SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: ~~January 3, 2015~~December 31, 2016

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 0-15386

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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As of ~~June 28, 2014,~~July 2, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was ~~$15.5~~$17.6 billion based on the closing sale price as reported on the NASDAQ Global Select Market. Shares of common stock held by each executive officer, director and holder of 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status for purposes of this calculation is not intended as a conclusive determination of affiliate status for other purposes.

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DOCUMENTS INCORPORATED BY REFERENCE

Cerner Corporation started doing business as a Missouri corporation in 1980 and it was ~~organized as~~merged into a Delaware corporation in 1986. Unless the context otherwise requires, references in this report to “Cerner,” the “Company,” “we,” “us” or “our” mean Cerner Corporation and its subsidiaries.

Our corporate world headquarters is located in a Company-owned office park in North Kansas City, Missouri, with our principal place of business located at 2800 Rockcreek Parkway, North Kansas City, Missouri 64117. Our telephone number is 816.201.1024. Our Web site, which we use to communicate important business information, can be accessed at: www.cerner.com. We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports available free of charge on or through this Web site as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission ~~(SEC)~~("SEC"). We do not intend for information contained in our website to be part of this annual report on Form 10-K.

Cerner is a leading supplier of health care information technology ~~(HCIT)~~("HCIT"). Our mission is to contribute to the improvement of health care delivery and the health of communities. We offer a wide range of intelligent solutions and services that support the clinical, financial and operational needs of organizations of all sizes. We have systems in more than ~~18,000~~25,000 facilities worldwide, including hospitals, physician practices, laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics, surgery centers, extended care facilities, retail pharmacies, and employer sites.

Cerner solutions are offered on the unified Cerner Millennium^® architecture and on the HealtheIntent™ cloud-based platform. Cerner Millennium is a person-centric computing framework, which includes integrated clinical, financial and management information systems. This architecture allows providers to securely access an individual’s electronic health record ~~(EHR)~~("EHR") at the point of care, and it organizes and proactively delivers information to meet the specific needs of physicians, nurses, laboratory technicians, pharmacists, front- and back-office professionals and consumers. Our HealtheIntent platform is a cloud-based platform ~~that enables~~designed to scale at a ~~new generation of solutions to leverage the increasing amount of data being captured as the~~population level while facilitating health and care ~~industry is digitized.~~at a person and provider level. On the HealtheIntent platform, we offer EHR-agnostic solutions ~~based on sophisticated, statistical algorithms~~ that ~~are intended to~~ help ~~providers predict~~health care systems aggregate, transform and ~~improve outcomes, control costs, improve quality, and~~reconcile data across the continuum of care, manage the health of ~~the~~ populations they ~~serve.~~serve, improve outcomes and lower costs.

On February 2, 2015, Cerner acquired Siemens Health Services (now referred to as "Cerner Health Services"). Cerner Health Services offers a portfolio of enterprise-level clinical and financial health care information technology solutions, as well as departmental, connectivity, population health, and care coordination solutions globally.

We offer a broad range of services, including implementation and training, remote hosting, operational management services, revenue cycle services, support and maintenance, health care data analysis, clinical process optimization, transaction processing, employer health centers, employee wellness programs and third party administrator ~~(TPA)~~("TPA") services for employer-based health plans.

In addition to software and services, we offer a wide range of complementary hardware and devices, both directly from Cerner and as a reseller for third parties.

~~Table of Contents~~

The following table presents our consolidated revenues by major solutions and services and by segment, as a percentage of total revenues:


	For the Years Ended						For the Years Ended
	2014		2013		2012		2016		2015		2014

Revenues by Solutions & Services
System sales	28	%	29	%	34	%	26	%	29	%	28	%
Support and maintenance	21	%	23	%	23	%	21	%	22	%	21	%
Services	48	%	46	%	41	%	51	%	47	%	48	%
Reimbursed travel	3	%	2	%	2	%	2	%	2	%	3	%
	100	%	100	%	100	%	100	%	100	%	100	%

Revenues by Segment
Domestic	89	%	88	%	88	%	89	%	88	%	89	%
Global	11	%	12	%	12	%	11	%	12	%	11	%
	100	%	100	%	100	%	100	%	100	%	100	%

