cern-20220503
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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): May 3, 2022 
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 May 3, 2022, Cerner Corporation ("Cerner") announced that it had released its financial results for the first quarter ended March 31, 2022. 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: May 3, 2022  By: /s/ Mark J. Erceg
   Mark J. Erceg, Executive Vice President
   and Chief Financial Officer


Document

Exhibit 99.1

CERNER REPORTS FIRST QUARTER 2022 RESULTS
Margin Expansion Drives Strong Earnings Growth


KANSAS CITY, Mo. - May 3, 2022 - Cerner Corporation (Nasdaq: CERN) today announced results for the 2022 first quarter that ended March 31, 2022.

"I am pleased with Cerner's solid results in the first quarter," said David Feinberg, M.D., president and CEO. "Our results reflect solid execution across the business and strong contributions from Cerner EnvizaSM, which is well positioned to build on a terrific first year by accelerating the discovery, development, and deployment of therapies. We continue to make progress towards the closing of the proposed acquisition by Oracle, and I remain excited by the potential for the combination to further our purpose of empowering those devoted to delivering care and keeping people healthy."

2022 First Quarter Highlights

Revenue of $1.430 billion, up 3% compared to $1.388 billion in the first quarter of 2021.
GAAP operating margin of 17.6%, up 190 basis points from 15.7% in the year-ago quarter.
Adjusted Operating Margin (non-GAAP) of 22.7%, up 130 basis points from 21.4% in the year-ago quarter.
GAAP diluted EPS of $0.70, up 25% compared to $0.56 in the year-ago quarter.
Adjusted Diluted EPS (non-GAAP) of $0.89, up 17% compared to $0.76 in the year-ago quarter.
GAAP cash flow from operating activities of $375 million, down 17% compared to $450 million in the year-ago quarter.
Free Cash Flow (non-GAAP) of $276 million, down 5% compared to $291 million in the year-ago quarter.

"During the first quarter, we delivered revenue growth in line with our expectations and expanded Adjusted Operating Margin by 130 basis points, resulting in strong Adjusted Diluted EPS growth of 17%," said Mark Erceg, executive vice president and chief financial officer. "The margin expansion this quarter was on top of strong margin expansion over the past two years. Since the first quarter of 2020, our GAAP operating margin has expanded 500 basis points and our Adjusted Operating Margin has expanded 330 basis points, reflecting the ongoing impact of our organizational transformation, productivity measures, more focused product strategy, and cost control initiatives. These efforts are improving our ability to create value for our clients while also driving better financial performance."

Proposed Merger with Oracle

On Dec. 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 Cedar Acquisition Corporation ("Merger Subsidiary"), OC Acquisition LLC and Oracle Corporation ("Oracle"). Pursuant to the Merger Agreement, on Jan. 19, 2022, Oracle commenced a cash tender offer (the "Offer") to acquire all of the issued and outstanding shares of our common stock, par value $0.01 per share (the "Shares") 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. Following the completion of the Offer, Merger Subsidiary will merge with and into Cerner (the "Merger"), with Cerner continuing as the surviving corporation and as a wholly owned indirect subsidiary of Oracle, at which time the Shares would cease to be publicly held. We expect the Merger to close in calendar year 2022, subject to receiving certain regulatory approvals and satisfying other closing conditions, including Cerner stockholders tendering a majority of Cerner's outstanding Shares in the Offer. Additional information about the Offer and Merger and the Merger Agreement is set forth in our filings with the Securities and Exchange Commission ("SEC").




Information on Non-GAAP Measures

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.

Conference Call and Prepared Remarks

Given the proposed acquisition of Cerner by Oracle, Cerner will not be hosting an earnings conference call, issuing prepared remarks, providing financial guidance or repurchasing shares.

Additional Information about the Acquisition and Where to Find It

In connection with the proposed acquisition, Oracle has commenced a tender offer for the Shares. This document is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell the Shares, nor is it a substitute for the tender offer materials that Oracle and its acquisition subsidiary have filed with the SEC upon commencement of the tender offer. Oracle and its acquisition subsidiary have filed tender offer materials on Schedule TO, and Cerner has filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC with respect to the tender offer. The tender offer materials (including an Offer to Purchase, a related Letter of Transmittal and certain other tender offer documents) and the Solicitation/Recommendation Statement contain important information. Holders of the Shares are urged to read these documents carefully (as each may be amended or supplemented from time to time) because they contain important information that holders of Shares should consider before making any decision regarding tendering their Shares. The Offer to Purchase, the related Letter of Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, are available to all holders of the Shares at no expense to them. The tender offer materials and the Solicitation/Recommendation Statement are available for free at the SEC's website at www.sec.gov.

