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
Number)
|
|
|
|
|
2800 Rockcreek Parkway
North Kansas City, MO
|
64117
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Class
|
|
Outstanding at April 17, 2019
|
Common Stock, $0.01 par value per share
|
|
325,420,595 shares
|
Part I.
|
Financial Information:
|
|
|
|
|
Item 1.
|
Financial Statements:
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
Part II.
|
Other Information:
|
|
|
|
|
Item 1A.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 6.
|
||
|
|
|
Signatures
|
|
(In thousands, except share data)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
503,161
|
|
|
$
|
374,126
|
|
Short-term investments
|
400,509
|
|
|
401,285
|
|
||
Receivables, net
|
1,159,215
|
|
|
1,183,494
|
|
||
Inventory
|
24,104
|
|
|
25,029
|
|
||
Prepaid expenses and other
|
336,817
|
|
|
334,870
|
|
||
Total current assets
|
2,423,806
|
|
|
2,318,804
|
|
||
|
|
|
|
||||
Property and equipment, net
|
1,790,116
|
|
|
1,743,575
|
|
||
Right-of-use assets
|
134,137
|
|
|
—
|
|
||
Software development costs, net
|
915,149
|
|
|
894,512
|
|
||
Goodwill
|
846,740
|
|
|
847,544
|
|
||
Intangible assets, net
|
385,128
|
|
|
405,305
|
|
||
Long-term investments
|
283,596
|
|
|
300,046
|
|
||
Other assets
|
219,840
|
|
|
198,850
|
|
||
|
|
|
|
||||
Total assets
|
$
|
6,998,512
|
|
|
$
|
6,708,636
|
|
|
|
|
|
||||
Liabilities and Shareholders' Equity
|
|
|
|
||||
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
290,947
|
|
|
$
|
293,534
|
|
Current installments of long-term debt and capital lease obligations
|
—
|
|
|
4,914
|
|
||
Deferred revenue
|
337,811
|
|
|
399,189
|
|
||
Accrued payroll and tax withholdings
|
230,407
|
|
|
195,931
|
|
||
Other current liabilities
|
81,459
|
|
|
69,122
|
|
||
Total current liabilities
|
940,624
|
|
|
962,690
|
|
||
|
|
|
|
||||
Long-term debt and capital lease obligations
|
438,823
|
|
|
438,802
|
|
||
Deferred income taxes
|
343,788
|
|
|
336,379
|
|
||
Other liabilities
|
146,128
|
|
|
42,376
|
|
||
Total liabilities
|
1,869,363
|
|
|
1,780,247
|
|
||
|
|
|
|
||||
Shareholders' Equity:
|
|
|
|
||||
Common stock, $.01 par value, 500,000,000 shares authorized, 362,919,192 shares issued at March 30, 2019 and 362,212,843 shares issued at December 29, 2018
|
3,629
|
|
|
3,622
|
|
||
Additional paid-in capital
|
1,591,138
|
|
|
1,559,562
|
|
||
Retained earnings
|
5,742,744
|
|
|
5,576,525
|
|
||
Treasury stock, 37,905,013 shares at March 30, 2019 and December 29, 2018
|
(2,107,768
|
)
|
|
(2,107,768
|
)
|
||
Accumulated other comprehensive loss, net
|
(100,594
|
)
|
|
(103,552
|
)
|
||
Total shareholders' equity
|
5,129,149
|
|
|
4,928,389
|
|
||
|
|
|
|
||||
Total liabilities and shareholders' equity
|
$
|
6,998,512
|
|
|
$
|
6,708,636
|
|
|
Three Months Ended
|
||||||
(In thousands, except per share data)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Revenues
|
$
|
1,389,877
|
|
|
$
|
1,292,861
|
|
Costs and expenses:
|
|
|
|
||||
Costs of revenue
|
253,204
|
|
|
231,278
|
|
||
Sales and client service
|
640,187
|
|
|
589,948
|
|
||
Software development (Includes amortization of $56,245 and $50,001, respectively)
|
180,361
|
|
|
161,617
|
|
||
General and administrative
|
96,196
|
|
|
92,294
|
|
||
Amortization of acquisition-related intangibles
|
21,985
|
|
|
22,509
|
|
||
|
|
|
|
||||
Total costs and expenses
|
1,191,933
|
|
|
1,097,646
|
|
||
|
|
|
|
||||
Operating earnings
|
197,944
|
|
|
195,215
|
|
||
|
|
|
|
||||
Other income, net
|
8,432
|
|
|
4,864
|
|
||
|
|
|
|
||||
Earnings before income taxes
|
206,376
|
|
|
200,079
|
|
||
Income taxes
|
(40,157
|
)
|
|
(40,078
|
)
|
||
|
|
|
|
||||
Net earnings
|
$
|
166,219
|
|
|
$
|
160,001
|
|
|
|
|
|
||||
Basic earnings per share
|
$
|
0.51
|
|
|
$
|
0.48
|
|
Diluted earnings per share
|
$
|
0.51
|
|
|
$
|
0.48
|
|
Basic weighted average shares outstanding
|
324,573
|
|
|
332,395
|
|
||
Diluted weighted average shares outstanding
|
327,003
|
|
|
336,534
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Net earnings
|
$
|
166,219
|
|
|
$
|
160,001
|
|
Foreign currency translation adjustment and other (net of taxes (benefit) of $(183) and $920, respectively)
|
2,321
|
|
|
2,794
|
|
||
Unrealized holding gain (loss) on available-for-sale investments (net of taxes (benefit) of $210 and $(293), respectively)