Health Care and Health Care IT Industry

~~There are several trends in~~Health care expenditures continue to consume an increasing portion of most economies. In the U.S., health care ~~that we believe create a favorable environment for Cerner. One is~~spending increased 5.5 percent to $3.20 trillion in 2015, growing to 17.8 percent of the ~~unsustainable rate of growth in health care spending.~~U.S.'s Gross Domestic Product ("GDP"). The Centers for Medicare and Medicaid Services ~~(CMS)~~("CMS") estimates ~~United States~~U.S. health care spending in ~~2014~~2016 at ~~$3.1~~$3.35 trillion, or ~~17.6~~18.1 percent of ~~Gross Domestic Product (GDP),~~GDP, and projects it to be ~~19.3~~20.1 percent of GDP by ~~2023.~~2025. We believe this trajectory is unsustainable and that health care IT ~~is one of few remaining levers that~~ can ~~change this trajectory. Further,~~play an important role in facilitating a shift from a high-cost health care ~~providers continue~~system that incents volume to ~~operate in an environment~~a proactive system that ~~includes what we call ‘raining measures~~incents health, quality and ~~mandates’. Examples of these include:~~efficiency.

For this change to occur, traditional fee-for-service ("FFS") reimbursement models must shift to value-based approaches that are more aligned with quality, outcomes, and efficiency. The largest signal of this shift occurred in January of 2015 when the U.S. Department of Health ~~Information Technology for Economic~~& Human Services laid out a plan to shift 50 percent of Medicare payments to value-based payment models by the end of 2018, and ~~Clinical Health (HITECH) provisions within~~to tie 90 percent of the ~~American Recovery~~remaining traditional FFS payments to quality measures.

A further step towards a value-based model occurred in 2016 with the passage of The Medicare Access and ~~Reinvestment~~CHIP Reauthorization Act ~~(ARRA)~~("MACRA"), which enacts significant reforms to the payment programs under the Medicare Physician Fee Schedule and consolidated three current value-based programs into one. We believe that ~~offer incentives for~~MACRA and other government and private models aligning payment with value, quality and outcomes will drive major changes in the way health care ~~organizations to modernize operations through “Meaningful Use” of HCIT~~is provided in the next decade, and ~~will begin to penalize for non-compliance in coming years;~~

As providers position themselves for these shifts, there has been an increase in industry consolidation, with health systems acquiring hospitals, physician practices, and other venues to control more of the care continuum and achieve economies of scale. We believe this is a positive trend for Cerner as we have relationships with the majority of the largest health systems responsible for most of the acquisition activity, creating an opportunity to offer our solutions and services to the acquired facilities.

WeOver the past several years, we have also seen a shift in the ~~United States~~U.S. marketplace towards a preference for a single platform across inpatient and ambulatory settings. The number of physicians employed by hospitals has increased ~~significantly~~ as hospitals have acquired physician groups, ~~in order to ensure a consistent stream of referrals,~~ and health systems are recognizing the benefit of having a single patient record at the hospital and the physician office. We are benefiting from this trend due to our unified Cerner Millennium platform, ~~that~~which spans multiple venues, and ~~due to~~ significant enhancements we have made to our physician solutions in recent years.

While health care providers are showing a preference for a single platform across multiple venues, there is also an increased push for interoperability across disparate systems to address the reality that no patient’s record will only have information from a single health care IT system. We believe health information should be shareable and accessible among primary care physicians, specialists, and hospital physicians.

~~Table~~As a result, Cerner has led or been a key participant in nearly every major industry effort to advance interoperability and system openness. One example is Cerner’s role as a founding member of ~~Contents~~the CommonWell Health Alliance, an open, not-for-profit industry consortium that brought health care IT firms together for the purpose of enabling safe nationwide interoperability. The vision of CommonWell is for a patient to be able to visit a new doctor, give their consent, and, within moments, have his or her lifetime record available from all the prior places he or she has visited.

CommonWell members represent about 70 percent of the acute care market and about 30 percent of the ambulatory market. CommonWell membership also spans a diverse range of clinical care settings beyond acute and ambulatory, including health IT market leaders in imaging, perinatal, emergency department, laboratory, retail pharmacy, oncology, care management, patient portal, post-acute care, and state and federal government agencies. In 2016, CommonWell and CareQuality, another national interoperability framework, announced an agreement to work together and leverage the respective strengths of each organization to create a level interoperability playing field for all provider organizations that wish to share clinical information using standards-based queries. This agreement is expected to create near-universal connectivity that establishes a baseline query capability for all providers, regardless of their EHR supplier.

