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~~March 3031, ~~2021~~2022

☐ 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 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~~April 2526, ~~2021~~2022
Common Stock, $0.01 par value per share						294,~~222~~098,~~760~~094 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, 2021 (unaudited) and December 31, 2020	1
	Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and September 30, 2020 (unaudited)	2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and September 30, 2020 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and September 30, 2020 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	4
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and Nine Months Ended September 30, 2021 and September 30, 2020 (unaudited)	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	76
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2218
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3726
Item 4.	Controls and Procedures	3726
Part II.	Other Information:
Item 1.	Legal Proceedings	3726
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 6.	Exhibits	27
Item 6.	Exhibits	39
Signatures

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of ~~September~~March 3031, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021

(In thousands, except share data)	~~2021~~2022		~~2020~~2021
Assets
Current assets:
Cash and cash equivalents	$	~~459~~709,~~540~~532	$	~~615~~589,~~615~~847
Short-term investments	~~322~~171,~~634~~180		~~442~~252,~~473~~622
Receivables, net	1,~~219~~178,~~849~~037		1,~~168~~161,~~712~~361
Inventory	2527,~~389~~704		2328,~~027~~159
Prepaid expenses and other	~~412~~381,~~744~~404		~~401~~417,~~160~~465
Total current assets	2,~~440~~467,~~156~~857		2,~~650~~449,~~987~~454
Property and equipment, net	1,~~717~~610,~~630~~496		1,~~804~~656,~~083~~171
Right-of-use assets	8976,~~619~~474		~~104~~82,~~536~~940
Software development costs, net	1,~~008~~003,~~440~~806		1,~~009~~000,~~349~~357
Goodwill	1,~~126~~129,~~843~~539		~~914~~1,~~520~~131,121
Intangible assets, net	~~476~~434,~~067~~900		~~329~~458,~~249~~482
Long-term investments	~~488~~456,~~454~~398		~~510~~461,~~220~~984
Other assets	~~195~~194,~~951~~761		~~198~~193,~~152~~649
Total assets	$	7,~~543~~374,~~160~~231	$	7,~~521~~434,~~096~~158
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	~~311~~359,~~196~~562	$	~~235~~329,~~755~~582
Current installments of long-term debt	~~225,000~~—		—225,000
Deferred revenue	~~438~~456,~~063~~929		~~393~~531,~~293~~234
Accrued payroll and tax withholdings	~~344~~284,~~879~~145		~~309~~317,~~814~~092
Other current liabilities	~~232~~278,~~187~~236		~~229~~223,~~764~~350
Total current liabilities	1,~~551~~378,~~325~~872		1,~~168,~~626,258
Long-term debt	1,611,~~205~~303		1,~~336~~611,~~069~~256
Deferred income taxes	~~389~~362,~~843~~236		~~376~~395,~~035~~177
Other liabilities	~~150~~113,~~884~~301		~~157~~121,~~799~~005
Total liabilities	3,~~703~~465,~~257~~712		3,~~038~~753,~~529~~696
Shareholders' Equity:
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
Common stock, $0.01 par value, 500,000,000 shares authorized, 381,357,862 shares issued at March 31, 2022 and 380,232,975 shares issued at December 31, 2021	3,814		3,802
Additional paid-in capital	2,~~598~~811,~~853~~612		2,~~288~~717,~~806~~244
Retained earnings	6,~~656~~877,~~679~~111		6,~~475~~751,~~551~~692
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)
Treasury stock, 87,383,166 shares at March 31, 2022 and December 31, 2021	(5,664,718)		(5,664,718)
Accumulated other comprehensive loss, net	(~~129~~119,~~696~~300)		(~~120~~127,~~804~~558)
Total shareholders' equity	3,~~839~~908,~~903~~519		43,~~482~~680,~~567~~462
Total liabilities and shareholders' equity	$	7,~~543~~374,~~160~~231	$	7,~~521~~434,~~096~~158

See notes to condensed consolidated financial statements (unaudited).

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CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021

(unaudited)

	Three Months Ended				~~Nine Months Ended~~
(In thousands, except per share data)	~~2021~~2022		~~2020~~2021		~~2021~~		~~2020~~
Revenues	$	1,~~467~~429,~~976~~801	$	1,~~368~~387,~~673~~778	$	~~4,312,509~~	$	~~4,110,763~~
Costs and expenses:
Costs of revenue	~~251~~243,~~111~~848		~~231~~230,~~889~~656		~~743,092~~		~~698,268~~
Sales and client service	~~651~~612,~~010~~997		~~625~~622,~~402~~176		~~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
Software development (Includes amortization of $65,206 and $64,850, respectively)	195,091		192,327
General and administrative	~~121~~109,~~395~~279		~~116~~112,~~816~~365		~~390,067~~		~~391,000~~
Amortization of acquisition-related intangibles	16,~~874~~602		12,~~789~~196		~~45,956~~		~~43,031~~
Total costs and expenses	1,~~243~~177,~~053~~817		1,~~173~~169,~~722~~720		~~3,819,968~~		~~3,590,538~~
Gain on sale of businesses	—		216,869		—		216,869
Operating earnings	251,984		218,058
Operating earnings	224,923		411,820		492,541		737,094
Other income, net	26		1,206
Other income (loss), net	(5,070)		48,020		(5,542)		78,247
Earnings before income taxes	252,010		219,264
Earnings before income taxes	219,853		459,840		486,999		815,341
Income taxes	(45,881)		(47,012)
Income taxes	(44,058)		(103,164)		(106,245)		(176,758)
Net earnings	$	206,129	$	172,252
Net earnings	$	175,795	$	356,676	$	380,754	$	638,583
Basic earnings per share	$	0.70	$	0.57
Basic earnings per share	$	0.59	$	1.17	$	1.27	$	2.08
Diluted earnings per share	$	0.70	$	0.56
Diluted earnings per share	$	0.59	$	1.16	$	1.25	$	2.07
Basic weighted average shares outstanding	293,412		304,731
Basic weighted average shares outstanding	296,202		305,759		300,526		306,759
Diluted weighted average shares outstanding	296,336		308,031
Diluted weighted average shares outstanding	298,714		308,366		303,423		309,124

See notes to condensed consolidated financial statements (unaudited).

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CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021

(unaudited)

	Three Months Ended				~~Nine Months Ended~~
(In thousands)	~~2021~~2022		~~2020~~2021		~~2021~~		~~2020~~
Net earnings	$	~~175~~206,~~795~~129	$	~~356~~172,~~676~~252	$	~~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)
Foreign currency translation adjustment and other (net of tax benefit of $237 and $679, respectively)	(3,424)		(8,991)
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 gain (loss) on cash flow hedge (net of taxes of $3,906 and $1,509, respectively)	12,060		4,588
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
Unrealized holding gain (loss) on available-for-sale investments (net of tax benefit of $125 and $71, respectively)	(378)		(217)
Comprehensive income	$	~~164~~214,~~826~~387	$	~~368~~167,~~332~~632	$	~~371,862~~	$	~~619,228~~

See notes to condensed consolidated financial statements (unaudited).

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CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021

(unaudited)

	Nine Months Ended
	Three Months Ended
(In thousands)	~~2021~~2022		~~2020~~2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	~~380~~206,~~754~~129	$	~~638~~172,~~583~~252
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	~~535~~175,~~816~~223		~~518~~175,~~987~~313
Share-based compensation expense	~~157~~33,~~165~~332		~~110~~47,~~500~~950
Provision for deferred income taxes	3(36,~~582~~301)		21(2,~~554~~829)
Gain on sale of businesses	—		(216,869)
Changes in assets and liabilities:
Investment gains	—		(75,834)
Receivables, net	(16,712)		(12,301)
Asset impairments	117,739		—
Inventory	461		(7,411)
Changes in assets and liabilities (net of businesses acquired):
Prepaid expenses and other	13,600		24,173
Receivables, net	(33,948)		(78,695)
Accounts payable	35,730		30,118
Inventory	(2,360)		8,206
Accrued income taxes	75,323		21,378
Prepaid expenses and other	(2,091)		(36,664)
Deferred revenue	(72,800)		14,768
Accounts payable	27,467		(60,808)
Other accrued liabilities	(38,922)		(12,977)
Accrued income taxes	13,100		33,005
Net cash provided by operating activities	375,063		450,434
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~~42,~~813~~393)		(~~238~~75,~~053~~925)
Capitalized software development costs	(~~242~~56,~~677~~300)		(~~224~~83,~~710~~550)
Purchases of investments	(~~607~~8,~~390~~439)		(~~511~~321,~~378~~670)
Sales and maturities of investments	~~753~~99,~~347~~638		~~213~~306,~~309~~935
Purchase of other intangibles	(234,~~197~~703)		(297,~~698~~975)
Acquisition of businesses, net of cash acquired	(348,179)		(35,766)
Net cash used in investing activities	(12,197)		(182,185)
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~~500,000
Repayment of long-term debt	—(225,000)		~~(2,500)~~—
Proceeds from exercise of stock options	~~214~~63,~~577~~394		~~202~~36,~~680~~514
Payments to taxing authorities in connection with shares directly withheld from associates	(621,~~159~~583)		(224,~~623~~897)
Treasury stock purchases	~~(1,125,000)~~—		(~~650~~341,~~000~~715)
Dividends paid	(~~202~~79,~~054~~183)		(~~166~~67,~~277~~477)
Other	~~(18~~1,~~441)~~038		(65,~~807~~310)
Net cash used in financing activities	(693,077)		(345,527)
Net cash provided by (used in) financing activities	(241,334)		117,115
Effect of exchange rate changes on cash and cash equivalents	(111,~~828~~847)		(43,~~382~~118)
Net decrease in cash and cash equivalents	(156,075)		(22,689)
Net increase in cash and cash equivalents	119,685		382,246
Cash and cash equivalents at beginning of period	~~615~~589,~~615~~847		~~441~~615,~~843~~615
Cash and cash equivalents at end of period	$	~~459~~709,~~540~~532	$	~~419~~997,~~154~~861

See notes to condensed consolidated financial statements (unaudited).

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CERNER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021

(unaudited)

	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		—		—		—
Balance at December 31, 2021	380,233	$	3,802	$	2,717,244	$	6,751,692	$	(5,664,718)	$	(127,558)
Employee share-based compensation expense	—	—		53,941		—		—		—
Exercise of stock options and vests of restricted shares and share units	1,125	12		61,036		—		—		—
Other comprehensive income (loss)	—	—		—		—		—		6,697
Employee share-based compensation expense	—	—		33,332		—		—		—
Treasury stock purchases	—	—		—		—		(400,000)		—
Other comprehensive income (loss)	—	—		—		—		—		8,258
Cash dividends declared ($0.22 per share)	—	—		—		(66,704)		—		—
Cash dividends declared ($0.27 per share)	—	—		—		(80,710)		—		—
Net earnings	—	—		—		32206,~~707~~129		—		—
Balance at June 30, 2021	376,936	3,769		2,509,545		6,546,615		(4,914,718)		(118,727)
Balance at March 31, 2022	381,358	$	3,814	$	2,811,612	$	6,877,111	$	(5,664,718)	$	(119,300)
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).

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CERNER CORPORATION AND SUBSIDIARIES

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

For the three and nine months ended September 30, 2021 and September 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)

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.

All references to quarters or ~~nine~~three month periods ended ~~2021~~2022 and ~~2020~~2021 in these notes to condensed consolidated financial statements refer to the respective three ~~and nine~~ month periods ended ~~September 30~~March 31, ~~2021~~2022 and ~~September 30~~March 31, ~~2020~~2021, unless otherwise noted.