|
637
|
|
|
(898
|
)
|
||
|
|
|
|
||||
Comprehensive income
|
$
|
169,177
|
|
|
$
|
161,897
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net earnings
|
$
|
166,219
|
|
|
$
|
160,001
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
166,671
|
|
|
152,592
|
|
||
Share-based compensation expense
|
19,860
|
|
|
24,935
|
|
||
Provision for deferred income taxes
|
3,998
|
|
|
(3,047
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Receivables, net
|
13,789
|
|
|
(70,608
|
)
|
||
Inventory
|
928
|
|
|
1,445
|
|
||
Prepaid expenses and other
|
(13,318
|
)
|
|
125,550
|
|
||
Accounts payable
|
(10,891
|
)
|
|
7,608
|
|
||
Accrued income taxes
|
4,256
|
|
|
7,195
|
|
||
Deferred revenue
|
(61,547
|
)
|
|
(7,205
|
)
|
||
Other accrued liabilities
|
27,301
|
|
|
10,499
|
|
||
|
|
|
|
||||
Net cash provided by operating activities
|
317,266
|
|
|
408,965
|
|
||
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Capital purchases
|
(119,261
|
)
|
|
(79,711
|
)
|
||
Capitalized software development costs
|
(74,551
|
)
|
|
(73,602
|
)
|
||
Purchases of investments
|
(90,953
|
)
|
|
(151,387
|
)
|
||
Sales and maturities of investments
|
110,104
|
|
|
101,674
|
|
||
Purchase of other intangibles
|
(8,994
|
)
|
|
(8,472
|
)
|
||
|
|
|
|
||||
Net cash used in investing activities
|
(183,655
|
)
|
|
(211,498
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Repayment of long-term debt
|
—
|
|
|
(75,000
|
)
|
||
Proceeds from exercise of stock options
|
15,281
|
|
|
10,036
|
|
||
Payments to taxing authorities in connection with shares directly withheld from associates
|
(1,730
|
)
|
|
(1,723
|
)
|
||
Treasury stock purchases
|
(20,542
|
)
|
|
(87,624
|
)
|
||
|
|
|
|
||||
Net cash used in financing activities
|
(6,991
|
)
|
|
(154,311
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
2,415
|
|
|
(680
|
)
|
||
|
|
|
|
||||
Net increase in cash and cash equivalents
|
129,035
|
|
|
42,476
|
|
||
Cash and cash equivalents at beginning of period
|
374,126
|
|
|
370,923
|
|
||
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
503,161
|
|
|
$
|
413,399
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss, Net
|
|||||||||||||
(In thousands)
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 30, 2017
|
359,205
|
|
|
$
|
3,592
|
|
|
$
|
1,380,371
|
|
|
$
|
4,938,866
|
|
|
$
|
(1,464,099
|
)
|
|
$
|
(73,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Exercise of stock options (including net-settled option exercises)
|
667
|
|
|
7
|
|
|
8,331
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Employee share-based compensation expense
|
—
|
|
|
—
|
|
|
24,935
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cumulative effect of accounting change (ASU 2014-09)
|
—
|
|
|
—
|
|
|
—
|
|
|
7,600
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,896
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Treasury stock purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(87,624
|
)
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
160,001
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at March 31, 2018
|
359,872
|
|
|
$
|
3,599
|
|
|
$
|
1,413,637
|
|
|
$
|
5,106,467
|
|
|
$
|
(1,551,723
|
)
|
|
$
|
(71,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 29, 2018
|
362,213
|
|
|
$
|
3,622
|
|
|
$
|
1,559,562
|
|
|
$
|
5,576,525
|
|
|
$
|
(2,107,768
|
)
|
|
$
|
(103,552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Exercise of stock options (including net-settled option exercises)
|
706
|
|
|
7
|
|
|
11,716
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Employee share-based compensation expense
|
—
|
|
|
—
|
|
|
19,860
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,958
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
166,219
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at March 30, 2019
|
362,919
|
|
|
$
|
3,629
|
|
|
$
|
1,591,138
|
|
|
$
|
5,742,744
|
|
|
$
|
(2,107,768
|
)
|
|
$
|
(100,594
|
)
|
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
|
|
2019
|
|
2018
|
||||
Cash paid during the period for:
|
|
|
|
|
|
||||
Interest (including amounts capitalized of $3,797 and $2,811, respectively)
|
|
|
$
|
7,288
|
|
|
$
|
8,199
|
|
Income taxes, net of refunds
|
|
|
22,511