Outside the United States, we believe Cerner’s growth opportunities are good, as most countries are also dealing with health care expenditures growing faster than their economies, which is leading to a focus on controlling costs while also improving quality of care.

Cerner Vision and Growth Strategy

For over three decades, Cerner has been continuously building intelligent solutions for the health care industry. Together with our clients, we are creating a future where the health care system works to improve the well-being of individuals and communities. Our vision has always guided our large investments in research and development (R&D), which have created strong levels of organic growth throughout our history. Our proven ability to innovate has led to what we believe to be industry-leading ~~solution and device~~ architectures and an unmatched breadth and depth of solutions and services. The strength of our solutions and services has led to our ability to gain market share in recent years, which has contributed to our growth. We believe we are positioned to continue gaining share in coming years as regulatory requirements and industry shifts continue to pressure health care providers to improve quality while lowering costs, which we believe will require having more sophisticated information technology than many of our competitors provide.

In addition to growth by gaining market share, we believe we have a significant opportunity to grow revenues by expanding our solution footprint with existing clients. For example, less than 35 percent of our Cerner Millennium EHR clients have implemented Cerner revenue cycle solutions. This penetration has been growing in recent years and we expect it to continue because of the preference for having EHR and revenue cycle systems provided on the same platform. There is also opportunity to expand penetration of ~~our core~~other solutions, such as ~~EHRs and computerized physician order entry, and increase penetration of our broad range of complementary solutions that can be offered into our existing client base. Examples include~~ women’s health, anesthesiology, imaging, clinical process optimization, critical care, health care devices, device connectivity, emergency department ~~revenue cycle~~ and surgery.

We also have an opportunity to grow by expanding penetration of services we offer that are targeted at capturing a larger percentage of our clients’ existing IT spending. These services leverage our proven operational capabilities and the success of our CernerWorks^SM managed services business, where we have demonstrated the ability to improve our clients’ service levels at a cost that is at or below amounts they were previously spending. One of these services is Cerner ITWorks^SM, a suite of solutions and services that ~~improve~~improves the ability of hospital IT departments to meet their organization’s needs while also creating a closer alignment between Cerner and our clients. A second example is Cerner RevWorks^SM, which includes solutions and services to help health care organizations improve their revenue cycle functions.

We have made progress over the past several years at reducing the total cost of our solutions, which expands our end market opportunities by allowing us to offer lower-cost, higher-value solutions and services to smaller community hospitals, critical access hospitals and physician practices. For example, our CommunityWorks^TM offering leverages a shared instance of the Cerner Millennium platform across multiple clients, which decreases the total cost for these clients.

We also expect to drive growth over the course of the next decade through initiatives outside the core HCIT market. For example, we offer clinic, pharmacy, wellness and third-party administrator services directly to employers. These offerings have been shaped by what we have learned from changes we have implemented at Cerner. We have removed our third-party administrator and become self-administered, launched an on-site clinic and pharmacy, incorporated biometric measurements for our associate population, realigned the economic incentives for associates in our health plan, and implemented a data-driven wellness management program. These changes have had a positive impact on the health of our associates while also ~~reducing~~keeping our health care ~~costs.~~costs below industry averages.

As discussed below, another significant opportunity for future growth, and a ~~significant~~large area of investment for Cerner, is leveraging the vast amounts of data being created as the health care industry is digitized and using this data to help providers and employers manage the health of populations.

Population Health

~~We believe~~ Population Health Management ~~is more than an industry buzzword or the next big fad. It is the~~involves a shift from solely automating health systems to managing a person’s health. Getting there requires complete, accurate patient data and meaningfully using that data to engage individuals, exchange information between providers and ultimately drive better ~~outcomes.~~outcomes at a lower cost. This shift will shape the future of health care and enable a system driven by accountability, transparency and value.

~~Table of Contents~~

Cerner's approach to population health is to enable organizations to:

KNOW what is happening and predict what will happen within their population through solutions for data exchange, longitudinal record, enterprise data warehouse, analytics and quality and regulatory reporting;

ENGAGE providers and patients in health and care delivery through personal health portals and solutions for care management, home care, long-term care, and retail pharmacy; and

MANAGE health and improve care with capacity and workforce management, clinical research, predictive modeling, health registries, and contract and network management.