~~Employee~~Oracle ~~Separation~~Merger ~~Costs~~Agreement

InOn ~~connection~~December 20, 2021, we entered into an Agreement and Plan of Merger (as it may be amended or supplemented from time to time, the "Merger Agreement") with ~~involuntary~~Cedar ~~separation~~Acquisition ~~benefits~~Corporation ("Merger Subsidiary"), wewhich ~~recognized~~is ~~less~~a ~~than~~wholly ~~$1 million~~owned subsidiary of OC Acquisition LLC ("Parent"), Parent, which is a wholly owned subsidiary of Oracle Corporation ("Oracle"), and ~~$6 million~~(solely with respect to performance of ~~expenses~~its obligations set forth in certain specified sections thereof) Oracle. Pursuant to the ~~third~~Merger ~~quarters~~Agreement, on January 19, 2022, Oracle commenced a cash tender offer (the "Offer") to acquire all of ~~2021~~the issued and ~~2020~~outstanding shares of our common stock for a purchase price of $95.00 per share, ~~respectively;~~net to the holders thereof in cash, without interest and ~~$46 million~~subject to any required tax withholding. If the Offer is completed, Merger Subsidiary will merge with and ~~$21 million~~into Cerner (the "Merger") and we will become a wholly owned indirect subsidiary of ~~expenses~~Oracle. ~~during~~As a result of the ~~first~~Merger, ~~nine~~the ~~months~~shares of ~~2021~~our common stock will cease to be publicly held. Completion of the Merger remains subject to certain closing conditions, including receipt of certain regulatory approvals, shareholders holding a majority of the outstanding shares of our common stock tendering their shares in the Offer, and ~~2020~~other customary closing conditions. We have agreed to various customary covenants and agreements in the Merger Agreement, ~~respectively~~including with respect to the operation of our business prior to the closing of the transaction, such as restrictions on making certain acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and making certain capital expenditures, paying dividends in excess of our regular quarterly dividend, issuing or repurchasing stock and taking other specified actions.

In connection with voluntary separation benefits, we recognized $24 million and $2 million of expenses in the third quarters of 2021 and 2020, respectively; and $51 million and $18 million of expenses during the first nine months of 2021 and 2020, respectively.6

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

At September 30, 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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~~Software~~Supplemental ~~Development~~Disclosures ~~Costs~~of Cash Flow Information

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 "Software development" expense in our condensed consolidated statements of operations.


	Three Months Ended
(In thousands)	2022		2021
Cash paid during the period for:
Interest (including amounts capitalized of $2,763 and $2,692, respectively)	$	21,667	$	15,549
Income taxes, net of refunds	(2,063)		19,216
Non-cash items:
Lease liabilities recorded upon the commencement of operating leases	292		7,745
Financed capital purchases	—		1,361

	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. The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020 and ASU 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 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 this guidance may have on our contracts that reference LIBOR, specifically, our ~~Third~~Fourth 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 guidance.

8Business Combinations. The FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in October 2021. Such guidance amends the recognition and measurement principles that apply to business combinations to require that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. ASU 2021-08 is effective for the Company in the first quarter of 2023, with early adoption permitted. The standard requires prospective application to business combinations occurring on or after the date of adoption. As of the date of this filing, we have not determined if we will early adopt.

~~Table~~(2) ofRevenue ~~Contents~~Recognition

(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.

(3) Revenue Recognition

Disaggregation of Revenue

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

Three Months Ended

2021

2020

2022

2021

(In thousands)

DomesticSegment

InternationalSegment

Total

DomesticSegment

InternationalSegment

Total

Licensed software

~~186~~178,~~106~~913

1310,~~073~~508

~~199~~189,~~179~~421

~~159~~148,~~327~~833

12,~~367~~828

~~171~~161,~~694~~661

Technology resale

3542,~~206~~764

24,~~378~~719

3747,~~584~~483

4537,~~217~~891

17,~~896~~781

4745,~~113~~672

Subscriptions

8790,~~490~~553

43,~~281~~870

9194,~~771~~423

8795,~~878~~383

54,~~529~~429

9399,~~407~~812

Professional services

~~472~~452,~~387~~238

7973,~~361~~022

~~551~~525,~~748~~260

~~433~~434,~~127~~162

4660,~~768~~260

~~479~~494,~~895~~422

Managed services

~~286~~287,~~038~~975

3736,~~094~~651

~~323~~324,~~132~~626

~~280~~282,~~827~~076

3135,~~017~~300

~~311~~317,~~844~~376

Support and maintenance

~~210~~200,~~864~~667

4642,~~161~~213

~~257~~242,~~025~~880

~~219~~217,~~682~~499

4045,~~296~~825

~~259~~263,~~978~~324

Reimbursed travel

75,~~397~~346

~~140~~362

75,~~537~~708

46,~~711~~148

31(637)

45,~~742~~511

Total revenues

1,~~285~~258,~~488~~456

~~182~~171,~~488~~345

1,~~467~~429,~~976~~801

1,~~230~~221,~~769~~992

~~137~~165,~~904~~786

1,~~368~~387,~~673~~778

	Nine Months Ended
	2021						2020
(In thousands)	DomesticSegment		InternationalSegment		Total		DomesticSegment		InternationalSegment		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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The following ~~tables~~table ~~present~~presents our revenues disaggregated by timing of revenue recognition:

Three Months Ended

2021

2020

2022

2021

(In thousands)

DomesticSegment

InternationalSegment

Total

DomesticSegment

InternationalSegment

Total

Revenue recognized over time

1,~~200~~182,~~015~~210

~~175~~160,~~440~~615

1,~~375~~342,~~455~~825

1,~~143~~152,~~515~~849

~~132~~153,~~891~~868

1,~~276~~306,~~406~~717

Revenue recognized at a point in time

8576,~~473~~246

710,~~048~~730

9286,~~521~~976

8769,~~254~~143

511,~~013~~918

9281,~~267~~061

Total revenues

1,~~285~~258,~~488~~456

~~182~~171,~~488~~345

1,~~467~~429,~~976~~801

1,~~230~~221,~~769~~992

~~137~~165,~~904~~786

1,~~368~~387,~~673~~778

	Nine Months Ended
	2021						2020
(In thousands)	DomesticSegment		InternationalSegment		Total		DomesticSegment		InternationalSegment		Total
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	232,329		30,288		262,617		234,570		27,575		262,145
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~~March 3031, ~~2021~~2022, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $13.1221 billion of which we expect to recognize approximately 3031% 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~~three months ended ~~September~~March 3031, ~~2021~~2022, we recognized $~~340~~151 million of revenues that were included in our contract liability balance at the beginning of such period.

Significant Customers

Revenues attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies, within our Domestic segment, comprised 2120% ~~and 19%~~ of our consolidated revenues for the ~~third quarters of 2021 and 2020, respectively; and 20% and 17% for the~~ first ~~nine~~three months of ~~2021~~both 2022 and ~~2020, respectively~~2021. Amounts due in connection with these relationships comprised 1715% ~~and 13%~~ of client receivables as of ~~September~~both March 3031, ~~2021~~2022 and December 31, ~~2020, respectively~~2021.

11(3) Receivables

~~Table~~A summary of ~~Contents~~net receivables is as follows:

(4) Receivables


(In thousands)	March 31, 2022		December 31, 2021

Client receivables	$	1,291,556	$	1,307,167
Less: Provision for expected credit losses	113,519		145,806

Total receivables, net	$	1,178,037	$	1,161,361

(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 addition to the client receivables presented above, at March 31, 2022 and December 31, 2021, we had $12 million and $16 million, respectively, of non-current net client receivables, which are presented in "Other assets" in our condensed consolidated balance sheets.

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)	Current		Non-current		Total
Provision for expected credit losses - balance at December 31, 2020	$	153,566	$	38,564	$	192,130
Provision for expected credit losses - balance at December 31, 2021	$	145,806	$	61,106	$	206,912
Additions charged to costs and expenses	20,251		—		20,251
Additions (reductions) charged to costs and expenses	(7,011)		—		(7,011)
Deductions, foreign currency and other	2(25,~~278~~276)		—		2(25,~~278~~276)
Provision for expected credit losses - balance at March 31, 2021	176,095		38,564		214,659
Provision for expected credit losses - balance at March 31, 2022	$	113,519	$	61,106	$	174,625
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 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; 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.8

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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Our estimates of expected credit losses for client receivables at both March 31, 2022 and December 31, 2021, were primarily based on historical credit loss experience and adjustments for certain asset-specific risk characteristics (5i.e. known client financial hardship or bankruptcy). ~~Investments~~Exposure to credit losses may increase if our clients are adversely affected by changes in healthcare laws; changes in reimbursement or payor models; economic pressures or uncertainty associated with local or global economic recessions; disruption associated with the COVID-19 pandemic; or other client-specific factors. Although we have historically not experienced significant credit losses, it is possible that there could be an adverse impact from potential adjustments to the carrying amount of client receivables as clients' cash flows are impacted by the COVID-19 pandemic and related economic uncertainty, which may be material.

(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

During the first three months of 2022 and 2021, we received total client cash collections of $1.40 billion and $1.44 billion, respectively.

(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

(4) Investments

~~We sold available~~Available-for-sale investments ~~for~~at ~~proceeds of $400~~March ~~million and $5 million during the nine months ended September 30~~31, ~~2021~~2022 ~~and~~were ~~September 30,~~as ~~2020, respectively, resulting in insignificant losses in each period.~~follows:


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

Cash equivalents:
Money market funds	$	63,290	$	—	$	—	$	63,290
Time deposits	45,501		—		—		45,501
Commercial Paper	115,500		—		—		115,500
Total cash equivalents	224,291		—		—		224,291

Short-term investments:
Time deposits	19,994		—		—		19,994
Commercial paper	34,000		—		(10)		33,990
Government and corporate bonds	117,576		3		(383)		117,196
Total short-term investments	171,570		3		(393)		171,180

Long-term investments:
Government and corporate bonds	19,642		—		(361)		19,281

Total available-for-sale investments	$	415,503	$	3	$	(754)	$	414,752

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Available-for-sale investments at December 31, 2021 were as follows:


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

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

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

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

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

We sold available-for-sale investments for proceeds of $133 million during the three months ended March 31, 2022, resulting in insignificant losses in the period.

Other Investments

At ~~September~~both March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, we had investments in equity securities that do not have readily determinable fair values of $406 million ~~and $361 million~~, ~~respectively,~~ accounted for in accordance with Accounting Standards Codification Topic ("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~~three months ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021, respectively.

13At March 31, 2022 and December 31, 2021, we had investments in equity securities reported under the equity method of accounting of $31 million and $25 million, respectively. Such investments are included in "Long-term investments" in our condensed consolidated balance sheets.

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At(5) September 30, 2021 and December 31, 2020, we had investments in equity securities reported under the equity method of accounting of $22 million and $12 million, respectively. Such investments are included in "Long-term ~~investments" in our condensed consolidated balance sheets.~~Debt

The following is a summary of indebtedness outstanding:

(6) Long-term Debt


(In thousands)	March 31, 2022		December 31, 2021

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

Total indebtedness	1,611,662		1,836,662
Less: debt issuance costs	(359)		(406)

Indebtedness, net	1,611,303		1,836,256
Less: current installments of long-term debt	—		(225,000)

Long-term debt	$	1,611,303	$	1,611,256

(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~~March 3031, ~~2021~~2022, the interest rate on revolving credit loans outstanding under our Credit Agreement was 01.8814% 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~~March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, this swap was in a net liability position with an aggregate fair value of $251 million and $3717 million, respectively; which is presented in our condensed consolidated balance sheets in "Other current liabilities".