|
|
|
(97,506
|
)
|
|
Three Months Ended
|
||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||
(In thousands)
|
Domestic
Segment
|
International
Segment
|
Total
|
|
Domestic
Segment
|
International
Segment
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Licensed software
|
$
|
140,445
|
|
$
|
14,032
|
|
$
|
154,477
|
|
|
$
|
124,094
|
|
$
|
10,725
|
|
$
|
134,819
|
|
Technology resale
|
49,158
|
|
6,382
|
|
55,540
|
|
|
58,249
|
|
5,127
|
|
63,376
|
|
||||||
Subscriptions
|
77,702
|
|
6,589
|
|
84,291
|
|
|
69,852
|
|
6,784
|
|
76,636
|
|
||||||
Professional services
|
437,229
|
|
53,210
|
|
490,439
|
|
|
379,844
|
|
61,424
|
|
441,268
|
|
||||||
Managed services
|
277,325
|
|
27,068
|
|
304,393
|
|
|
246,145
|
|
22,160
|
|
268,305
|
|
||||||
Support and maintenance
|
226,481
|
|
50,482
|
|
276,963
|
|
|
234,236
|
|
50,328
|
|
284,564
|
|
||||||
Reimbursed travel
|
22,490
|
|
1,284
|
|
23,774
|
|
|
22,676
|
|
1,217
|
|
23,893
|
|
||||||
|
|
|
|
|
|
|
|
||||||||||||
Total revenues
|
$
|
1,230,830
|
|
$
|
159,047
|
|
$
|
1,389,877
|
|
|
$
|
1,135,096
|
|
$
|
157,765
|
|
$
|
1,292,861
|
|
|
Three Months Ended
|
||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||
(In thousands)
|
Domestic
Segment |
International
Segment |
Total
|
|
Domestic
Segment
|
International
Segment |
Total
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Revenue recognized over time
|
$
|
1,135,982
|
|
$
|
142,211
|
|
$
|
1,278,193
|
|
|
$
|
1,028,495
|
|
$
|
144,135
|
|
$
|
1,172,630
|
|
Revenue recognized at a point in time
|
94,848
|
|
16,836
|
|
111,684
|
|
|
106,601
|
|
13,630
|
|
120,231
|
|
||||||
|
|
|
|
|
|
|
|
||||||||||||
Total revenues
|
$
|
1,230,830
|
|
$
|
159,047
|
|
$
|
1,389,877
|
|
|
$
|
1,135,096
|
|
$
|
157,765
|
|
$
|
1,292,861
|
|
(In thousands)
|
March 30, 2019
|
|
December 29, 2018
|
||||
|
|
|
|
||||
Client receivables
|
$
|
1,233,419
|
|
|
$
|
1,237,127
|
|
Less: Allowance for doubtful accounts
|
74,204
|
|
|
64,561
|
|
||
|
|
|
|
||||
Client receivables, net of allowance
|
1,159,215
|
|
|
1,172,566
|
|
||
|
|
|
|
||||
Current portion of lease receivables (under ASC Topic 840)
|
—
|
|
|
10,928
|
|
||
|
|
|
|
||||
Total receivables, net
|
$
|
1,159,215
|
|
|
$
|
1,183,494
|
|
(In thousands)
|
|
Adjusted Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
77,709
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77,709
|
|
Time deposits
|
|
63,300
|
|
|
—
|
|
|
—
|
|
|
63,300
|
|
||||
Commercial paper
|
|
72,965
|
|
|
—
|
|
|
—
|
|
|
72,965
|
|
||||
Total cash equivalents
|
|
213,974
|
|
|
—
|
|
|
—
|
|
|
213,974
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Time deposits
|
|
35,011
|
|
|
—
|
|
|
—
|
|
|
35,011
|
|
||||
Commercial paper
|
|
85,631
|
|
|
17
|
|
|
(30
|
)
|
|
85,618
|
|
||||
Government and corporate bonds
|
|
280,119
|
|
|
84
|
|
|
(323
|
)
|
|
279,880
|
|
||||
Total short-term investments
|
|
400,761
|
|
|
101
|
|
|
(353
|
)
|
|
400,509
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Government and corporate bonds
|
|
1,319
|
|
|
—
|
|
|
(2
|
)
|
|
1,317
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total available-for-sale investments
|
|
$
|
616,054
|
|
|
$
|
101
|
|
|
$
|
(355
|
)
|
|
$
|
615,800
|
|
(In thousands)
|
|
Adjusted Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
76,471
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76,471
|
|
Time deposits
|
|
71,461
|
|
|
—
|
|
|
—
|
|
|
71,461
|
|
||||
Commercial Paper
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
||||
Total cash equivalents
|
|
157,932
|
|
|
—
|
|
|
—
|
|
|
157,932
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Time deposits
|
|
31,947
|
|
|
—
|
|
|
—
|
|
|
31,947
|
|
||||
Commercial paper
|
|
75,445
|
|
|
—
|
|
|
(91
|
)
|
|
75,354
|
|
||||
Government and corporate bonds
|
|
294,941
|
|
|
1
|
|
|
(958
|
)
|
|
293,984
|
|
||||
Total short-term investments
|
|
402,333
|
|
|
1
|
|
|
(1,049
|
)
|
|
401,285
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Government and corporate bonds
|
|
18,247
|
|
|
—
|
|
|
(55
|
)
|
|
18,192
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total available-for-sale investments
|
|
$
|
578,512
|
|
|
$
|
1
|
|
|
$
|
(1,104
|
)
|
|
$
|
577,409
|
|
•
|
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.
