Oxley Act of 2002

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

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

32.2						Certification of ~~Marc G. Naughton~~Mark 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: October 29, ~~2020~~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)


(In thousands)	September 30, 2020		December 28, 2019

Client receivables	$	1,370,394	$	1,245,670
Less: Provision for expected credit losses	151,167		106,075

Total receivables, net	$	1,219,227	$	1,139,595