Series ~~2021~~2015-A Senior Notes

WeOn ~~entered~~February ~~into a Master Note Agreement on November 11~~15, ~~2019~~2022, ~~and subsequently amended on October 8, 2020 (collectively and as amended, the "2019 Shelf Agreement"), pursuant to which~~ we ~~may~~repaid ~~issue~~our ~~and sell up to an aggregate principal amount of~~ $~~1.80 billion~~225 ~~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~~2015-A ~~Notes~~notes due ~~March 24,~~February ~~2026 and $400 million of 2.59% Series 2021-B Notes due March 24~~15, ~~2031~~2022. Interest on the Series 2021 Senior Notes is payable semiannually on each March 24 and September 24, commencing September 24, 2021, and the principal balance is due at maturity. The Company may prepay at any time all, or any part of, the outstanding principal amount of the Series 2021 Senior Notes, subject to the payment of a make-whole amount. The Series 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, $1.00 billion remains available for sale under the 2019 Shelf Agreement, which is uncommitted and subject to participation by the purchasers.

1411

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(76) 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~~March 3031, ~~2021~~2022:

(In thousands)		Fair Value Measurements Using
Description	Balance Sheet Classification	Level 1		Level 2		Level 3
Money market funds	Cash equivalents	$	9163,~~433~~290	$	—	$	—
Time deposits	Cash equivalents	—		4145,~~320~~501		—
Time deposits	Short-term investments	—		32,439		—
Commercial paper	Cash equivalents	—		115,500		—
Commercial paper	Short-term investments	—		118,308		—
Time deposits	Short-term investments	—		19,994		—
Government and corporate bonds	Short-term investments	—		171,887		—
Commercial paper	Short-term investments	—		33,990		—
Government and corporate bonds	~~Long~~Short-term investments	—		60117,~~061~~196		—
Government and corporate bonds	Long-term investments	—		19,281		—

The following table details our investments in available-for-sale debt securities measured and recorded at fair value on a recurring basis at December 31, ~~2020~~2021:

(In thousands)		Fair Value Measurements Using
Description	Balance Sheet Classification	Level 1		Level 2		Level 3
Money market funds	Cash equivalents	$	40149,~~027~~429	$	—	$	—
Time deposits	Cash equivalents	—		3635,~~756~~342		—
Commercial paper	Cash equivalents	—		6177,~~000~~850		—
Time deposits	Short-term investments	—		28,302		—
Government and corporate bonds	Cash equivalents	—		5,000		—
Commercial paper	Short-term investments	—		263,993		—
Time deposits	Short-term investments	—		25,598		—
Government and corporate bonds	Short-term investments	—		150,178		—
Commercial paper	Short-term investments	—		56,986		—
Government and corporate bonds	~~Long~~Short-term investments	—		~~137~~170,~~078~~038		—
Government and corporate bonds	Long-term investments	—		31,018		—

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 12

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~~Level~~observable 3in ~~discounted~~active ~~cash~~markets ~~flow~~over ~~analysis~~the ~~based~~terms onthat ~~LIBOR~~the ~~rate~~instrument ~~forward~~is ~~curves. The fair value of our long-term debt at September 30~~held, ~~2021~~the ~~and~~derivative ~~December 31,~~is ~~2020~~classified ~~was~~as ~~approximately~~Level ~~$1.84~~2 ~~billion~~in ~~and~~the $1hierarchy.~~36 billion, respectively. The carrying amount of such debt at September 30, 2021 and December 31, 2020 was $1.83 billion and $1.33 billion, respectively.~~

~~(8)~~We ~~Income~~estimate ~~Taxes~~the fair value of our long-term, fixed rate debt using a Level 3 discounted cash flow analysis based on current borrowing rates for debt with similar maturities. We estimate the fair value of our long-term, variable rate debt using a Level 3 discounted cash flow analysis based on LIBOR rate forward curves. The fair value of our long-term debt at March 31, 2022 and December 31, 2021 was approximately $1.59 billion and $1.87 billion, respectively. The carrying amount of such debt at March 31, 2022 and December 31, 2021 was $1.60 billion and $1.83 billion, respectively.

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 21.8% and 21.(7%) ~~for~~Income ~~the first nine months of 2021 and 2020, respectively.~~Taxes

~~(9)~~We ~~Earnings~~determine ~~Per~~the ~~Share~~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 18.2% and 21.4% for the first three months of 2022 and 2021, respectively. The decrease in the effective tax rate in the first quarter of 2022 is primarily due to favorability of permanent book-tax differences for share-based compensation in 2022 compared to 2021.

(8) Earnings Per Share

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

Three Months Ended

2021

2020

2022

2021

Earnings

Per-Share

Earnings

Per-Share

(In thousands, except per share data)

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

Basic earnings per share:

Income available to common shareholders

~~175~~206,~~795~~129

~~296~~293,~~202~~412

0.5970

~~356~~172,~~676~~252

~~305~~304,~~759~~731

10.1757

Effect of dilutive securities:

Stock options, non-vested shares and share units

—

2,~~512~~924

—

23,~~607~~300

Diluted earnings per share:

Income available to common shareholders including assumed conversions

~~175~~206,~~795~~129

~~298~~296,~~714~~336

0.5970

~~356~~172,~~676~~252

308,~~366~~031

10.1656

For the three months ended ~~September~~March 3031, 2021 ~~and September 30~~, ~~2020,~~ options to purchase 01.31 million ~~and 3.9 million~~ shares of common stock at per share prices ranging from $52.32 to $76.49, ~~and~~were ~~$55.24~~outstanding tobut ~~$76~~were not included in the computation of diluted earnings per share because they were anti-dilutive.49 For the three months ended March 31, ~~respectively~~2022, ~~were~~an inconsequential number of outstanding ~~but~~securities were not included in the computation of diluted earnings per share because they were anti-dilutive.

	Nine Months Ended
	2021					2020
	Earnings		Shares	Per-Share		Earnings		Shares	Per-Share
(In thousands, except per share data)	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Basic earnings per share:
Income available to common shareholders	$	380,754	300,526	$	1.27	$	638,583	306,759	$	2.08
Effect of dilutive securities:
Stock options, non-vested shares and share units	—		2,897			—		2,365
Diluted earnings per share:
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, 2021 and September 30, 2020, options to purchase 0.4 million and 4.4 million shares of common stock at per share prices ranging from $52.32 to $76.49 and $52.32 to $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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(109) Share-Based Compensation and Equity

Stock Options

Stock option activity for the three months ended March 31, 2022 was as follows:

Stock option activity for the nine months ended September 30, 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	4,670	$	59.61
Exercised	(1,093)	57.27
Forfeited and expired	(74)	62.77
Outstanding as of March 31, 2022	3,503	$	60.27	$	116,608	4.74

Exercisable as of March 31, 2022	2,322	$	59.59	$	78,862	4.11

(In thousands, except per share and term data)	Number ofShares	Weighted-AverageExercise Price(Per Share)		AggregateIntrinsic Value		Weighted-Average RemainingContractualTerm (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 March 31, 2022, there was $10 million of total unrecognized compensation cost related to stock options granted under all plans. That cost is expected to be recognized over a weighted-average period of 1.05 years.

As of September 30, 2021, there was $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 1.39 years.

Non-vested Shares and Share Units

Non-vested share and share unit activity for the ~~nine~~three months ended ~~September~~March 3031, ~~2021~~2022 was as follows:

(In thousands, except per share data)	Number of Shares	Weighted-AverageGrant Date Fair Value Per Share
Outstanding at beginning of year	43,~~131~~644	$	6873.0535
Granted	2,~~158~~016	7793.3139
Vested	(~~2,386~~48)	6773.9450
Forfeited	(~~522~~186)	7274.4016
Outstanding as of September 30, 2021	3,381	$	73.36
Outstanding as of March 31, 2022	5,426	$	80.77

As of ~~September~~March 3031, ~~2021~~2022, there was $~~195~~340 million of total unrecognized compensation cost related to non-vested share and share unit awards granted under all plans. That cost is expected to be recognized over a weighted-average period of 2.1340 years.

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~~

(In thousands)

~~2021~~2022

~~2020~~2021

~~2021~~

~~2020~~

Stock option and non-vested share and share unit compensation expense

5533,~~274~~332

3747,~~920~~950

~~157,165~~

~~110,500~~

Associate stock purchase plan expense

1,~~300~~477

1,~~367~~548

~~4,461~~

~~4,195~~

Amounts capitalized in software development costs, net of amortization

(~~908~~90)

(1,~~150~~663)

~~(4,034)~~

~~(2,971)~~

Amounts charged against earnings, before income tax benefit

5534,~~666~~719

3847,~~137~~835

~~157,592~~

~~111,724~~

Amount of related income tax benefit recognized in earnings

116,~~155~~321

710,~~818~~256

~~31,602~~

~~22,452~~

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Treasury Stock

Under one of our share repurchase programs, which was initially approved by our Board of Directors on May 23, 2017, and most recently amended on December 12, 2019 (the "2017 Share Repurchase Program"), the Company was authorized to repurchase up to $3.70 billion of shares of our common stock, excluding transaction costs. The repurchases 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, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.

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

Dividends

On March 2514, ~~2021~~2022, our Board of Directors declared a cash dividend of $0.2227 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,~~2022 ~~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~~March 28, ~~2021~~2022. 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 12, 2021 to shareholders of record as of September 27, 2021. In connection with the declaration of such ~~dividends~~dividend, our non-vested shares and share units are entitled to dividend equivalents, which will be payable to the holder subject to, and upon vesting of, the underlying awards. Our outstanding stock options are not entitled to dividend or dividend equivalents. At ~~September~~both March 3031, ~~2021~~2022 and December 31, ~~2020~~2021, our condensed consolidated balance sheets included liabilities for dividends payable of $6781 million ~~and $69 million~~, ~~respectively,~~ which are included in "Other current liabilities".

Accumulated Other Comprehensive Loss, Net (AOCI)

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

	Foreign currency translation adjustment and other		Unrealized loss on cash flow hedge		Unrealized holding gain (loss) on available-for-sale investments		Total
(In thousands)
Balance at December 31, 2020	$	(93,450)	$	(27,788)	$	434	$	(120,804)
Balance at December 31, 2021	$	(114,630)	$	(12,961)	$	33	$	(127,558)
Other comprehensive income (loss) before reclassifications	(83,~~991~~424)		29,~~061~~542		(~~217~~389)		(75,~~147)~~729
Amounts reclassified from AOCI	—		2,~~527~~518		—11		2,~~527~~529
Balance at March 31, 2021	(102,441)		(23,200)		217		(125,424)
Balance at March 31, 2022	$	(118,054)	$	(901)	$	(345)	$	(119,300)
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)


	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)

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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

~~2021~~2022

~~2020~~2021

~~2021~~

~~2020~~

Unrealized loss on cash flow hedge

Other income, net

(3,~~322~~079)

(3,~~213~~217)

~~(9,826)~~

~~(7,383)~~

Income taxes

~~665~~561

~~659~~690

~~1,975~~

~~1,509~~

Net of tax

(2,~~657~~518)

(2,~~554~~527)

~~(7,851)~~

~~(5,874)~~

Unrealized holding gain (loss) on available-for-sale investments

Other income, net

(5113)

—

~~(49)~~

—

Income taxes

112

—

Net of tax

(4011)

—

~~(39)~~

—

Total amount reclassified, net of tax

(2,~~697~~529)

(2,~~554~~527)

~~(7,890)~~

~~(5,874)~~

~~(11) Contingencies~~15

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.