About Cerner

Cerner's health technologies connect people and information systems at thousands of contracted provider facilities worldwide 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 a connected clinical and financial ecosystem 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, Cerner Perspectives, connect on Facebook, Instagram, LinkedIn, Twitter or join the discussion on Cerner's podcast Perspectives on Health & Tech. Nasdaq: CERN.

Investor Contact: Allan Kells, (816) 201-2445, akells@cerner.com
Media Contact: Stephanie Greenwood, (816) 201-2137, Stephanie.Greenwood@cerner.com
Cerner's Website: 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 "positioned", "proposed", "potential", "expect", "will", "would", "expectations", 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 the proposed acquisition of Cerner by Oracle and its affiliates and general business outlook. Factors that could cause or contribute to such differences include, but are not limited to, potential disruptions to our business caused by the proposed acquisition of us by Oracle; the possibilities that the proposed acquisition will 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 ability of Cerner to attract or retain customers and key personnel and to maintain relationships with key suppliers; litigation or claims relating to the proposed acquisition or Cerner's assets and business; general economic conditions in regions in which either Cerner or Oracle does business; the impact of the COVID-19 pandemic on how Cerner and its customers are operating their businesses and the duration and extent to which the pandemic will impact Cerner's future results of operations; 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; and changing political, economic and regulatory influences. Additional discussion of these and other risks, uncertainties and factors affecting Cerner's business is contained in Cerner's filings with the SEC. 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 months ended March 31, 2022 and March 31, 2021
(unaudited)
(In thousands, except per share data) Three Months Ended
20222021
Revenues$1,429,801 $1,387,778 
Costs of revenue243,848 230,656 
Margin1,185,953 1,157,122 
Operating expenses
Sales and client service612,997 622,176 
Software development195,091 192,327 
General and administrative109,279 112,365 
Amortization of acquisition-related intangibles16,602 12,196 
Total operating expenses933,969 939,064 
Operating earnings251,984 218,058 
Other income, net26 1,206 
Earnings before income taxes252,010 219,264 
Income taxes(45,881)(47,012)
Net earnings$206,129 $172,252 
Basic earnings per share$0.70 $0.57 
Basic weighted average shares outstanding293,412 304,731 
Diluted earnings per share$0.70 $0.56 
Diluted weighted average shares outstanding296,336 308,031 

Note 1: Our revenues by business model for the three months ended March 31, 2022 and March 31, 2021 were as follows:

(In thousands) Three Months Ended
20222021
Licensed software$189,421 $161,661 
Technology resale47,483 45,672 
Subscriptions94,423 99,812 
Professional services525,260 494,422 
Managed services324,626 317,376 
Support and maintenance242,880 263,324 
Reimbursed travel5,708 5,511 
Total revenues$1,429,801 $1,387,778 







CERNER CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS
For the three months ended March 31, 2022 and March 31, 2021
(unaudited)

ADJUSTED OPERATING EXPENSES
(In thousands) Three Months Ended
20222021
Operating expenses (GAAP)$933,969 $939,064 
Share-based compensation expense(34,719)(47,835)
Acquisition-related amortization(16,602)(12,196)
Organizational restructuring and other expense(21,179)(17,195)
COVID-19 related expense(565)(1,360)
Adjusted Operating Expenses (non-GAAP)$860,904 $860,478 

ADJUSTED OPERATING EARNINGS AND ADJUSTED OPERATING MARGIN
(In thousands) Three Months Ended
20222021
Operating earnings (GAAP)$251,984 $218,058 
Share-based compensation expense34,719 47,835 
Acquisition-related amortization16,602 12,196 
Organizational restructuring and other expense21,179 17,195 
COVID-19 related expense565 1,360 
Adjusted Operating Earnings (non-GAAP)$325,049 $296,644 
Operating Margin (GAAP)17.62 %15.71 %
Adjusted Operating Margin (non-GAAP)22.73 %21.38 %




ADJUSTED NET EARNINGS AND ADJUSTED DILUTED EARNINGS PER SHARE

(In thousands, except per share data) Three Months Ended
20222021
Net earnings (GAAP)$206,129 $172,252 
Pre-tax adjustments for Adjusted Net Earnings:
Share-based compensation expense34,719 47,835 
Acquisition-related amortization16,602 12,196 
Organizational restructuring and other expense21,179 17,195 
COVID-19 related expense565 1,360 
After-tax adjustments for Adjusted Net Earnings:
Income tax effect of pre-tax adjustments(13,302)(16,850)
Share-based compensation permanent tax items(3,121)1,411 
Adjusted Net Earnings (non-GAAP)$262,771 $235,399 
Diluted weighted average shares outstanding296,336 308,031 
Diluted earnings per share (GAAP)$0.70 $0.56 
Adjusted Diluted Earnings Per Share (non-GAAP)$0.89 $0.76 

FREE CASH FLOW
(In thousands) Three Months Ended
20222021
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 $290,959 
Cash flows from investing activities (GAAP)$(12,197)$(182,185)
Cash flows from financing activities (GAAP)$(241,334)$117,115 

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) the income tax effect of the aforementioned items, and (vi) share-based compensation permanent tax items.

