cern-20210730
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________ 
FORM 8-K
__________________________________________
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 30, 2021 
Cerner Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware0-1538643-1196944
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
2800 Rock Creek Parkway64117
North Kansas City,Missouri
(Address of Principal Executive Offices)(Zip Code)
(816) 221-1024
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareCERNThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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 provided pursuant to Section 13(a) of the Exchange Act.




Item 2.02 Results of Operations and Financial Condition.

On July 30, 2021, Cerner Corporation ("Cerner") announced that it had released its financial results for the quarter ended June 30, 2021. A copy of the full text of the related press release, which is posted on the Investor Relations section of www.cerner.com under News & Events - Financial Releases, is furnished as Exhibit 99.1 hereto and incorporated by reference into this Item 2.02.

The information in Exhibit 99.1 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise be subject to the liabilities of that section, nor shall it be incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in such filing.

Item 9.01 Financial Statements and Exhibits.
d) Exhibits
Exhibit
Number
Description
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document)





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 hereunto duly authorized.
 
   CERNER CORPORATION
Date: July 30, 2021  By: /s/ Mark J. Erceg
   Mark J. Erceg, Executive Vice President
   and Chief Financial Officer


Document

Exhibit 99.1

Cerner Reports Second Quarter 2021 Results
Delivers Strong Results Across All Key Metrics
GAAP Operating Margin and Diluted EPS Lower Due to Restructuring Charges
Strong Adjusted Operating Margin Expansion and Adjusted Diluted EPS Growth vs. Year Ago Quarter

KANSAS CITY, Mo. - July 30, 2021 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2021 second quarter that ended June 30, 2021.

"I am very pleased with Cerner's top and bottom-line execution in the second quarter, with our results reflecting good progress on our transformation initiatives and a strengthening market presence," said Brent Shafer, Chairman and CEO. "We delivered good revenue growth, expanded Adjusted Operating Margin and increased Adjusted Diluted EPS (non-GAAP) during the quarter while continuing to accelerate innovation and drive client value."

"During the second quarter we took a series of actions which we believe will strengthen our business in the years ahead. Namely, as part of recently implemented productivity measures and a comprehensive review of our business, we performed a sizable reduction in force, took specific measures to shrink our physical (office space) footprint and made some important product rationalization decisions to improve the return on our nearly $800 million annual R&D investment," said Mark Erceg, Executive Vice President and Chief Financial Officer. "We also spent $400 million on share repurchases, which brings our year-to-date purchases to $750 million, because we continue to believe that Cerner stock, at current trading levels, represents a good return on investment for our shareholders."

2021 Second Quarter Highlights
Revenue of $1.457 billion, up 10% compared to $1.330 billion in the second quarter of 2020, which included the largest impact of the pandemic last year.
GAAP operating margin of 3.4%, down from 11.0% in the year-ago quarter, reflecting impacts from employee separation costs, an impairment related to sold and held-for-sale properties, and product rationalization.
Adjusted Operating Margin (non-GAAP) of 20.6%, up 220 basis points from 18.4% in year-ago quarter.
GAAP diluted EPS of $0.11, down 75% compared to $0.44 in year-ago quarter.
Adjusted Diluted EPS (non-GAAP) of $0.80 up 27% compared to $0.63 in year-ago quarter.
GAAP cash flow from operating activities of $369 million, up 43% compared to $259 million in year-ago quarter.
Free Cash Flow (non-GAAP) of $162 million, up 153% compared to $64 million in the year-ago quarter.