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,~~(10) ~~Inc. and NextGen prior to the acquisition of the assets of Siemens Health Services, Inc. by Cerner HS in 2015. The parties have settled the matter, and Cerner did not incur a significant loss.~~Contingencies

OnWe ~~May~~accrue ~~16,~~estimates ~~2019,~~for ~~Steward~~resolution ~~Health~~of ~~Care~~any ~~System~~legal ~~LLC~~and ~~("Steward")~~other ~~filed~~contingencies awhen ~~lawsuit~~losses inare ~~the~~probable ~~Chancery~~and ~~Court~~reasonably ~~for~~estimable ~~Davidson~~in ~~County~~accordance with ASC 450, ~~Tennessee~~Contingencies ~~against~~("ASC ~~the~~450"). ~~Company~~No ~~alleging~~less ~~$210~~than ~~million~~quarterly, inand ~~damages.~~as ~~The~~facts ~~Company~~and ~~believes~~circumstances ~~Steward's~~change, ~~allegations~~we ~~arise~~review ~~out~~the status of ~~Steward's~~each ~~disinterest~~significant inmatter ~~following~~underlying ~~the~~a ~~contract~~legal ~~between~~proceeding ~~the~~or ~~Company~~claim and ~~Steward's~~assess ~~predecessor~~our ~~for~~potential ~~clinical and~~ financial ~~software~~exposure. ~~and~~We ~~services~~accrue ~~after~~a ~~Steward~~liability ~~closed~~for onan ~~its~~estimated ~~acquisition~~loss ofif the ~~predecessor.~~potential ~~The~~loss ~~Company~~from ~~has~~any ~~filed~~legal aproceeding ~~counterclaim~~or ~~against~~claim ~~Steward~~is ~~seeking~~considered ~~recovery~~probable ofand ~~more~~the ~~than~~amount ~~$42~~can ~~million~~be inreasonably ~~unpaid~~estimated. ~~invoices~~Significant ~~owed~~judgment tois ~~the~~required ~~Company.~~in ~~The~~both ~~Company believes~~ the ~~dispute~~determination isof inprobability and the ~~ordinary~~determination ~~course~~as ofto ~~business~~whether ~~and~~ the ~~damages~~amount ~~Steward~~of ~~asserts~~an ~~lack~~exposure ~~both~~is ~~factual~~reasonably estimable, and ~~causal~~accruals ~~support.~~are Webased ~~have~~only ~~not~~on ~~concluded~~the ~~that~~information aavailable ~~material~~to ~~loss~~our ~~related~~management toat the ~~Steward~~time ~~allegations~~the judgment is ~~probable~~made, ~~nor~~which ~~have~~may weprove ~~accrued~~to abe ~~liability~~incomplete ~~related~~or toinaccurate ~~these~~or ~~claims.~~unanticipated ~~Although~~events weand ~~believe~~circumstances amay ~~loss~~occur ~~could~~that bemight ~~reasonably~~cause ~~possible~~us ~~(as~~to ~~defined~~change inthose ~~ASC~~estimates ~~450)~~and assumptions. Furthermore, wethe dooutcome ~~not~~of ~~have~~legal ~~sufficient~~proceedings ~~information~~is toinherently ~~determine~~uncertain, ~~the~~and ~~amount~~we ormay ~~range~~incur substantial defense costs and expenses defending any of ~~reasonably~~these ~~possible~~matters. ~~loss~~Should ~~with~~any ~~respect~~one toor ~~the~~a ~~potential~~combination ~~damages~~of ~~given~~more ~~that~~than ~~the~~one ~~dispute~~of isthese inproceedings ~~the~~be ~~discovery~~successful, ~~process.~~or Weshould ~~will~~we ~~continue~~determine to ~~vigorously~~settle ~~defend~~any ~~against~~one or a combination of these ~~claims~~matters, ~~and~~ we ~~continue~~may be required to ~~believe~~pay ~~that~~substantial wesums, ~~have~~become ~~valid~~subject ~~grounds~~to ~~for~~the ~~recovery~~entry of an injunction or be forced to change the ~~disputed~~manner ~~client~~in ~~receivables.~~which ~~However~~we operate our business, ~~there~~which ~~can~~could behave noa ~~assurances~~material asadverse toimpact ~~the~~on ~~outcome~~our business, results of ~~the~~operations, ~~dispute~~cash flows or financial condition.

On ~~March~~May 2216, ~~2021~~2019, ~~Astria~~Steward Health Care System LLC ("~~Astria~~Steward") filed ana ~~adversary~~lawsuit ~~proceeding~~ in the ~~United~~Chancery ~~States Bankruptcy~~ Court, ~~Eastern~~for ~~District~~Davidson ofCounty, ~~Washington~~Tennessee against the Company. ~~Astria~~The Company believes Steward's allegations ~~largely~~ arise out of Steward's disinterest in following the contract between the Company and Steward's ~~provision~~predecessor offor ~~revenue~~clinical ~~cycle~~and financial software and services after Steward closed on its acquisition of the predecessor. The Company has filed a counterclaim against Steward seeking recovery of more than $42 million in ~~2018~~unpaid ~~and~~invoices ~~2019~~owed to the Company. The Company believes the dispute is in the ordinary course of business and the ~~factual allegations and the~~ damages ~~asserted~~Steward asserts lack both factual and causal support. Steward has recently asserted that its damages are $300 million and advised the Company that it will seek to treble the damages. We have not concluded that a material loss related to the ~~Astria~~Steward 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~~these ~~claim~~claims, and we continue to believe that we have valid grounds for recovery of the disputed client receivables. However, there can be no assurances as to the outcome of the dispute.

On March 22, 2021, Astria Health ("Astria") filed an adversary proceeding in the United States Bankruptcy Court, Eastern District of Washington against the Company. Astria's allegations largely arise out of the Company's provision of revenue cycle services in 2018 and 2019. The Company believes the dispute is in the ordinary course of business and the factual allegations and the damages asserted lack both factual and causal support. Astria has recently claimed damages of $96 million. We have not concluded that a material loss related to the Astria allegations is probable, nor have we accrued a liability related to these claims beyond reserving certain bankruptcy-related outstanding invoices. Although we believe a loss could be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the potential damages given that expert discovery is not yet complete. We will continue to vigorously defend against this claim. However, there can be no assurances as to the outcome of the dispute.

The terms of our agreements with our clients generally provide for limited indemnification of such clients against losses, expenses and liabilities arising from third party or other claims based on, among other things, alleged infringement by our solutions of an intellectual property right of third parties or damages caused by data privacy breaches or system interruptions. The terms of such indemnification often limit the scope of and remedies for such indemnification obligations and generally include, as applicable, a right to replace or modify an infringing solution. For several reasons, including the lack of a sufficient number of prior indemnification claims relating to intellectual property infringement, data privacy breaches or system interruptions, the inherent uncertainty stemming from such claims, and the lack of a monetary liability limit for such claims under the terms of the 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 condensed consolidated financial statements.

~~(12) Segment Reporting~~16

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(11) Segment Reporting

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

20The following table presents a summary of our operating segments and other expense for the three months ended March 31, 2022 and March 31, 2021:


(In thousands)	Domestic		International		Other		Total

Three Months Ended 2022
Revenues	$	1,258,456	$	171,345	$	—	$	1,429,801

Costs of revenue	215,241		28,607		—		243,848
Operating expenses	541,575		71,422		320,972		933,969
Total costs and expenses	756,816		100,029		320,972		1,177,817

Operating earnings (loss)	$	501,640	$	71,316	$	(320,972)	$	251,984


(In thousands)	Domestic		International		Other		Total

Three Months Ended 2021
Revenues	$	1,221,992	$	165,786	$	—	$	1,387,778

Costs of revenue	205,694		24,962		—		230,656
Operating expenses	560,562		61,614		316,888		939,064
Total costs and expenses	766,256		86,576		316,888		1,169,720

Operating earnings (loss)	$	455,736	$	79,210	$	(316,888)	$	218,058

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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, 2021 and September 30, 2020:

(In thousands)	Domestic		International		Other		Total
Three Months Ended 2021
Revenues	$	1,285,488	$	182,488	$	—	$	1,467,976
Costs of revenue	222,665		28,446		—		251,111
Operating expenses	580,535		70,472		340,935		991,942
Total costs and expenses	803,200		98,918		340,935		1,243,053
Operating earnings (loss)	$	482,288	$	83,570	$	(340,935)	$	224,923

(In thousands)	Domestic		International		Other		Total
Three Months Ended 2020
Revenues	$	1,230,769	$	137,904	$	—	$	1,368,673
Costs of revenue	219,938		11,951		—		231,889
Operating expenses	566,777		58,626		316,430		941,833
Total costs and expenses	786,715		70,577		316,430		1,173,722
Gain on sale of businesses	—		—		216,869		216,869
Operating earnings (loss)	$	444,054	$	67,327	$	(99,561)	$	411,820

(In thousands)	Domestic		International		Other		Total
Nine Months Ended 2021
Revenues	$	3,774,507	$	538,002	$	—	$	4,312,509
Costs of revenue	660,584		82,508		—		743,092
Operating expenses	1,797,466		206,794		1,072,616		3,076,876
Total costs and expenses	2,458,050		289,302		1,072,616		3,819,968
Operating earnings (loss)	$	1,316,457	$	248,700	$	(1,072,616)	$	492,541

(In thousands)	Domestic		International		Other		Total
Nine Months Ended 2020
Revenues	$	3,645,397	$	465,366	$	—	$	4,110,763
Costs of revenue	638,284		59,984		—		698,268
Operating expenses	1,724,545		182,594		985,131		2,892,270
Total costs and expenses	2,362,829		242,578		985,131		3,590,538
Gain on sale of businesses	—		—		216,869		216,869
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.

All references to quarters or ~~nine~~the three month periods ended ~~2021~~2022 and ~~2020~~2021 in this MD&A represent the respective three ~~and nine~~ month periods ended ~~September~~March 3031, ~~2021~~2022 and ~~September~~March 3031, ~~2020~~2021, unless otherwise noted.

Management Overview

Our revenues are primarily derived by selling, implementing, operating and supporting software solutions, clinical content, hardware, devices and services that give 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 healthcare.

Our core strategy is to create organic growth by investing in research and development to create solutions and tech-enabled services for the healthcare industry. We 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 healthcare, with Cerner holding 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 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. We have made good progress since we kicked off our transformation in 2019 and expect this progress to be reflected in improved profitability 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, entering into acquisitions or other strategic investments to drive profitable growth, and returning capital to shareholders through share repurchases and dividends.

22Oracle Merger Agreement

On December 20, 2021, we entered into the Merger Agreement with Oracle and certain of its wholly owned subsidiaries. Pursuant to the Merger Agreement, on January 19, 2022, Oracle commenced a cash tender offer to acquire all of the issued and outstanding shares of our common stock for a purchase price of $95.00 per share, net to the holders thereof in cash, without interest and subject to any required tax withholding. If the Offer is completed, Merger Subsidiary will merge

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~~COVID-19~~with and into Cerner and we will become a wholly owned indirect subsidiary of Oracle. As a result of the Merger, the shares of our common stock will cease to be publicly held. We have agreed to various customary covenants and agreements in the Merger Agreement, including with respect to the operation of our business prior to the closing of the transaction, such as restrictions on making certain acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and making certain capital expenditures, paying dividends in excess of our regular quarterly dividend, issuing or repurchasing stock and taking other specified actions. We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements. If the Merger Agreement is terminated under certain specified circumstances, we will be required to pay Parent a termination fee of $950 million. The completion of the Merger remains subject to customary closing conditions, including receipt of certain regulatory approvals and other customary closing conditions. The Merger is expected to close in calendar year 2022.