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 Ended
20222021
Sales and client service$18,078 $23,139 
Software development5,564 6,118 
General and administrative11,077 18,578 
Total share-based compensation expense$34,719 $47,835 

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. Also included herein, are $4.450 million of expenses incurred in the first quarter of 2022 in connection with that certain merger agreement dated December 20, 2021 with Oracle Corporation and related affiliates. 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 Ended
20222021
Sales and client service$— $(3,144)
General and administrative21,179 20,339 
Total organizational restructuring and other expense$21,179 $17,195 

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 Ended
20222021
Sales and client service$268 $504 
Software development20 33 
General and administrative277 823 
Total COVID-19 related expense$565 $1,360 

Income tax effect of pre-tax adjustments - The GAAP effective income tax rate for the applicable quarterly period 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."




CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2022 and December 31, 2021
(unaudited)
(In thousands)20222021
Assets
Current assets:
Cash and cash equivalents$709,532 $589,847 
Short-term investments171,180 252,622 
Receivables, net1,178,037 1,161,361 
Inventory27,704 28,159 
Prepaid expenses and other381,404 417,465 
Total current assets2,467,857 2,449,454 
Property and equipment, net1,610,496 1,656,171 
Right-of-use assets76,474 82,940 
Software development costs, net1,003,806 1,000,357 
Goodwill1,129,539 1,131,121 
Intangible assets, net434,900 458,482 
Long-term investments456,398 461,984 
Other assets194,761 193,649 
Total assets$7,374,231 $7,434,158 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable$359,562 $329,582 
Current installments of long-term debt— 225,000 
Deferred revenue456,929 531,234 
Accrued payroll and tax withholdings284,145 317,092 
Other current liabilities278,236 223,350 
Total current liabilities1,378,872 1,626,258 
Long-term debt1,611,303 1,611,256 
Deferred income taxes362,236 395,177 
Other liabilities113,301 121,005 
Total liabilities3,465,712 3,753,696 
Shareholders' Equity:
Common stock3,814 3,802 
Additional paid-in capital2,811,612 2,717,244 
Retained earnings6,877,111 6,751,692 
Treasury stock(5,664,718)(5,664,718)
Accumulated other comprehensive loss, net(119,300)(127,558)
Total shareholders' equity3,908,519 3,680,462 
Total liabilities and shareholders' equity$7,374,231 $7,434,158 




CERNER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2022 and March 31, 2021
(unaudited)
Three Months Ended
(In thousands)20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings$206,129 $172,252 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization175,223 175,313 
Share-based compensation expense33,332 47,950 
Provision for deferred income taxes(36,301)(2,829)
Changes in assets and liabilities:
Receivables, net(16,712)(12,301)
Inventory461 (7,411)
Prepaid expenses and other13,600 24,173 
Accounts payable35,730 30,118 
Accrued income taxes75,323 21,378 
Deferred revenue(72,800)14,768 
Other accrued liabilities(38,922)(12,977)
Net cash provided by operating activities375,063 450,434 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases(42,393)(75,925)
Capitalized software development costs(56,300)(83,550)
Purchases of investments(8,439)(321,670)
Sales and maturities of investments99,638 306,935 
Purchase of other intangibles(4,703)(7,975)
Net cash used in investing activities(12,197)(182,185)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance— 500,000 
Repayment of long-term debt(225,000)— 
Proceeds from exercise of stock options63,394 36,514 
Payments to taxing authorities in connection with shares directly withheld from associates(1,583)(4,897)
Treasury stock purchases— (341,715)
Dividends paid(79,183)(67,477)
Other1,038 (5,310)
Net cash provided by (used in) financing activities(241,334)117,115 
Effect of exchange rate changes on cash and cash equivalents(1,847)(3,118)
Net increase in cash and cash equivalents119,685 382,246 
Cash and cash equivalents at beginning of period589,847 615,615 
Cash and cash equivalents at end of period$709,532 $997,861