Future Period Guidance
Cerner currently expects:
Third quarter 2021 revenue to grow approximately 6% compared to third quarter of 2020
Full year 2021 revenue growth in the mid-single digits
Third quarter 2021 Adjusted Diluted EPS growth of 12% to 15% over the third quarter of 2020
Full year 2021 Adjusted Diluted EPS of approximately $3.25, compared to a prior outlook of more than $3.20
Full year 2021 Free Cash Flow (non-GAAP) of approximately $900 million
Total 2021 share repurchases of up to $1.5 billion









Earnings Conference Call
Cerner will host an earnings conference call to provide additional detail on the Company's results and outlook at 8:00 a.m. CT on July 30, 2021. On the call, Cerner will discuss its results and answer questions from the investment community. The call may also include discussion of Cerner developments, and forward-looking and other material information about business and financial matters. The dial-in number for the conference call is (678) 509-7542; the passcode is Cerner. Cerner recommends joining the call 15 minutes early for registration.

An audio webcast will be available live and archived on the Investor Relations page of Cerner's website at investors.cerner.com (click News & Events, then Events & Presentations).

Information on Non-GAAP Measures and Non-GAAP Guidance
Adjusted Operating Margin, Adjusted Diluted EPS and Free Cash Flow are not recognized terms under GAAP. These non-GAAP financial measures should not be substituted for GAAP operating margin, GAAP diluted earnings per share, or GAAP cash flows from operating activities, respectively, as measures of Cerner's performance, but instead should be utilized as supplemental measures of financial performance in evaluating our business. Please see the accompanying schedule, titled "Reconciliation of GAAP Results to Non-GAAP Results," where our non-GAAP financial measures are defined and reconciled to the most comparable GAAP measures.

Future period non-GAAP guidance includes adjustments for items not indicative of our core operations, which may include, without limitation, items included in the accompanying schedule, titled "Reconciliation of GAAP Results to Non-GAAP Results." Such adjustments may be affected by changes in ongoing assumptions and judgments, as well as nonrecurring, unusual or unanticipated charges, expenses or gains or other items that may not directly correlate to the underlying performance of our business operations. The exact amounts of these adjustments are not currently determinable but may be significant. It is therefore not practicable to provide the comparable GAAP measures or reconcile this future period non-GAAP guidance to the most comparable GAAP measures.

The future period guidance provided in this release reflects the Company's current view that the largest impact from the COVID-19 pandemic has already occurred. While the Company expects project and sales activity to continue improving, the COVID-19 pandemic could still cause unexpected impacts on future results. Therefore, the Company's forward-looking statements are subject to a higher-than-normal amount of risk.

About Cerner
Cerner's health technologies connect people and information systems in thousands of worldwide facilities dedicated to creating smarter and better care for individuals and communities. Recognized globally for innovation, Cerner assists clinicians in making care decisions and assists organizations in managing the health of their populations. The company also offers an integrated clinical and financial system to help manage day-to-day revenue functions, as well as a wide range of services to support clinical, financial and operational needs, focused on people. For more information, visit Cerner.com, The Cerner Blog, The Cerner Podcast or connect on Facebook, Instagram, LinkedIn or Twitter. Nasdaq: CERN. Smarter Care. Better Outcomes. Healthier You.

Investor Contact: Allan Kells, (816) 201-2445, akells@cerner.com
Media Contact: Stephanie Greenwood, (816) 201-2137, Stephanie.Greenwood@cerner.com
Cerner's Internet Home Page: www.cerner.com


All statements in this press release that do not directly and exclusively relate to historical facts constitute forward-looking statements. These 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 "outlook", "guidance", "expects", "expectations", "future", "believe", "position", "plans", "should", "growth" 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 future period guidance and our share repurchase plans. Factors that could cause or contribute to such differences include, but are not limited to 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; 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, the failure to successfully develop and execute succession planning to assure transitions of key associates and their knowledge, relationships and expertise and uncertainties as to how quickly we are able to finalize our CEO succession plans; 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; 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 Cerner's filings with the Securities and Exchange Commission. 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, Cerner undertakes 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.






CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2021 and June 30, 2020
(unaudited)
(In thousands, except per share data) Three Months EndedSix Months Ended
2021202020212020
Revenues$1,456,755 $1,330,349 $2,844,533 $2,742,090 
Costs of revenue261,325 211,963 491,981 466,379 
Margin1,195,430 1,118,386 2,352,552 2,275,711 
Operating expenses
Sales and client service731,077 645,087 1,353,253 1,281,736 
Software development241,600 178,955 433,927 364,275 
General and administrative156,307 134,332 268,672 274,184 
Amortization of acquisition-related intangibles16,886 13,114 29,082 30,242 
Total operating expenses1,145,870 971,488 2,084,934 1,950,437 
Operating earnings49,560 146,898 267,618 325,274 
Other income (loss), net(1,678)24,632 (472)30,227 
Earnings before income taxes47,882 171,530 267,146 355,501 
Income taxes(15,175)(36,782)(62,187)(73,594)
Net earnings$32,707 $134,748 $204,959 $281,907 
Basic earnings per share$0.11 $0.44 $0.68 $0.92 
Basic weighted average shares outstanding300,737 304,776 302,723 307,256 
Diluted earnings per share$0.11 $0.44 $0.67 $0.91 
Diluted weighted average shares outstanding303,591 306,717 305,802 309,520 

Note 1: Our revenues by business model for the three and six months ended June 30, 2021 and June 30, 2020 were as follows:
(In thousands) Three Months EndedSix Months Ended
2021202020212020
Licensed software$175,116 $152,162 $336,777 $310,194 
Technology resale56,860 42,117 102,532 93,604 
Subscriptions98,437 92,052 198,249 186,437 
Professional services537,078 461,082 1,031,500 972,428 
Managed services320,777 307,158 638,153 616,512 
Support and maintenance259,675 274,036 522,999 547,717 
Reimbursed travel8,812 1,742 14,323 15,198 
Total revenues$1,456,755 $1,330,349 $2,844,533 $2,742,090 







CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
For the three and six months ended June 30, 2021 and June 30, 2020
(unaudited)

ADJUSTED OPERATING EXPENSES

(In thousands) Three Months EndedSix Months Ended
2021202020212020
Operating expenses (GAAP)$1,145,870 $971,488 $2,084,934 $1,950,437 
Share-based compensation expense(54,091)(38,200)(101,926)(73,587)
Acquisition-related amortization(16,886)(13,114)(29,082)(30,242)
Organizational restructuring and other expense(178,871)(45,948)(196,066)(86,733)
COVID-19 related expense(1,289)(1,168)(2,649)(3,143)
Adjusted Operating Expenses (non-GAAP)$894,733 $873,058 $1,755,211 $1,756,732 

ADJUSTED OPERATING EARNINGS AND ADJUSTED OPERATING MARGIN

(In thousands) Three Months EndedSix Months Ended
2021202020212020
Operating earnings (GAAP)$49,560 $146,898 $267,618 $325,274 
Share-based compensation expense54,091 38,200 101,926 73,587 
Acquisition-related amortization16,886 13,114 29,082 30,242 
Organizational restructuring and other expense178,871 45,948 196,066 86,733 
COVID-19 related expense1,289 1,168 2,649 3,143 
Adjusted Operating Earnings (non-GAAP)$300,697 $245,328 $597,341 $518,979 
Operating Margin (GAAP)3.40 %11.04 %9.41 %11.86 %
Adjusted Operating Margin (non-GAAP)20.64 %18.44 %21.00 %18.93 %




ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE

(In thousands, except per share data) Three Months EndedSix Months Ended
2021202020212020
Net earnings (GAAP)$32,707 $134,748 $204,959 $281,907 
Pre-tax adjustments for Adjusted Net Earnings:
Share-based compensation expense54,091 38,200 101,926 73,587 
Acquisition-related amortization16,886 13,114 29,082 30,242 
Organizational restructuring and other expense178,871 45,948 196,066 86,733 
COVID-19 related expense1,289 1,168 2,649 3,143 
Investment gains— (25,933)— (26,410)
After-tax adjustments for Adjusted Net Earnings:
Income tax effect of pre-tax adjustments(47,318)(15,544)(64,168)(32,803)
Share-based compensation permanent tax items(559)1,270 852 (4,041)
Valuation allowance on deferred tax assets6,153 — 6,153 3,318 
Adjusted Net Earnings (non-GAAP)$242,120 $192,971 $477,519 $415,676 
Diluted weighted average shares outstanding303,591 306,717 305,802 309,520 
Diluted earnings per share (GAAP)$0.11 $0.44 $0.67 $0.91 
Adjusted Diluted Earnings Per Share (non-GAAP)$0.80 $0.63 $1.56 $1.34 

FREE CASH FLOW

(In thousands) Three Months EndedSix Months Ended
2021202020212020
Cash flows from operating activities (GAAP)$369,135 $258,590 $819,569 $542,096 
Capital purchases(123,356)(117,048)(199,281)(166,296)
Capitalized software development costs(83,558)(77,538)(167,108)(151,393)
Free Cash Flow (non-GAAP)$162,221 $64,004 $453,180 $224,407 
Cash flows from investing activities (GAAP)$(728,634)$(248,435)$(910,819)$(385,046)
Cash flows from financing activities (GAAP)$(392,493)$(26,608)$(275,378)$(322,569)

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"). However, we supplement our GAAP results with certain non-GAAP financial measures, which we believe 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. These non-GAAP financial measures are not meant to be considered in isolation, 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 Cerner's consolidated financial statements prepared in accordance with GAAP. These non-GAAP measures 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 calculations. We provide the measures of Adjusted Operating Expenses, Adjusted Operating Earnings, Adjusted Operating Margin, Adjusted Net Earnings and Adjusted Diluted Earnings Per Share as such measures are used by management, along with GAAP results, to analyze Cerner's business, make strategic decisions, assess long-term trends on a comparable basis, and for management compensation purposes. We provide the measure of Free Cash Flow as such measure takes into account certain capital expenditures necessary to operate our business. Free Cash Flow is 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 calculate each of our non-GAAP financial measures as follows:

Adjusted Operating Expenses - Consists of GAAP operating expenses adjusted for: (i) share-based compensation expense, (ii) acquisition-related amortization, (iii) organizational restructuring and other expense, and (iv) COVID-19 related expense.

Adjusted Operating Earnings - Consists of GAAP operating earnings adjusted for: (i) share-based compensation expense, (ii) acquisition-related amortization, (iii) organizational restructuring and other expense, and (iv) COVID-19 related expense.

Adjusted Operating Margin - Consists of Adjusted Operating Earnings, as defined above, divided by revenues, in the applicable period; the result presented as a percentage.

Adjusted Net Earnings - Consists of GAAP net earnings adjusted for: (i) share-based compensation expense, (ii) acquisition-related amortization, (iii) organizational restructuring and other expense, (iv) COVID-19 related expense, (v) investment gains, (vi) the income tax effect of the aforementioned items, (vii) share-based compensation permanent tax items, and (viii) valuation allowance on deferred tax assets.

Adjusted Diluted Earnings Per Share - Consists of Adjusted Net Earnings, as defined above, divided by diluted weighted average shares outstanding, in the applicable period.

Free Cash Flow - Consists of GAAP cash flows from operating activities, less capital purchases and capitalized software development costs.

Adjustments included in the calculations above are described below:

Share-based compensation expense - Non-cash expense arising from our equity compensation and stock purchase plans available to our associates and directors. We exclude share-based compensation expense as we believe the amount of such non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations. Share-based compensation expense is included in our Condensed Consolidated Statements of Operations as follows:

(In thousands) Three Months EndedSix Months Ended
2021202020212020
Sales and client service$24,083 $20,079 $47,222 $34,981 
Software development6,462 5,513 12,580 9,782 
General and administrative23,546 12,608 42,124 28,824 
Total share-based compensation expense$54,091 $38,200 $101,926 $73,587 

Acquisition-related amortization - Non-cash expense consisting of the amortization of customer relationships, acquired technology, and trade name intangible assets recorded in connection with our acquisitions of the Health Services business in February 2015, AbleVets in October 2019, and all subsequent acquisitions. We exclude acquisition-related amortization as we believe the amount of such non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations. Such amount is included in our Condensed Consolidated Statements of Operations in the caption "Amortization of acquisition-related intangibles."