~~Our~~For ~~business~~additional ~~and~~information ~~results~~related ofto ~~operations for~~ the ~~first~~proposed ~~nine months of both 2021 and 2020 were impacted by the ongoing COVID-19 pandemic. It has caused us to modify certain of our business practices~~transaction, ~~including~~please ~~requiring~~refer ~~most of our associates~~ to work remotely; restricting 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~~Schedule ~~financial impact that the COVID~~14D-~~19 pandemic has had on our results of operations~~9, ~~cash~~as ~~flows~~amended, orpreviously ~~financial~~filed ~~condition,~~with ~~due to~~ the ~~uncertainty~~SEC ~~surrounding the pandemic, the difficulty inherent in identifying~~ and ~~measuring~~other ~~the~~relevant ~~various~~materials ~~impacts~~related ~~that~~to ~~have or may stem from such an event and~~ the ~~fact~~transaction 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~~will ~~COVID-19~~file ~~has~~with ~~impacted, and could continue in~~ the ~~near-term to impact, our business results, primarily, but not limited to, in the following areas:~~SEC.

•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. A sustained decline in bookings 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 or strategies evolve.

We believe the impact of COVID-19 on our results of operations for the first quarter of 2020 was limited, due to the mid-March 2020 timing of when we implemented changes to our business practices in response to COVID-19, and the nature of the industry in which we operate. We believe the most significant impact of COVID-19 on our business was in the second quarter of 2020, with the impact beginning to moderate in subsequent periods but still persisting into 2021 due to some ongoing restrictive measures and certain regions dealing with resurgences of cases.

While we expect a negative financial impact to continue for the rest of 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; new solutions and services; capital allocation plans; cost optimization and operational improvement initiatives; and the expected benefits of our acquisitions, divestitures or other collaborations are all subject to increased risks.

Operational Improvement Initiatives

The Company has continued to focus on leveraging the impact of our new operating structure 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. 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 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 primarily related to professional services fees, 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 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.

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

Net earnings for the third quarter of 2021 decreased 51% to $176 million, compared to $357 million in the third quarter of 2020. Diluted earnings per share decreased 49% to $0.59, compared to $1.16 in the third quarter of 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. Days sales outstanding was 76 days in the third quarter of 2021, compared to 77 days for the second quarter of 2021 and 81 days for the third quarter of 2020. Operating cash flows for the third quarter of 2021 were $435 million, compared to $382 million in the third quarter of 2020.

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Results of Operations

Three Months Ended ~~September~~March 3031, ~~2021~~2022 Compared to Three Months Ended ~~September~~March 3031, ~~2020~~2021

The following table presents a summary of our operating information for the ~~third~~first quarters of ~~2021~~2022 and ~~2020~~2021:

(In thousands)	~~2021~~2022		% ofRevenue		~~2020~~2021		% ofRevenue		% Change
Revenues	$	1,~~467~~429,~~976~~801	100	%	$	1,~~368~~387,~~673~~778	100	%	73	%
Costs of revenue	~~251~~243,~~111~~848		17	%	~~231~~230,~~889~~656		17	%	86	%
Margin	1,~~216~~185,~~865~~953		83	%	1,~~136~~157,~~784~~122		83	%	72	%
Operating expenses
Sales and client service	~~651~~612,~~010~~997		4443	%	~~625~~622,~~402~~176		4645	%	4(1)	%
Software development	~~202~~195,~~663~~091		14	%	~~186~~192,~~826~~327		14	%	81	%
General and administrative	~~121~~109,~~395~~279		8	%	~~116~~112,~~816~~365		98	%	4(3)	%
Amortization of acquisition-related intangibles	16,~~874~~602		1	%	12,~~789~~196		1	%	3236	%
Total operating expenses	~~991~~933,~~942~~969		6865	%	~~941~~939,~~833~~064		6968	%	5(1)	%
Total costs and expenses	1,~~243~~177,~~053~~817		8582	%	1,~~173~~169,~~722~~720		8684	%	61	%
Gain on sale of businesses	—		—	%	216,869		16	%
Operating earnings	251,984		18	%	218,058		16	%	16	%
Operating earnings	224,923		15	%	411,820		30	%	(45)	%
Other income, net	26				1,206
Other income (loss), net	(5,070)				48,020
Income taxes	(45,881)				(47,012)
Income taxes	(44,058)				(103,164)
Net earnings	$	206,129			$	172,252			20	%
Net earnings	$	175,795			$	356,676			(51)	%

Revenues & Backlog

Revenues increased 73% to $1.4743 billion in the ~~third~~first quarter of ~~2021~~2022, as compared to $1.3739 billion in the same period of ~~2020~~2021. The ~~following~~first ~~factors~~quarter ~~impacted~~of ~~the~~2022 ~~year-over-year~~includes ~~change~~a $47 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 revenues disaggregated by our business models.

~~•Increased~~Backlog, ~~implementation~~which ~~activity~~reflects ~~during~~contracted ~~the~~revenue ~~third~~that ~~quarter~~has ofnot ~~2021~~yet ~~within~~been ~~our~~recognized ~~federal~~as ~~business~~revenue, ~~inclusive~~was ~~of ongoing projects with the U~~$13.S.21 ~~Department~~billion ofat ~~Defense~~March 31, ~~and~~2022, ~~the~~compared Uto $13.S.26 ~~Department~~billion ofat ~~Veterans~~December 31, ~~Affairs~~2021. InWe ~~the~~expect ~~third~~to ~~quarter~~recognize ~~of 2021, 21~~31% of our ~~total~~backlog ~~revenues were attributable to our relationships (~~as ~~the~~revenue ~~prime~~over ~~contractor or a subcontractor) with U.S. government agencies, compared to 19% in~~ the ~~same~~next ~~period~~12 ~~of 2020~~months.

~~•The~~We ~~third~~believe ~~quarter~~that ofbacklog ~~2021~~may ~~includes~~not necessarily be a ~~$45 million~~comprehensive ~~increase~~indicator inof ~~revenues~~future ~~due~~revenue toas ~~contributions~~certain ~~from~~of our ~~April~~arrangements 1,may ~~2021~~be ~~acquisition~~canceled of(or ~~the~~conversely ~~Kantar~~renewed) ~~Health~~at ~~business.~~our Weclients' ~~expect~~option; ~~the~~thus ~~acquired~~contract ~~business~~consideration related to ~~contribute~~such ~~approximately~~cancellable ~~$50~~periods ~~million~~has ofbeen ~~additional~~excluded ~~revenues~~from ~~over~~our ~~the~~calculation ~~remainder~~ of ~~2021~~backlog. ~~Refer~~However, tohistorically ~~Note~~our ~~(2)~~experience ofhas ~~the~~been ~~Notes~~that ~~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.~~19

Backlog, which reflects contracted revenue that has not yet been recognized as revenue, was $13.12 billion at September 30, 2021, compared to $13.04 billion at December 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 $1.27 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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such cancellation provisions are rarely exercised. We expect to recognize approximately $993 million 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.

Costs of Revenue

Costs of revenue as a percent of revenues were 17% in the ~~third~~first quarter of both ~~2021~~2022 and ~~2020~~2021.

Costs of revenue include the cost of reimbursed travel expense, sales commissions, 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 ~~increased~~decreased 51% to $~~992~~934 million in the ~~third~~first quarter of ~~2021~~2022, compared to $~~942~~939 million in the same period of ~~2020~~2021.

•Sales and client service expenses as a percent of revenues were 4443% in the ~~third~~first quarter of ~~2021~~2022, compared to 46 45% in the same period of ~~2020~~2021. These expenses ~~increased~~decreased 41% to $~~651~~613 million in the ~~third~~first quarter of ~~2021~~2022, from $~~625~~622 million in the same period of ~~2020~~2021. 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, expenses for expected credit losses on client receivables, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The ~~increase~~decrease in sales and client service expenses was primarily driven by ~~expense~~reductions ~~contributions~~in ~~from~~non-personnel ~~the Kantar Health business, which was acquired on April 1, 2021~~costs.

•Software development expenses as a percent of revenues were 14% in the ~~third~~first quarter of both ~~2021~~2022 and ~~2020~~2021. Expenditures for software development include ongoing development and enhancement of the Cerner Millennium® and HealtheIntent platforms, as well as other key initiatives 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~~first quarters of ~~2021~~2022 and ~~2020~~2021 is as follows:

	Three Months Ended
(In thousands)	~~2021~~2022		~~2020~~2021
Software development costs	$	~~210~~186,~~082~~185	$	~~198~~211,~~565~~027
Capitalized software costs	(7355,~~773~~163)		(7181,~~525~~155)
Capitalized costs related to share-based payments	(1,~~796~~137)		(12,~~792~~395)
Amortization of capitalized software costs	6665,~~222~~206		6164,~~578~~850
Net realizable value charges (see Note (1) of the Notes)	1,928		—
Total software development expense	$	195,091	$	192,327
Total software development expense	$	202,663	$	186,826

•General and administrative expenses as a percent of revenues were 8% in the ~~third~~first quarter of ~~2021,~~both ~~compared~~2022 toand ~~9% in the same period of 2020~~2021. These expenses ~~increased~~decreased 43% to $~~121~~109 million in the ~~third~~first quarter of ~~2021~~2022, from $~~117~~112 million in the same period of ~~2020~~2021. 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 ~~increase~~decrease in general and administrative expenses was primarily driven by ~~increased~~a ~~employee~~reduction ~~separation costs, as further discussed~~ in ~~Note~~employee ~~(1)~~separation ~~of the Notes~~costs.

•Amortization of acquisition-related intangibles as a percent of revenues was 1% in the ~~third~~first quarter of both ~~2021~~2022 and ~~2020~~2021. These expenses increased 3236% to $17 million in the ~~third~~first quarter of ~~2021~~2022, from $1312 million in the same period in ~~2020~~2021. 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 increase in amortization of acquisition-related intangibles is primarily due to amortization of~~

2620

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~~intangibles~~acquisitions. ~~acquired~~The increase in ~~our~~amortization ~~April~~of ~~1, 2021~~ acquisition-related ofintangibles ~~the~~is ~~Kantar~~primarily ~~Health~~due ~~business.~~to ~~Refer~~amortization toof ~~Note~~intangibles ~~(2)~~acquired ofin ~~the~~our ~~Notes~~April ~~for~~1, ~~further~~2021 ~~information~~acquisition ~~regarding~~of the Kantar Health ~~acquisition~~business.

Gain on Sale of Businesses

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.

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.

In the third quarter of 2020, we recognized a $217 million gain in connection with these divestiture transactions.

Non-Operating Items

•Other income ~~(loss)~~, net was aless ~~net~~than ~~loss of~~ $51 million in the ~~third~~first quarter of ~~2021~~2022, compared to $481 million ~~of income~~ in the same period of ~~2020~~2021. ~~The~~Other ~~decrease~~income, innet ~~2021~~for isthe ~~primarily~~periods ~~attributable~~presented tois ~~the~~primarily ~~third~~comprised ~~quarter~~ of ~~2020~~investment ~~including~~earnings, aoffset ~~$49~~by ~~million~~interest ~~gain~~expense ~~recognized~~ on ~~the disposition of one of~~ our ~~equity~~outstanding ~~investments~~indebtedness.