|
(In thousands)
|
|
|
Increase /
(Decrease)
|
||
|
|
|
|
||
Right-of-use asset
|
|
|
$
|
129,652
|
|
Prepaid expenses and other
|
|
|
3,968
|
|
|
Other current liabilities
|
|
|
22,767
|
|
|
Other liabilities
|
|
|
110,853
|
|
(In thousands)
|
|
|
|
|
||
Description
|
|
Balance Sheet Classification
|
|
March 30, 2019
|
||
|
|
|
|
|
||
Right-of-use asset
|
|
Right-of-use assets
|
|
$
|
134,137
|
|
Lease liability - current
|
|
Other current liabilities
|
|
29,746
|
|
|
Lease liability - non-current
|
|
Other liabilities
|
|
112,606
|
|
(In thousands)
|
|
|
Operating Lease Obligations
|
||
|
|
|
|
||
Remainder of 2019
|
|
|
$
|
26,506
|
|
2020
|
|
|
31,186
|
|
|
2021
|
|
|
26,576
|
|
|
2022
|
|
|
20,890
|
|
|
2023
|
|
|
14,092
|
|
|
2024 and thereafter
|
|
|
46,689
|
|
|
|
|
|
|
||
Aggregate future payments
|
|
|
165,939
|
|
|
Impact of discounting
|
|
|
(23,587
|
)
|
|
|
|
|
|
||
Aggregate lease liability at March 30, 2019
|
|
|
$
|
142,352
|
|
|
Three Months Ended
|
||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||
|
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
|
$
|
166,219
|
|
|
324,573
|
|
|
$
|
0.51
|
|
|
$
|
160,001
|
|
|
332,395
|
|
|
$
|
0.48
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock options and non-vested shares
|
—
|
|
|
2,430
|
|
|
|
|
—
|
|
|
4,139
|
|
|
|
||||||
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to common shareholders including assumed conversions
|
$
|
166,219
|
|
|
327,003
|
|
|
$
|
0.51
|
|
|
$
|
160,001
|
|
|
336,534
|
|
|
$
|
0.48
|
|
(In thousands, except per share data)
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
|
Weighted-Average
Remaining
Contractual
Term (Yrs)
|
|||||
|
|
|
|
|
|
|
|
|||||
Outstanding at beginning of year
|
21,792
|
|
|
$
|
52.31
|
|
|
|
|
|
||
Granted
|
39
|
|
|
55.28
|
|
|
|
|
|
|||
Exercised
|
(750
|
)
|
|
19.16
|
|
|
|
|
|
|||
Forfeited and expired
|
(329
|
)
|
|
62.92
|
|
|
|
|
|
|||
Outstanding as of March 30, 2019
|
20,752
|
|
|
53.34
|
|
|
$
|
138,631
|
|
|
6.12
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable as of March 30, 2019
|
10,663
|
|
|
$
|
46.77
|
|
|
$
|
131,285
|
|
|
4.40
|
Expected volatility (%)
|
|
26.1
|
%
|
|
Expected dividend rate (%)
|
|
1
|
%
|
|
Expected term (yrs)
|
|
7
|
|
|
Risk-free rate (%)
|
|
2.6
|
%
|
|
Fair value per option
|
|
$
|
15.62
|
|
(In thousands, except per share data)
|
Number of Shares
|
|
Weighted-Average
Grant Date Fair Value
|
|||
|
|
|
|
|||
Outstanding at beginning of year
|
882
|
|
|
$
|
62.82
|
|
Granted
|
10
|
|
|
54.47
|
|
|
Vested
|
(4
|
)
|
|
59.22
|
|
|
Forfeited
|
(6
|
)
|
|
59.62
|
|
|
|
|
|
|
|||
Outstanding as of March 30, 2019
|
882
|
|
|
$
|
62.76
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Stock option and non-vested share and share unit compensation expense
|
$
|
19,860
|
|
|
$
|
24,935
|
|
Associate stock purchase plan expense
|
1,542
|
|
|
1,362
|
|
||
Amounts capitalized in software development costs, net of amortization
|
187
|
|
|
160
|
|
||
|
|
|
|
||||
Amounts charged against earnings, before income tax benefit
|
$
|
21,589
|
|
|
$
|
26,457
|
|
|
|
|
|
||||
Amount of related income tax benefit recognized in earnings
|
$
|
4,201
|
|
|
$
|
5,300
|
|
(In thousands)
|
Domestic
|
|
International
|
|
Other
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Three Months Ended 2019
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
1,230,830
|
|
|
$
|
159,047
|
|
|
$
|
—
|
|
|
$
|
1,389,877
|
|
|
|
|
|
|
|
|
|
||||||||
Costs of revenue
|
228,559
|
|
|
24,645
|
|
|
—
|
|
|
253,204
|
|
||||
Operating expenses
|
572,018
|
|
|
68,169
|
|
|
298,542
|
|
|
938,729
|
|
||||
Total costs and expenses
|
800,577
|
|
|
92,814
|
|
|
298,542
|
|
|
1,191,933
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating earnings (loss)
|
$
|
430,253
|
|
|
$
|
66,233
|
|
|
$
|
(298,542
|
)
|
|
$
|
197,944
|
|
(In thousands)
|
Domestic
|
|
International
|
|
Other
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Three Months Ended 2018
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
1,135,096
|
|
|
$
|
157,765
|
|
|
$
|
—
|
|
|
$
|
1,292,861
|
|
|
|
|
|
|
|
|
|
||||||||
Costs of revenue
|
206,674
|
|
|
24,604
|
|
|
—
|
|
|
231,278
|
|
||||
Operating expenses
|
519,871
|
|
|
69,144
|
|
|
277,353
|
|
|
866,368
|
|
||||
Total costs and expenses
|
726,545
|
|
|
93,748
|
|
|
277,353
|
|
|
1,097,646
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating earnings (loss)
|
$
|
408,551
|
|
|
$
|
64,017
|
|
|
$
|
(277,353
|
)
|
|
$
|
195,215
|
|
(In thousands)
|
2019
|
|
% of
Revenue
|
|
2018
|
|
% of
Revenue
|
|
% Change