Organizational restructuring and other expense - Consists of certain charges incurred in connection with our operational improvement initiatives. Expenses in connection with these efforts 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. We exclude organizational restructuring and other expense as we believe the amount of such expense in any specific period may not directly correlate to the underlying performance of our business operations. Organizational restructuring and other expense is included in our Condensed Consolidated Statements of Operations as follows:

(In thousands) Three Months EndedSix Months Ended
2021202020212020
Sales and client service$78,335 $— $75,191 $933 
Software development45,166 — 45,166 — 
General and administrative55,370 45,948 75,709 85,800 
Total organizational restructuring and other expense$178,871 $45,948 $196,066 $86,733 

Sales and client service includes a $68.159 million pre-tax charge in the second quarter of 2021 to reduce the carrying amount of certain held for sale real estate assets to fair value, less estimated costs to sell. Software development includes a $45.166 million pre-tax charge in the second quarter of 2021 to reduce the carrying amount of certain capitalized software development costs to estimated net realizable value.

COVID-19 related expense - Consists of certain charges incurred that we can clearly and objectively attribute to the impact of the ongoing Coronavirus disease pandemic ("COVID-19"). These charges include expenses incurred related to trade shows for which we withdrew our participation and expenses associated with incremental cleaning and sanitation efforts for facility space that may have been exposed to the virus. We exclude COVID-19 related expense as we believe the amount of such expense in any specific period may not directly correlate to the underlying performance of our business operations. COVID-19 related expense is included in our Condensed Consolidated Statements of Operations as follows:

(In thousands)Three Months EndedSix Months Ended
2021202020212020
Sales and client service$493 $520 $997 $2,475 
Software development240 — 273 — 
General and administrative556 648 1,379 668 
Total COVID-19 related expense$1,289 $1,168 $2,649 $3,143 

Investment gains - Consists of unrealized gains recognized in 2020 on one of our equity investments, which was accounted for in accordance with Accounting Standards Codification Topic 321, Investments-Equity Securities. We have excluded these gains as we believe the amount of such gains do not directly correlate to the underlying performance of our business operations in the periods they were recorded. Such gains are included in our Condensed Consolidated Statements of Operations in the caption "Other income (loss), net."

Income tax effect of pre-tax adjustments - The GAAP effective income tax rate for the applicable quarterly period, adjusted for the impact of a valuation allowance on deferred tax assets of $6.153 million recorded in the second quarter of 2021 and $3.318 million recorded in the first quarter of 2020 as described below, is applied to pre-tax adjustments for Adjusted Net Earnings.

Share-based compensation permanent tax items - Consists of permanent items impacting the Company's income tax provision related to our share-based compensation arrangements, including net excess tax benefits recognized upon the exercise of stock options and the vesting of restricted share and share unit awards. We exclude such items as we believe the amount of such items in any specific period may not directly correlate to the underlying performance of our business operations. Such amount is included in our Condensed Consolidated Statements of Operations in the caption "Income taxes."

Valuation allowance on deferred tax assets - Consists of a valuation allowance recorded against certain deferred tax assets where certain strategic decisions associated with our operational improvement initiatives have made it more likely than not that such deferred tax assets will not be realized. We have excluded this charge as we believe the amount of such expense does not directly correlate to the underlying performance of our business operations in the period recorded. Such amount is included in our Condensed Consolidated Statements of Operations in the caption "Income taxes."




CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2021 and December 31, 2020
(unaudited)
(In thousands)20212020
Assets
Current assets:
Cash and cash equivalents$246,404 $615,615 
Short-term investments638,488 442,473 
Receivables, net1,237,230 1,168,712 
Inventory20,168 23,027 
Prepaid expenses and other398,510 401,160 
Total current assets2,540,800 2,650,987 
Property and equipment, net1,768,617 1,804,083 
Right-of-use assets95,666 104,536 
Software development costs, net1,001,440 1,009,349 
Goodwill1,129,699 914,520 
Intangible assets, net492,547 329,249 
Long-term investments497,350 510,220 
Other assets194,983 198,152 
Total assets$7,721,102 $7,521,096 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable$332,959 $235,755 
Current installments of long-term debt225,000 — 
Deferred revenue429,219 393,293 
Accrued payroll and tax withholdings332,513 309,814 
Other current liabilities223,203 229,764 
Total current liabilities1,542,894 1,168,626 
Long-term debt1,611,154 1,336,069 
Deferred income taxes389,018 376,035 
Other liabilities151,552 157,799 
Total liabilities3,694,618 3,038,529 
Shareholders' Equity:
Common stock3,769 3,732 
Additional paid-in capital2,509,545 2,288,806 
Retained earnings6,546,615 6,475,551 
Treasury stock(4,914,718)(4,164,718)
Accumulated other comprehensive loss, net(118,727)(120,804)
Total shareholders' equity4,026,484 4,482,567 
Total liabilities and shareholders' equity$7,721,102 $7,521,096 




CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and six months ended June 30, 2021 and June 30, 2020
(unaudited)
Three Months EndedSix Months Ended
(In thousands)2021202020212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings$32,707 $134,748 $204,959 $281,907 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization179,254 171,295 354,567 343,941 
Share-based compensation expense53,941 37,549 101,891 72,580 
Provision for deferred income taxes6,061 2,435 3,232 12,884 
Investment gains— (25,933)— (26,410)
Asset impairments115,812 — 115,812 — 
Changes in assets and liabilities (net of businesses acquired):
Receivables, net(29,450)(25,652)(41,751)(48,426)
Inventory10,279 5,805 2,868 5,509 
Prepaid expenses and other(14,259)(22,750)9,914 (36,431)
Accounts payable23,970 (40,250)54,088 (31,711)
Accrued income taxes(9,793)25,253 11,585 26,358 
Deferred revenue(15,444)(23,827)(676)(66,137)
Other accrued liabilities16,057 19,917 3,080 8,032 
Net cash provided by operating activities369,135 258,590 819,569 542,096 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases(123,356)(117,048)(199,281)(166,296)
Capitalized software development costs(83,558)(77,538)(167,108)(151,393)
Purchases of investments(237,016)(52,763)(558,686)(91,957)
Sales and maturities of investments73,221 44,910 380,156 81,022 
Purchase of other intangibles(8,056)(10,974)(16,031)(20,656)
Acquisition of businesses, net of cash acquired(349,869)(35,022)(349,869)(35,766)
Net cash used in investing activities(728,634)(248,435)(910,819)(385,046)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance— — 500,000 300,000 
Proceeds from exercise of stock options118,386 38,705 154,900 156,908 
Payments to taxing authorities in connection with shares directly withheld from associates(31,449)(9,700)(36,346)(14,217)
Treasury stock purchases(408,285)— (750,000)(650,000)
Dividends paid(67,783)(55,054)(135,260)(111,101)
Other(3,362)(559)(8,672)(4,159)
Net cash used in financing activities(392,493)(26,608)(275,378)(322,569)
Effect of exchange rate changes on cash and cash equivalents535 936 (2,583)(6,429)
Net decrease in cash and cash equivalents(751,457)(15,517)(369,211)(171,948)
Cash and cash equivalents at beginning of period997,861 285,412 615,615 441,843 
Cash and cash equivalents at end of period$246,404 $269,895 $246,404 $269,895