•Our effective tax rate was 2018.02% for the ~~third~~first quarter of ~~2021~~2022, compared to 2221.4% for the same period of ~~2020~~2021. The decrease in the effective tax rate in the first quarter of 2022 is primarily due to ~~the~~favorability ~~third quarter~~ of ~~2020~~permanent ~~including~~book-tax ~~taxes~~differences ~~associated~~for ~~with~~share-based ~~the~~compensation ~~divestiture~~in ~~transactions~~2022 ~~discussed~~compared ~~above~~to 2021. Refer to Note (87) of the Notes for further discussion regarding our effective tax rate.

Operations by Segment

We have two operating segments: Domestic and International. The Domestic segment includes revenue contributions and expenditures associated with business activity in the United States. The International segment includes revenue contributions and expenditures linked to business activity outside the United States, primarily from Australia, Canada, Europe, and the Middle East. Refer to Note (1211) of the Notes for further information regarding our reportable segments.

27The following table presents a summary of our operating segment information for the first quarters of 2022 and 2021:

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(In thousands)	2022		% of Revenue	2021		% of Revenue	% Change

Domestic Segment
Revenues	$	1,258,456	100%	$	1,221,992	100%	3%

Costs of revenue	215,241		17%	205,694		17%	5%
Operating expenses	541,575		43%	560,562		46%	(3)%
Total costs and expenses	756,816		60%	766,256		63%	(1)%

Domestic operating earnings	501,640		40%	455,736		37%	10%

International Segment
Revenues	171,345		100%	165,786		100%	3%

Costs of revenue	28,607		17%	24,962		15%	15%
Operating expenses	71,422		42%	61,614		37%	16%
Total costs and expenses	100,029		58%	86,576		52%	16%

International operating earnings	71,316		42%	79,210		48%	(10)%

Other costs and expenses, net	(320,972)			(316,888)			1%

Consolidated operating earnings	$	251,984		$	218,058		16%

The following table presents a summary of our operating segment information for the third quarters of 2021 and 2020:

(In thousands)	2021		% of Revenue	2020		% of Revenue	% Change
Domestic Segment
Revenues	$	1,285,488	100%	$	1,230,769	100%	4%
Costs of revenue	222,665		17%	219,938		18%	1%
Operating expenses	580,535		45%	566,777		46%	2%
Total costs and expenses	803,200		62%	786,715		64%	2%
Domestic operating earnings	482,288		38%	444,054		36%	9%
International Segment
Revenues	182,488		100%	137,904		100%	32%
Costs of revenue	28,446		16%	11,951		9%	138%
Operating expenses	70,472		39%	58,626		43%	20%
Total costs and expenses	98,918		54%	70,577		51%	40%
International operating earnings	83,570		46%	67,327		49%	24%
Other costs and expenses, net	(340,935)			(316,430)			8%
Gain on sale of businesses	—			216,869
Consolidated operating earnings	$	224,923		$	411,820		(45)%

Domestic Segment

•Revenues increased 43% to $1.2926 billion in the ~~third~~first quarter of ~~2021~~2022, from $1.2322 billion in the same period of ~~2020~~2021. The ~~following~~first ~~factors~~quarter ~~impacted~~of ~~the~~2022 ~~year-over-year~~includes ~~change~~a $23 million increase in ~~Domestic~~revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business. The remaining increase is primarily attributable to increased implementation activity during the first quarter of 2022 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 quarter of both 2022 and 2021, 20% of our consolidated revenues: were attributable to our relationships (as the prime contractor or a subcontractor) with U.S. government agencies. Refer to Note (2) of the Notes for further information regarding revenues disaggregated by our business models.

~~◦Increased~~•Costs ~~implementation activity during the third quarter~~ of ~~2021~~revenue ~~within~~as ~~our~~a ~~federal~~percent ~~business, inclusive~~ of ~~ongoing~~revenues ~~projects~~were ~~with~~17% in the ~~U.S.~~first ~~Department~~quarter of ~~Defense~~both 2022 and ~~the U~~2021.~~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 (3) of the Notes for further information regarding revenues disaggregated by our business models.

•Costs of revenue as a percent of revenues were 17% in the third quarter of 2021, compared to 18% in the same period of 2020. The lower costs of revenue as a percent of revenues was primarily driven by the mix of revenues for the quarters, inclusive of the third quarter of 2021 containing a higher percentage of licensed software revenues, which caries a lower cost of revenue.

•Operating expenses as a percent of revenues were 45% in the third quarter of 2021, compared to 46% in the same period of 2020. These expenses increased 2% to $581 million in the third quarter of 2021, from $567 million in the same period of 2020. The increase in operating expenses was primarily driven by expense contributions from the Kantar Health business, which was acquired on April 1, 2021.

International Segment

•Revenues increased 32% to $182 million in the third quarter of 2021, compared to $138 million in the same period of 2020. The increase in revenues is primarily due to a $24 million increase in revenues due to contributions from our April 1, 2021 acquisition of the Kantar Health business. The remaining increase is attributable to 2021 revenue growth across the majority of our remaining International Segment operations. Refer to Note (3) of the Notes for further information regarding revenues disaggregated by our business models.

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•~~Costs~~Operating ofexpenses ~~revenue~~ as a percent of revenues were 1643% in the ~~third~~first quarter of ~~2021~~2022, compared to 946% in the same period of ~~2020~~2021. ~~The~~These ~~higher~~expenses ~~costs~~decreased of3% ~~revenue~~to as$542 amillion ~~percent~~in the first quarter of ~~revenues~~2022, ~~was~~from ~~primarily~~$561 ~~driven~~million byin the ~~impact~~same period of ~~the~~2021. ~~Kantar~~The ~~Health~~decrease ~~business~~in ~~acquired~~operating onexpenses ~~April~~was 1,primarily ~~2021~~driven by reductions in non-personnel costs.

•Operating expenses as a percent of revenues were 39% in the third quarter of 2021, compared to 43% in the same period of 2020. These expenses increased 20% to $70 million in the third quarter of 2021, from $59 million in the same period of 2020. The increase in operating expenses is primarily due to the April 1, 2021 acquisition of the 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 increased 8% to $341 million in the third quarter of 2021, from $316 million in the same period of 2020. The increase is primarily due to increased employee separation costs, as further discussed in Note (1) of the Notes.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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

(In thousands)	2021		% ofRevenue		2020		% ofRevenue		% 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 & Backlog

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

•Increased implementation activity during the first nine months of 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 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 17% in the same period of 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 both 2021 and 2020.

Operating Expenses

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

•Sales and client service expenses as a percent of revenues were 46% in the first nine months of both 2021 and 2020. These expenses increased 5% to $2.00 billion in the first nine months of 2021, from $1.91 billion in the same period of 2020. The increase in sales and client service expenses was primarily driven by a $68 million pre-tax charge recorded in the first nine months of 2021 in connection with the designation of certain 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 Notes for further information.

•Software development expenses as a percent of revenues were 15% in the first nine months of 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, as well as other key initiatives 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 2021 and 2020 is as follows:

	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 9% in the first nine months of 2021, compared to 10% in the same period of 2020. These expenses were relatively flat at $390 million in the first nine months of 2021, compared to $391 million in the same period of 2020. General and administrative expenses include certain charges incurred in connection with our operational improvement initiatives, as further discussed above, and in the 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 both 2021 and 2020. These expenses increased 7% to $46 million in the first nine months of 2021, from $43 million in the same period in 2020. The 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 Kantar Health business. Refer to Note (2) of the Notes for further information regarding the Kantar Health acquisition.

Gain on Sale of Businesses

The first nine months of 2020 includes a $217 million gain recognized in connection with the divestiture transactions described above.

Non-Operating Items

•Other income (loss), net was a net loss of $6 million in the first nine months of 2021, compared to $78 million of income in the same period of 2020. The decrease in 2021 is primarily attributable to the first nine months of 2020 including a $76 million gain recognized on the disposition of one of our equity investments. The remaining difference is primarily attributable to increased interest expense in the first nine months of 2021 from the $300 million of Series 2020-A Notes we issued in March 2020 and the $500 million of Series 2021 Senior Notes we issued in March 2021.

•Our effective tax rate was relatively flat at 21.8% for the first nine months of 2021, compared to 21.7% for the same period of 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 2021 and 2020:

(In thousands)	2021		% of Revenue	2020		% of Revenue	% Change
Domestic Segment
Revenues	$	3,774,507	100%	$	3,645,397	100%	4%
Costs of revenue	660,584		18%	638,284		18%	3%
Operating expenses	1,797,466		48%	1,724,545		47%	4%
Total costs and expenses	2,458,050		65%	2,362,829		65%	4%
Domestic operating earnings	1,316,457		35%	1,282,568		35%	3%
International Segment
Revenues	538,002		100%	465,366		100%	16%
Costs of revenue	82,508		15%	59,984		13%	38%
Operating expenses	206,794		38%	182,594		39%	13%
Total costs and expenses	289,302		54%	242,578		52%	19%
International operating earnings	248,700		46%	222,788		48%	12%
Other costs and expenses, net	(1,072,616)			(985,131)			9%
Gain on sale of businesses	—			216,869
Consolidated operating earnings	$	492,541		$	737,094		(33)%

Domestic Segment

•Revenues increased 4% to $3.77 billion in the first nine months of 2021, from $3.65 billion in the same period of 2020. The following factors impacted the year-over-year change in Domestic revenues:

◦Increased implementation activity during the first nine months of 2021 within our federal business, inclusive of ongoing projects with the U.S. Department of Defense and the U.S. Department of Veterans Affairs.

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◦The first nine months of 2021 includes a $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 to affiliates of R1 RCM Inc., on August 3, 2020.

Refer to Note (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 both 2021 and 2020.

•Operating expenses as a percent of revenues were 48% in the first nine months of 2021, compared to 47% in the same period of 2020. These expenses increased 4% to $1.80 billion in the first nine months of 2021, from $1.72 billion in the same period of 2020. The increase in operating expenses was primarily driven by a $68 million pre-tax charge recorded in the first nine months of 2021 in connection with the designation of certain 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 Notes for further information.

International Segment

•Revenues increased 163% to $~~538~~171 million in the first ~~nine~~quarter ~~months~~ of ~~2021~~2022, from $~~465~~166 million in the same period of ~~2020~~2021. The ~~following~~first ~~factors~~quarter ~~impacted~~of 2022 includes a $24 million increase in revenues due to contributions from our April 1, 2021 acquisition of the ~~year-over-year~~Kantar ~~change~~Health business. This increase was partially offset by a reduction in ~~International~~revenues in the first quarter of 2022 attributable to project delays in certain regions in Europe. Refer to Note (2) of the Notes for further information regarding revenues: disaggregated by our business models.

~~◦The~~•Costs ~~first~~of ~~nine~~revenue ~~months~~as ofa ~~2021~~percent ~~includes~~of arevenues ~~$48 million~~were ~~increase~~17% in ~~revenues~~the ~~due~~first quarter of 2022, compared to ~~contributions~~15% ~~from~~in ~~our~~the ~~April~~same 1,period of 2021. ~~acquisition~~The higher costs of revenue as a percent of revenues was primarily driven by the impact of the Kantar Health business acquired on April 1, 2021.