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
Revenues
|
$
|
1,389,877
|
|
|
100
|
%
|
|
$
|
1,292,861
|
|
|
100
|
%
|
|
8
|
%
|
Costs of revenue
|
253,204
|
|
|
18
|
%
|
|
231,278
|
|
|
18
|
%
|
|
9
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Margin
|
1,136,673
|
|
|
82
|
%
|
|
1,061,583
|
|
|
82
|
%
|
|
7
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|||||||
Sales and client service
|
640,187
|
|
|
46
|
%
|
|
589,948
|
|
|
46
|
%
|
|
9
|
%
|
||
Software development
|
180,361
|
|
|
13
|
%
|
|
161,617
|
|
|
13
|
%
|
|
12
|
%
|
||
General and administrative
|
96,196
|
|
|
7
|
%
|
|
92,294
|
|
|
7
|
%
|
|
4
|
%
|
||
Amortization of acquisition-related intangibles
|
21,985
|
|
|
2
|
%
|
|
22,509
|
|
|
2
|
%
|
|
(2
|
)%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Total operating expenses
|
938,729
|
|
|
68
|
%
|
|
866,368
|
|
|
67
|
%
|
|
8
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Total costs and expenses
|
1,191,933
|
|
|
86
|
%
|
|
1,097,646
|
|
|
85
|
%
|
|
9
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Operating earnings
|
197,944
|
|
|
14
|
%
|
|
195,215
|
|
|
15
|
%
|
|
1
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|||||||
Other income, net
|
8,432
|
|
|
|
|
4,864
|
|
|
|
|
|
|||||
Income taxes
|
(40,157
|
)
|
|
|
|
(40,078
|
)
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||||
Net earnings
|
$
|
166,219
|
|
|
|
|
$
|
160,001
|
|
|
|
|
4
|
%
|
•
|
Sales and client service expenses as a percent of revenues were
46%
in the
first
quarter of both
2019
and
2018
. These expenses increased
9%
to
$640 million
in the
first
quarter of
2019
, from
$590 million
in the same period of
2018
. Sales and client service expenses include salaries and benefits of sales, marketing, support, and services personnel, depreciation and other expenses associated with our managed services business, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The growth in sales and client service expenses is primarily due to the hiring of services personnel to support growth in services revenue.
|
•
|
Software development expenses as a percent of revenues were
13%
in the
first
quarter of both
2019
and
2018
. Expenditures for software development include ongoing development and enhancement of the
Cerner Millennium
®
and
HealtheIntent
platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle and population health solutions. A summary of our total software development expense in the
first
quarters of
2019
and
2018
is as follows:
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Software development costs
|
$
|
198,667
|
|
|
$
|
185,218
|
|
Capitalized software costs
|
(74,099
|
)
|
|
(73,071
|
)
|
||
Capitalized costs related to share-based payments
|
(452
|
)
|
|
(531
|
)
|
||
Amortization of capitalized software costs
|
56,245
|
|
|
50,001
|
|
||
|
|
|
|
||||
Total software development expense
|
$
|
180,361
|
|
|
$
|
161,617
|
|
•
|
General and administrative expenses as a percent of revenues were
7%
in the
first
quarter of both
2019
and
2018
. These expenses increased
4%
to $
96 million
in the
first
quarter of
2019
, from $
92 million
in the same period in
2018
. 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, acquisition costs and related adjustments. The increase in general and administrative expenses includes $2 million of expenses incurred in the
first
quarter of
2019
in connection with our operational improvement initiatives discussed above. We expect to incur additional expenses in connection with these efforts in future periods in 2019, which may be material. Such additional expenses include charges associated with the 2019 VSP, as further discussed in Note (1) of the notes to condensed consolidated financial statements.
|
•
|
Amortization of acquisition-related intangibles as a percent of revenues was
2%
in the
first
quarter of both
2019
and
2018
. These expenses remained relatively flat at
$22 million
in the
first
quarter of
2019
, and
$23 million
in the same period in
2018
. 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.
|
•
|
Other income, net was
$8 million
in the
first
quarter of
2019
, compared to
$5 million
in the same period of
2018
. The increase is primarily attributable to increased interest income on our cash and investment balances, due to rising interest rates.
|
•
|
Our effective tax rate remained relatively flat at
19.5%
for the
first
quarter of
2019
, and
20.0%
in the same period of
2018
. Refer to Note (7) of the notes to condensed consolidated financial statements for further discussion regarding our effective tax rate.