~~◦The~~•Operating ~~first~~expenses ~~nine~~as ~~months~~a percent of ~~2021~~revenues ~~includes~~were a42% ~~$40~~in ~~million~~the ~~reduction~~first inquarter ~~revenues~~of ~~due~~2022, compared to 37% in the ~~sale~~same period of ~~certain~~2021. ofThese ~~our~~expenses ~~business~~increased ~~operations~~16% ~~primarily~~to ~~conducted~~$71 million in ~~Germany~~the ~~and~~first ~~Spain~~quarter toof ~~affiliates~~2022, offrom ~~CompuGroup~~$62 ~~Medical~~million SEin &the Cosame period of 2021. ~~KGaA~~The onincrease ~~July~~in operating expenses is primarily due to the April 1, ~~2020~~2021 acquisition of the Kantar Health business.

◦The remaining difference is attributable to 2021 revenue growth across the majority of our remaining International Segment operations.

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

•Costs of revenue as a percent of revenues were 15% in the first nine months of 2021, compared to 13% in the same period of 2020. The higher costs of revenue as a percent of revenues was primarily driven by the impact of the Kantar Health business acquired on April 1, 2021.

•Operating expenses as a percent of revenues were 38% in the first nine months of 2021, compared to 39% in the same period of 2020. These expenses increased 13% to $207 million in the first nine months of 2021, from $183 million in the same period of 2020. The increase in operating expenses is primarily due to the April 1, 2021 acquisition of the Kantar Health business.

Other Costs and Expenses, Net

~~These~~Operating costs and expenses ~~increased~~not 9%attributed to ~~$1.07~~an ~~billion~~operating insegment ~~the~~include ~~first~~expenses ~~nine~~such ~~months~~as ofsoftware ~~2021~~development, ~~from~~general ~~$985~~and ~~million~~administrative inexpenses, ~~the~~share-based ~~same~~compensation ~~period~~expense, ofcertain ~~2020.~~amortization ~~The~~and ~~increase~~depreciation, iscertain ~~primarily~~organizational ~~due~~restructuring toand ~~pre-tax~~other ~~charges~~expense. ofThese expenses increased 1% to $50 321 million ~~recorded~~ in the first ~~nine~~quarter ~~months~~ of ~~2021~~2022, tofrom ~~reduce~~$317 million in the ~~carrying~~same ~~amount~~period of ~~certain~~2021. ~~capitalized~~The ~~software~~increase ~~development~~is ~~costs~~primarily due to ~~estimated~~a ~~net~~reduction ~~realizable~~in ~~value,~~capitalized assoftware ~~further~~costs ~~discussed~~ in ~~Note~~the ~~(1)~~first quarter of ~~the Notes~~2022.

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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. We have agreed to various customary covenants and agreements in the Merger Agreement, including with respect to the operation of our business prior to the closing of the transaction, such as restrictions on making certain acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and making certain capital expenditures, paying dividends in excess of our regular quarterly dividend, issuing or repurchasing stock and taking other specified actions. We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements.

Our principal sources of liquidity are our cash, cash equivalents (which primarily consist of money market funds, time deposits and commercial paper with original maturities of less than 90 days), short-term investments, borrowings under our Credit Agreement and other sources of debt financing. At ~~September~~March 3031, ~~2021~~2022, we had cash and cash equivalents of $~~460~~710 million and short-term investments of $~~323~~171 million, as compared to cash and cash equivalents of $~~616~~590 million and short-term investments of $~~442~~253 million at December 31, ~~2020~~2021.

We have entered into a Credit Agreement with a syndicate of lenders that provides for an unsecured $1.00225 billion revolving credit loan facility, along with a letter of credit facility up to $~~100~~200 million (which is a sub-facility of the $1.00225 billion revolving credit loan facility). We have the ability to increase the maximum capacity to $1.20725 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~~December ~~2024~~2026, with two one-year extension options that are subject to lender approval. As of ~~September~~March 3031, ~~2021~~2022, we had outstanding revolving credit loans and letters of credit of $600 million and $3016 million, respectively; which reduced our available borrowing capacity to $~~370~~609 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 (6) of the Notes for further information.~~

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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.

	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

The following table summarizes our cash flows in the first three months of 2022 and 2021:

	Nine Months Ended
	Three Months Ended
(In thousands)	~~2021~~2022		~~2020~~2021
Cash collections from clients	$	4,464,651	$	4,085,527
Cash flows from operating activities	$	375,063	$	450,434
Cash paid to employees and suppliers and other	(3,073,278)		(3,051,302)
Cash flows from investing activities	(12,197)		(182,185)
Cash paid for interest	(41,918)		(31,661)
Cash flows from financing activities	(241,334)		117,115
Cash paid for taxes, net of refunds	(95,065)		(78,519)
Effect of exchange rate changes on cash	(1,847)		(3,118)
Total cash from operations	$	1,254,390	$	924,045
Total change in cash and cash equivalents	119,685		382,246
Cash and cash equivalents at beginning of period	589,847		615,615
Cash and cash equivalents at end of period	$	709,532	$	997,861
Free cash flow (non-GAAP)	$	276,370	$	290,959

Cash ~~flows~~ from ~~operations~~Operating increased $330 million in the first nine months of 2021 when compared to the same period of 2020, due primarily to increased collections of client receivables. Days sales outstanding was 76 days in the third quarter of 2021, compared to 77 days for the second quarter of 2021 and 81 days for the third quarter of 2020.Activities


	Three Months Ended
(In thousands)	2022		2021

Cash collections from clients	$	1,399,577	$	1,439,319
Cash paid to employees and suppliers and other	(1,004,910)		(954,120)
Cash paid for interest	(21,667)		(15,549)
Cash paid for taxes, net of refunds	2,063		(19,216)

Total cash from operations	$	375,063	$	450,434

Cash flows from operations decreased $75 million in the first three months of 2022 when compared to the same period of 2021, due primarily to an increase in cash used to fund working capital requirements. Days sales outstanding was 75 days in the first quarter of 2022, compared to 73 days for the fourth quarter of 2021 and 77 days for the first quarter of 2021.

Cash from Investing Activities


	Three Months Ended
(In thousands)	2022		2021

Capital purchases	$	(42,393)	$	(75,925)
Capitalized software development costs	(56,300)		(83,550)
Sales and maturities of investments, net of purchases	91,199		(14,735)
Purchases of other intangibles	(4,703)		(7,975)

Total cash flows from investing activities	$	(12,197)	$	(182,185)

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

Our capital spending in the first three months of 2022 was driven by capitalized equipment purchases primarily to support our managed services business and capitalized spending to support our ongoing software development initiatives. We expect the aggregate of capital purchases and capitalized software development costs to approximate 2021 levels for the remainder of 2022.

Short-term investment activity historically consists of the investment of cash generated by our business in excess of what is necessary to fund operations. 2022 and 2021 activity is impacted by excess cash primarily being used to execute on

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	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)

our capital allocation strategy, including the share repurchases in the 2021 period and cash dividends in both the 2021 and 2022 periods as discussed below.

Cash from Financing Activities

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


	Three Months Ended
(In thousands)	2022		2021

Long-term debt issuance	$	—	$	500,000
Repayment of long-term debt	(225,000)		—
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)	61,811		31,617
Treasury stock purchases	—		(341,715)
Dividends paid	(79,183)		(67,477)
Other	1,038		(5,310)

Total cash flows from financing activities	$	(241,334)	$	117,115

~~Our~~In ~~capital~~March ~~spending in the first nine months of~~ 2021, ~~was~~we ~~driven~~issued by$100 ~~capitalized~~million ~~equipment~~aggregate ~~purchases~~principal ~~primarily~~amount toof ~~support~~Series ~~growth~~2021-A inNotes ~~our managed services business~~ and ~~capitalized~~$400 ~~spending~~million toaggregate ~~support~~principal ~~our~~amount ~~ongoing~~of ~~software~~Series ~~development initiatives. Capital purchases for the full year~~ 2021-B ~~are expected to approximate 2020 levels~~Notes.

~~Short-term~~On ~~investment~~February ~~activity~~15, ~~historically~~2022, ~~consists~~we ofrepaid ~~the investment of cash generated by~~ our ~~business~~$225 inmillion ~~excess~~ of ~~what~~Series is2015-A ~~necessary~~Notes todue ~~fund~~February ~~operations. Both the 2021 and 2020 activity is impacted by excess cash primarily being used to execute on our capital allocation strategy~~15, ~~including the acquisition of businesses~~2022, ~~share~~using ~~repurchases and~~ cash ~~dividends,~~on ~~as discussed below~~hand. ~~The 2020 activity includes the investment of proceeds from the sale of certain business operations in the third quarter of 2020, as discussed below.~~

~~During~~We ~~the~~do ~~first~~not ~~nine~~expect ~~months~~to ofincur ~~2021,~~additional weindebtedness ~~paid $363 million of purchase price consideration~~ in ~~connection with our acquisition of Kantar Health, as further discussed in Note (2) of~~ the ~~Notes~~near-term. ~~We expect to continue seeking and completing strategic business acquisitions, investments, and relationships that are complementary to our business.~~

~~During~~Cash ~~the~~inflows ~~first~~from ~~nine~~stock ~~months~~option exercises are dependent on a number of ~~2020~~factors, weincluding ~~received~~the ~~proceeds~~price of ~~$229~~our ~~million~~common instock, ~~connection~~grant ~~with~~activity ~~certain~~under ~~business~~our ~~divestitures~~stock ~~discussed~~option ~~above~~and equity plans, and overall market volatility. We expect net cash inflows from stock option exercises to continue, tobased ~~evaluate~~on ~~and~~the ~~complete~~number ~~divestiture~~of ~~transactions~~exercisable ~~that~~options ~~are~~as ~~strategic~~of toMarch 31, ~~our~~2022 ~~operational~~and ~~improvement~~our ~~initiatives~~current ~~discussed~~stock ~~above~~price.

During the first ~~nine~~three months of 2021, we ~~received~~repurchased ~~proceeds of $~~4.9 million inshares ~~connection with the sale~~ of our ~~Oaks~~common ~~Campus.~~stock Wefor ~~expect~~total ~~future~~consideration ~~proceeds~~of ~~from~~$350 million. ~~the~~As ~~disposition~~ of ~~real estate held for sale~~March 31, ~~however~~2022, ~~the~~$3.18 ~~amount~~billion ~~and~~remains ~~timing~~available offor ~~such~~repurchase ~~proceeds~~under ~~are~~our ~~dependent~~share ~~upon~~repurchase ~~economic~~program. ~~and~~We ~~market~~do ~~conditions which are~~ not ~~within~~expect ~~our~~to ~~control.~~repurchase ~~Refer~~additional toshares ~~Note~~in ~~(1)~~the ofnear-term as the ~~Notes~~Merger ~~for~~Agreement ~~further~~prohibits ~~information~~us ~~regarding~~from ~~real~~repurchasing ~~estate~~additional ~~held~~shares ~~for~~without ~~sale.~~Parent's consent.

	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)

During the first three months of both 2022 and 2021, we declared and paid quarterly cash 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, including considering the timing of the expected closing of the Oracle transaction, and compliance with covenants under our outstanding debt agreements. The source of funds for such dividends may include cash generated from operations, liquidation of investment holdings and other dispositions of assets.