|
(In thousands)
|
2019
|
|
% of Revenue
|
|
2018
|
|
% of Revenue
|
|
% Change
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Domestic Segment
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
$
|
1,230,830
|
|
|
100%
|
|
$
|
1,135,096
|
|
|
100%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
||||
Costs of revenue
|
228,559
|
|
|
19%
|
|
206,674
|
|
|
18%
|
|
11%
|
||
Operating expenses
|
572,018
|
|
|
46%
|
|
519,871
|
|
|
46%
|
|
10%
|
||
Total costs and expenses
|
800,577
|
|
|
65%
|
|
726,545
|
|
|
64%
|
|
10%
|
||
|
|
|
|
|
|
|
|
|
|
||||
Domestic operating earnings
|
430,253
|
|
|
35%
|
|
408,551
|
|
|
36%
|
|
5%
|
||
|
|
|
|
|
|
|
|
|
|
||||
International Segment
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
159,047
|
|
|
100%
|
|
157,765
|
|
|
100%
|
|
1%
|
||
|
|
|
|
|
|
|
|
|
|
||||
Costs of revenue
|
24,645
|
|
|
15%
|
|
24,604
|
|
|
16%
|
|
—%
|
||
Operating expenses
|
68,169
|
|
|
43%
|
|
69,144
|
|
|
44%
|
|
(1)%
|
||
Total costs and expenses
|
92,814
|
|
|
58%
|
|
93,748
|
|
|
59%
|
|
(1)%
|
||
|
|
|
|
|
|
|
|
|
|
||||
International operating earnings
|
66,233
|
|
|
42%
|
|
64,017
|
|
|
41%
|
|
3%
|
||
|
|
|
|
|
|
|
|
|
|
||||
Other, net
|
(298,542
|
)
|
|
|
|
(277,353
|
)
|
|
|
|
8%
|
||
|
|
|
|
|
|
|
|
|
|
||||
Consolidated operating earnings
|
$
|
197,944
|
|
|
|
|
$
|
195,215
|
|
|
|
|
1%
|
•
|
Revenues increased
8%
to
$1.23 billion
in the
first
quarter of
2019
, from
$1.14 billion
in the same period of
2018
. The growth in revenues includes a $57 million increase in professional services revenue, driven by increased implementation activity. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models.
|
•
|
Costs of revenue as a percent of revenues were
19%
in the
first
quarter of
2019
, compared to
18%
in the same period of
2018
. The marginally higher costs of revenue as a percent of revenues is impacted by the mix of technology resale revenue, whereas the first quarter of 2019 included a higher mix of hardware and devices, which carry a higher cost of revenue than sublicensed software.
|
•
|
Operating expenses as a percent of revenues were
46%
in the
first
quarter of both
2019
and
2018
.
|
•
|
Revenues remained relatively flat at
$159 million
in the
first
quarter of
2019
, and
$158 million
in the same period of
2018
. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models.
|
•
|
Costs of revenue remained flat at
$25 million
in the
first
quarter of both
2019
and
2018
.
|
•
|
Operating expenses remained relatively flat at
$68 million
in the
first
quarter of
2019
, and
$69 million
in the same period of
2018
.
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Cash flows from operating activities
|
$
|
317,266
|
|
|
$
|
408,965
|
|
Cash flows from investing activities
|
(183,655
|
)
|
|
(211,498
|
)
|
||
Cash flows from financing activities
|
(6,991
|
)
|
|
(154,311
|
)
|
||
Effect of exchange rate changes on cash
|
2,415
|
|
|
(680
|
)
|
||
Total change in cash and cash equivalents
|
129,035
|
|
|
42,476
|
|
||
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
374,126
|
|
|
370,923
|
|
||
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
503,161
|
|
|
$
|
413,399
|
|
|
|
|
|
||||
Free cash flow (non-GAAP)
|
$
|
123,454
|
|
|
$
|
255,652
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Cash collections from clients
|
$
|
1,357,139
|
|
|
$
|
1,274,497
|
|
Cash paid to employees and suppliers and other
|
(1,010,074
|
)
|
|
(954,839
|
)
|
||
Cash paid for interest
|
(7,288
|
)
|
|
(8,199
|
)
|
||
Cash paid for taxes, net of refunds
|
(22,511
|
)
|
|
97,506
|
|
||
|
|
|
|
||||
Total cash from operations
|
$
|
317,266
|
|
|
$
|
408,965
|
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Capital purchases
|
$
|
(119,261
|
)
|
|
$
|
(79,711
|
)
|
Capitalized software development costs
|
(74,551
|
)
|
|
(73,602
|
)
|
||
Sales and maturities of investments, net of purchases
|
19,151
|
|
|
(49,713
|
)
|
||
Purchases of other intangibles
|
(8,994
|
)
|
|
(8,472
|
)
|
||
|
|
|
|
||||
Total cash flows from investing activities
|
$
|
(183,655
|
)
|
|
$
|
(211,498
|
)
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Repayment of long-term debt
|
$
|
—
|
|
|
$
|
(75,000
|
)
|
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates)
|
13,551
|
|
|
8,313
|
|
||
Treasury stock purchases
|
(20,542
|
)
|
|
(87,624
|
)
|
||
|
|
|
|
||||
Total cash flows from financing activities
|
$
|
(6,991
|
)
|
|
$
|
(154,311
|
)
|
|
Three Months Ended
|
||||||
(In thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Cash flows from operating activities (GAAP)
|
$
|
317,266
|
|
|
$
|
408,965
|
|
Capital purchases
|
(119,261
|
)
|
|
(79,711
|
)
|
||
Capitalized software development costs
|
(74,551
|
)
|
|
(73,602
|
)
|
||
|
|
|
|
||||
Free cash flow (non-GAAP)
|
$
|
123,454
|
|
|
$
|
255,652
|
|
a)
|
Evaluation of Disclosure Controls and Procedures.
|
b)
|
Changes in Internal Control over Financial Reporting.
|
c)
|
Limitations on Controls.
|
|
|
Total Number of Shares Purchased (a)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b)
|
||||||
Period
|
|
|
|
|
||||||||||
December 30, 2018 - January 26, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
283,172,767
|
|
January 27, 2019 - February 23, 2019
|
|
59
|
|
|
54.95
|
|
|
—
|
|
|
283,172,767
|
|
||
February 24, 2019 - March 30, 2019
|
|
246
|
|
|
57.14
|
|
|
—
|
|
|
283,172,767
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
305
|
|
|
$
|
56.72
|
|
|
—
|
|
|
|
(a)
|
Of the 305 shares of common stock, par value $0.01 per share, presented in the table above, all 305 were originally granted to employees as restricted stock pursuant to our 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"). The Omnibus Plan allows for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock. Pursuant to the Omnibus Plan, the 305 shares reflected above were relinquished by employees in exchange for our agreement to pay U.S. federal and state withholding obligations resulting from the vesting of the Company’s restricted stock.
|
(b)
|
As announced on May 21, 2018, our Board of Directors approved an amendment to our repurchase program that allowed for the Company to repurchase up to an aggregate of
$1.0 billion
of shares of our common stock, excluding transaction costs. As announced on April 9, 2019, our Board of Directors approved a further amendment to this share repurchase program. Under the amendment, the Company is authorized to repurchase up to an additional
$1.2 billion
of shares of our common stock, for an aggregate of
$2.2 billion
, excluding transaction costs. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers. As of the date of this filing,
$1.5 billion
remains available for repurchase under the amended program. Refer to Note (9) of the notes to condensed consolidated financial statements for further information regarding our share repurchase program.
|
(a)
|
|
Exhibits
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
CERNER CORPORATION
|
|
|
|
Registrant
|
|
|
|
|
|
Date: April 26, 2019
|
|
By:
|
/s/ Marc G. Naughton
|
|
|
|
Marc G. Naughton
|
|
|
|
Executive Vice President and Chief
|
|
|
|
Financial Officer (duly authorized
|
|
|
|
officer and principal financial officer)
|
Form 2019 Executive Performance Agreement -
Section 16 Officer
|
||
|
Pursuant to the Cerner Corporation 2018 Performance Compensation Plan, effective as of January 1, 2018
(the “2018 CPP”)
|
|
Weighting
|
Performance Metric
|
PF Applies
|
Scope
|
50%
|
Adjusted Earnings per Share (Adjusted EPS)
|
Yes
|
Corporate
|
25%
|
Revenue
|
Yes
|
Corporate
|
25%
|
Free Cash Flow
|
Yes
|
Corporate
|
Attainment % of Performance Metric*
|
Payout %
|
|
103%
|
140%
|
|
102%
|
120%
|
|
100% (target)
|
100%
|
|
98%
|
75%
|
|
96%
|
50%
|
|
<96%
|
0%
|
Attainment % of Performance Metric*
|
Payout %
|
|
102%
|
140%
|
|
101%
|
120%
|
|
100% (target)
|
100%
|
|
98%
|
75%
|
|
97%
|
50%
|
|
<97%
|
0%
|
Attainment % of Performance Metric*
|
Payout %
|
|
111%
|
140%
|
|
105%
|
120%
|
|
100% (target)
|
100%
|
|
95%
|
75%
|
|
89%
|
50%
|
|
<89%
|
0%
|
1.
|
In order to be eligible for any payments under this Agreement, Cerner must have received your signed Cerner Associate Employment Agreement, which governs the terms and conditions of your employment with Cerner.
|
2.
|
Participation under this Agreement begins as of the beginning of the first full quarter of employment in, or assignment to, an eligible role under the 2018 CPP. If you are newly eligible to participate under this Agreement, you will satisfy the "full quarter" requirement as long as you are actively working within the first sixteen (16) working days of the quarter.
|
3.
|
Payments under the 2018 CPP for any one quarter or the year will be forfeited if you fail to complete performance reviews/self-appraisals as required by Cerner's Human Resources group. Any balance of the payout that could have been attained is forfeited and will not be paid in subsequent quarters.
|
4.
|
Exceptions to the above items will be considered and determined by the Plan Administrator(s), in its sole discretion.
|
1.