InFree ~~March~~Cash ~~2021,~~Flow ~~we issued $500 million aggregate principal amount of Series 2021 Senior Notes. In March 2020, we issued $300 million aggregate principal amount of Series 2020-A notes. Refer to Note~~ (6Non-GAAP) ~~of the Notes for further information regarding these, as well as our other debt obligations.~~


	Three Months Ended
(In thousands)	2022		2021

Cash flows from operating activities (GAAP)	$	375,063	$	450,434
Capital purchases	(42,393)		(75,925)
Capitalized software development costs	(56,300)		(83,550)

Free cash flow (non-GAAP)	$	276,370	$	290,959

Free cash flow decreased $15 million in the first three months of 2022 compared to the same period in 2021, primarily due to a reduction in cash from operations, partially offset by a reduction in capital 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

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Wemost ~~may~~directly ~~incur~~comparable ~~additional~~to ~~indebtedness~~free incash ~~the~~flow. ~~next~~The 12presentation ~~months,~~of ~~which~~free ~~will~~cash ~~primarily~~flow beis ~~dependent~~not onmeant ~~cash~~to ~~flows~~be ~~from~~considered ~~operations~~in isolation, ~~market~~nor ~~interest~~as ~~rates,~~a ~~and~~substitute ~~the~~for, ~~timing~~or ofsuperior ~~business~~to, ~~acquisition~~GAAP results, and ~~capital~~investors ~~allocation~~should ~~activity.~~be ~~The~~aware ~~proceeds~~that ~~from~~non-GAAP ~~such~~measures ~~indebtedness~~have ~~would~~inherent limitations and should be ~~deployed~~read only in ~~accordance~~conjunction with our ~~capital~~consolidated ~~allocation~~financial ~~strategy,~~statements ~~which~~prepared ~~may~~in ~~include~~accordance ~~share~~with ~~repurchases~~GAAP. ~~and~~Free ~~dividend~~cash ~~payments~~flow ~~(as~~may ~~discussed~~also ~~further~~be ~~below),~~different asfrom ~~well~~similar asnon-GAAP ~~for~~financial ~~general~~measures ~~corporate~~used ~~purposes,~~by ~~including~~other ~~acquisitions~~companies and ~~investments.~~may ~~The~~not ~~terms~~be ~~and~~comparable ~~availability~~to similarly titled captions of ~~any~~other ~~such~~companies ~~debt~~due ~~financing~~to ~~may~~potential beinconsistencies ~~impacted~~in bythe ~~economic~~method ~~and~~of ~~financial~~calculation. ~~market~~We ~~conditions,~~believe asfree ~~well~~cash asflow ~~our~~is ~~financial~~important ~~condition~~to ~~and~~enable ~~results~~investors ofto ~~operations~~better atunderstand ~~the~~and ~~time~~evaluate weour ~~seek~~ongoing ~~such~~operating ~~financing,~~results and ~~there~~allows ~~can~~for begreater notransparency ~~assurances~~in ~~that~~the wereview ~~would~~and beunderstanding ~~able~~of toour ~~obtain~~overall ~~such~~financial, ~~financing~~operational onand ~~terms~~economic ~~that~~performance, ~~will~~because befree ~~acceptable~~cash orflow ~~advantageous~~takes into account certain capital expenditures necessary to usoperate our business.

~~Cash~~Forward ~~inflows~~Looking 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 2021 based on the number of exercisable options as of September 30, 2021 and our current stock price.Statements

~~During~~All ~~the~~statements ~~first~~contained ~~nine~~in ~~months~~this ofquarterly ~~2021~~report on Form 10-Q that do not directly and ~~2020,~~exclusively werelate ~~repurchased~~to 14historical facts constitute forward-looking statements.~~8 million~~ ~~shares~~Forward-looking statements are based on the current beliefs, expectations and assumptions of ~~our~~Cerner's ~~common~~management ~~stock~~with ~~for~~respect ~~total~~to ~~consideration~~future events and are subject to a number of $1significant risks and uncertainties.~~12 billion~~ It is important to note that Cerner's performance, and 9actual results, financial condition or business could differ materially from those expressed in such forward-looking statements.2 ~~million~~The ~~shares~~words "will," “current,” "believe," "plans," "may," "expect," "expected," "anticipated," "strategy," "opportunities," "future," "estimated," "objectives", or the negative of these words, variations thereof or similar expressions are intended to identify such forward-looking statements. For example, our ~~common~~forward-looking ~~stock~~statements include statements regarding our expectations, opportunities or plans for ~~total~~growth; ~~consideration~~the proposed acquisition of ~~$650~~us ~~million~~by Oracle and its affiliates; 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, ~~respectively.~~cash Asrequirements and sources of ~~September 30,~~liquidity; ~~2021,~~the anexpected ~~aggregate~~revenue contributions of $3acquired businesses; and our capital allocation strategies and plans.55 ~~billion~~Factors ~~remained~~that ~~available~~could ~~for~~cause ~~repurchase~~or ~~under~~contribute to actual results differing materially, include but are not limited to: potential disruptions to our ~~share~~business ~~repurchase~~caused ~~program.~~by Wethe proposed acquisition of us by Oracle; the possibility that the proposed acquisition will ~~continue~~not close or that the closing may be delayed; stockholder litigation could prevent or delay the closing of the transaction or otherwise impact our business, operating results and financial condition; the impact of the COVID-19 pandemic on how Cerner and its customers are operating their businesses and the duration and extent to ~~repurchase~~which ~~shares~~the ~~under~~pandemic will impact Cerner's future results of operations; the possibility of interruption at our ~~share~~data ~~repurchase~~centers ~~program~~or client support facilities, ~~but~~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 and interrupt clients' access to their data; the ~~amount~~possibility of increased expenses, exposure to legal claims and ~~timing~~regulatory actions and reputational harm associated with a security breach; 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 ~~such~~intellectual ~~repurchases~~property ~~will~~rights of others, or may be ~~dependent~~infringed onor amisappropriated ~~number~~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; the possibility that Cerner may be adversely affected by other economic, business, and/or competitive factors, including 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 ~~price~~failure to achieve projected synergies, or divestitures; managing growth in the new markets in which we offer solutions, healthcare devices or services; long sales cycles for our solutions and services; risks related to our dependence on strategic relationships and third party suppliers; 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 cost reduction activities; changing political, economic and regulatory influences, which could impact the purchasing practices and operations of our ~~common~~clients ~~stock~~and increase costs to deliver compliant solutions and ~~other~~services; ~~cash~~non-compliance ~~flow~~with ~~needs.~~laws, ~~There~~regulations isor nocertain ~~assurance~~industry initiatives or failure to deliver solutions or services that weenable 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; risks associated with our outstanding and future indebtedness, such as compliance with restrictive covenants, which may limit our flexibility to operate our business; risk that our capital allocation strategy will ~~repurchase~~not upbe 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 ~~full~~U.S. ~~amount~~and ~~remaining~~non-U.S. ~~under~~countries; our ~~program.~~strategy ~~Refer~~to transition to ~~Note~~a ~~(10)~~subscription ofbased ~~the~~recurring ~~Notes~~revenue ~~for~~model ~~further~~and ~~information~~continued ~~regarding~~modernization of our ~~share~~technology ~~repurchase~~may ~~program.~~adversely affect our near-term revenue growth and results of operations; the

During the first nine months of both 2021 and 2020, we declared and paid quarterly cash 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.25

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.

	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 $304 million in the first nine months of 2021 compared to the same period in 2020, primarily due to increased cash from operations, partially offset by an increase in capital spending. Free cash flow is a non-GAAP financial measure used by management, along with GAAP results, to analyze our earnings quality and overall cash generation of the business, and for management compensation purposes. We define free cash flow as cash flows from operating activities reduced by capital purchases and capitalized software development costs. The table above sets forth a reconciliation of free cash flow to cash flows from operating activities, which we believe is the GAAP financial measure most directly comparable to free cash flow. The presentation of free cash flow is not meant to be considered in isolation, nor as a substitute for, or superior to, GAAP results, and investors should be aware that non-GAAP measures have inherent limitations and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Free cash flow may also be different from similar non-GAAP financial measures used by other companies and may not be comparable to similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe free cash flow is important to enable investors to better understand and evaluate our ongoing operating results and allows for greater transparency in the review and understanding of our overall financial, operational and economic performance, because free cash flow takes into account certain capital expenditures necessary to operate our business.

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potential for losses resulting from asset impairment charges; potential variations in our sales forecasts compared to actual sales; risks that our revenue growth may be lower than anticipated and/or that the mix of revenue shifts to low margin revenue; variations in our quarterly operating results; volatility in the trading price of our common stock and the timing and volume of market activity; and risks associated with fluctuations in foreign currency exchange rates. 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, or in materials incorporated herein or therein by reference. Forward-~~Looking~~looking ~~Statements~~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.

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. 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," "strategy," "opportunities," "future," "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 extent to which the COVID-19 pandemic and measures taken in response thereto could adversely affect our financial condition, future bookings and results of 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; 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, 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; 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 U.S. and non-U.S. countries; the potential for losses resulting from asset impairment charges; potential variations in our sales forecasts compared to actual sales; risks that our revenue growth may be lower than anticipated and/or that the mix of revenue shifts to low margin revenue; variations in our quarterly operating results; volatility in the trading price of our common stock and the timing and volume of market activity; risks associated with fluctuations in foreign currency exchange rates; and our directors’ authority to issue preferred stock and the 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, 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~~March 3031, ~~2021~~2022, 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.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we are involved in litigation which is incidental to our business. InThere ~~our~~have ~~opinion,~~been no ~~litigation~~material developments to ~~which~~the welegal ~~are~~proceedings ~~currently~~previously areported ~~party~~in isour ~~likely~~2021 toannual ~~have~~report aon ~~material~~Form ~~adverse~~10-K. ~~effect~~In on our ~~consolidated financial condition~~opinion, ~~results~~no ~~of operations, or cash flows.~~

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~~Item~~litigation 2.to ~~Unregistered~~which ~~Sales~~we ofare ~~Equity~~currently ~~Securities~~a ~~and~~party ~~Use~~is likely to have a material adverse effect on our consolidated financial condition, results of ~~Proceeds~~operations, or cash flows.

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

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, or any combination thereof. The 2021 Share Repurchase Program will expire on December 31, 2023.During the nine months ended September 30, 2021, we repurchased 14.8 million shares for total consideration of $1.12 billion under our share repurchase programs pursuant to Rule 10b5-1 plans. As of September 30, 2021, an aggregate of $3.55 billion remained available for repurchase under the 2021 Share Repurchase Program.

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Item 6. Exhibits

(a)						Exhibits
10.1*						~~Executive~~Amended Employment Agreement between Cerner Corporation and ~~David~~Nasim T.Afsarmanesh, ~~Feinberg~~incorporated by reference to Exhibit (e)(19) of the Schedule 14D-9 filed by the Company on January 19, 2022
10.2*						~~Time~~Cerner ~~Sharing~~Corporation ~~Agreement~~2011 ~~between~~Omnibus ~~Cerner~~Equity ~~Corporation~~Incentive ~~and~~Plan ~~David~~– T.Time-Based ~~Feinberg~~Restricted Stock Unit Agreement
10.3*						~~Separation~~Cerner ~~Agreement~~Corporation ~~between~~2011 ~~Cerner~~Omnibus ~~Corporation~~Equity ~~and~~Incentive ~~Donald~~Plan ~~Trigg~~– Performance-Based Restricted Stock Unit Agreement
10.4*						Form 2022 Executive Performance Agreement - Section 16 Officer
10.5*						Form Amendment to Executive Severance/Employment Agreement
31.1						Certification of David T. Feinberg pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2						Certification of Mark J. Erceg pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1						Certification of David T. Feinberg pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2						Certification of Mark J. Erceg pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
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, 2021	By:	/s/ Mark J. Erceg
Date: May 3, 2022	By:	/s/ Mark J. Erceg
		Mark J. Erceg
		Executive Vice President and Chief
		Financial Officer (duly authorized
		officer and principal financial officer)

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