|
Termination of Eligibility
: Your eligibility under the 2018 CPP will be terminated immediately in the event of termination of employment with Cerner Corporation or any of its subsidiaries (“Cerner”), for any reason (voluntarily or involuntarily), or transfer to a non-Cerner Performance Plan (CPP) eligible role. Payments are earned only for completed periods (quarters, semi-annual, or annual metrics); i.e., if employment with Cerner is terminated or if participation in the 2018 CPP is otherwise terminated at any time before the completion of a period, no incentive will be earned or paid for that period. You will be entitled to payment for the earned CPP incentive only if you are employed in your CPP-eligible role on the last day of the fiscal period. The 2018 fiscal year calendar can be found in Exhibit III of the 2019 CPP Glossary (effective January 1, 2019) available on uCERN.
|
2.
|
Leave of Absence
: If you are not actively at work for more than six weeks of any quarter, your Performance Metric Payout will be reduced as set forth in the CPP Leave Policy (located on uCERN).
|
3.
|
Repayments to Cerner
: In the event your employment is terminated, for any reason (voluntarily or involuntarily), and you owe money to Cerner, for any reason, or you are required to return incentive payments, Cerner may deduct the amounts owed from all accounts due to you, such as salary, advances, vacation pay, expense reimbursements, incentive payments, and other Cerner monies owed to you. To the extent such amounts are not setoff, you will remain liable for any remaining balance. Cerner reserves the right to collect any outstanding balance through legal means if necessary.
|
4.
|
Incentive Payment Recovery; Clawback
:
|
a.
|
In the Event of a Restatement
. If Cerner implements a Mandatory Restatement (as defined in Section 9 of the 2018 CPP), which restatement relates in whole or in part to the 2019 fiscal year or prior years while you were eligible for CPP, some or all of any amounts paid as an incentive payment earned by you under this Agreement and related to such restated period(s) shall be recoverable and,
as determined appropriate by Cerner's Board of Directors,
must be repaid within ninety (90) days of such restatement(s) or such other period as determined by the Board of Directors. The amount which must be repaid, if any as determined by the Board of Directors, will be up to the amount by which the compensation paid or received exceeds the amount that would have been paid or received based on the financial results reported in the restated financial statement, in each case determined by the Plan Administrator. Any amount required to be repaid may be repaid directly by you, setoff against future amounts owed to you by Cerner under this Agreement (if such amounts will be earned and paid within the ninety (90) day payment period) or any other amount owed to you by Cerner, as permitted by applicable law, or paid as otherwise agreed in writing between you and Cerner. Cerner will not be required to award additional CPP payments should the restated financial statements result in a higher CPP payout.
|
b.
|
In the Event of Fraud or Misconduct
. Additionally, if Cerner implements a Mandatory Restatement, which restatement relates in whole or in part to the 2019 fiscal year or prior years while you were eligible for CPP, all amounts paid as an incentive payment earned by you under this Agreement and related to such restated period(s) shall be fully recoverable if it is determined by Cerner’s Board of Directors that you engaged in fraud or misconduct that caused or partially caused the need for the restatement and must be repaid within ninety (90) days of such restatement(s) or such other period as determined by the Board of Directors. Any amount required to be repaid may be repaid directly by you, setoff against future amounts owed to you by Cerner under this Agreement (if such amounts will be earned and paid within the ninety (90) day payment period) or any other amount owed to you by Cerner, as permitted by applicable law, or paid as otherwise agreed in writing between you and Cerner.
|
c.
|
Dodd-Frank Clawback
. Additionally, any amounts paid under the 2018 CPP and this Agreement may be subject to certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) that will require Cerner to recover certain amounts of incentive compensation paid to certain executive officers if Cerner is required to prepare an accounting restatement due to the material noncompliance of Cerner with any financial reporting requirements under any applicable securities laws. By participating in the 2018 CPP and whether or not any compensation is ultimately paid hereunder, you agree and consent to any forfeiture or required recovery or reimbursement obligations of Cerner with respect to any compensation paid to you that is forfeitable or recoverable by Cerner pursuant to Dodd-Frank and in accordance with any Cerner policies and procedures adopted by the Compensation Committee in order to comply with Dodd Frank, even if such policies or procedures are adopted in the future.
|
5.
|
Modifications to this Agreement
: The Plan Administrator reserves the right, in its sole discretion, to interpret and modify this Agreement: (a) during the performance period to coincide with changing corporate objectives, and (b) during or after the performance period to: (i) avoid windfall payments unintentionally derived from the 2018 CPP design that may result from the highly variable nature of many Client Agreement(s) or market conditions and/or (ii) adjust payments or terminate this Agreement when an Associate’s performance has been documented by management to be unacceptable. Such modifications will occur only under the authority of the Plan Administrator(s), in its sole discretion. Any component of this Agreement may be adjusted to ensure that you receive adequate, yet reasonable, compensation.
|
|
|
|
|
|
|
|
|
|
Date: April 26, 2019
|
|
|
|
|
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/s/ Brent Shafer
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Brent Shafer
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Chief Executive Officer
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(Principal Executive Officer)
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Date: April 26, 2019
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/s/ Marc G. Naughton
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Marc G. Naughton
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Chief Financial Officer
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(Principal Financial Officer)
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1.
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The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Brent Shafer
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Brent Shafer, Chairman of the Board
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and Chief Executive Officer
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(Principal Executive Officer)
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Date: April 26, 2019
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1.
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The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Marc G. Naughton
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Marc G. Naughton, Executive Vice President
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and Chief Financial Officer
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(Principal Financial Officer)
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Date: April 26, 2019
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