These solutions are enabled by Cerner’s HealtheIntent platform, which is a multi-purpose, programmable platform designed to scale at a population level while facilitating health and care at a person and provider level. This cloud-based platform enables organizations to aggregate, transform and reconcile data across the continuum of care, and helps improve outcomes and lower costs.

HealtheIntent is scalable, secure and can be accessed anywhere, anytime. It is able to receive data from any EHR, existing HCIT system and other data sources, such as pharmacy benefits managers or insurance claims. HealtheIntent collects data from multiple, disparate sources in near real-time, providing clarity to millions of data points in an actionable and programmable workflow. It enables organizations to identify, score and predict the risks of individual patients, allowing them to match the right care programs to the right individuals. The EHR-agnostic nature of our HealtheIntent platform allows us to offer our solutions to the entire marketplace, not just existing Cerner clients.

We ~~are investing heavily in expanding~~have created a series of initial solutions on the HealtheIntent platform, ~~and our overall capabilities to support population health. One of~~including the ~~ways we are expanding our capabilities is working closely with clients~~following solutions that are ~~early movers at taking accountability~~generally available or being released soon:

Longitudinal Record - provides clinicians and the patient a view of their consolidated clinical record, gathered and normalized from multiple sources.

Registries - identifies and automatically segments patients by disease, guides interventions according to clinical best practice, provides visibility to quality measures for ~~keeping~~provider’s population, produces client-defined performance scorecards, and tracks their health and their interventions according to clinical best practice.

Analytics - allows the ~~populations they serve healthy. A key partner with whom we are working is Advocate Health Care ("Advocate"). One~~integrated data to be analyzed for the purpose of the first outcomes of this collaboration was the joint development in 2012 of a predictive agent for readmissions that has demonstrated significant improvement in predictive power as compared to the majority of existing models. Our relationship expanded in early 2013 to further advance clinical integration and population health management ~~capabilities~~and research.

Provider Performance Management - creates visibility for providers on their performance against key clinical and operation metrics and can be aligned with payment models that incentivize high quality and efficient care.

Patient/Member Engagement - an enhanced patient portal complemented by engagement services to help health care organizations create more meaningful interactions and engagement with the members they serve, and provides the ability to target individuals at risk of becoming chronically ill.

Care Management - provides a person-centric approach of proactive surveillance, coordination and facilitation of health services across the care continuum to achieve optimal health status, quality and costs.

Population Health Programs - leverages evidence-based guidelines and the contextual information within HealtheIntent to provide identification, prediction and management of a condition at the population, provider and person level and facilitates a personalized plan of care for ~~the more than 500,000 lives~~each member.

Contract Network Management - for ~~which they have gone at risk.~~managing provider networks, modeling to inform payer negotiations, determining appropriate business models, and managing contract performance in near real-time.

In ~~September 2013, we released~~less than three years since the first ~~HealtheRegistries™~~HealtheIntent~~, which provides the ability to stratify patient populations based on risk, conditions, and attributed physicians. Advocate~~ solution went live ~~with~~at our alpha client, more than 100 additional clients have purchased ~~HealtheRegistries~~ HealtheIntent~~in January 2014 and we have since sold the solution to multiple clients. In 2014, we continued to advance our~~ solutions. The broad addressable market for population health ~~capabilities through our work with Advocate, including development~~solutions is reflected in the diversity of these clients, which include health systems, physician groups, employers, health plans, state governments, and accountable care ~~management~~organizations. The initial adoption by a large number of clients is encouraging and positions us for larger

contributions to revenue from HealtheIntent solutions as these initial clients and others transition away from FFS models to value-based and at-risk models that ~~we expect to release in 2015~~require population health solutions and ~~a transition of care model that suggests 30 percent of the population could be sent to a more optimal venue and achieve better outcomes at a lower cost~~.services.

In summary, we believe our comprehensive architectural approach to population health is differentiated in the marketplace. We expect population health to be a large contributor to our long-term growth as health care continues to evolve towards a model that incents keeping people healthy.

~~Siemens Health Services Acquisition~~

On February 2, 2015, we acquired substantially all of the assets, and assumed certain liabilities of Siemens AG's health information technology business unit, Siemens Health Services. We believe our acquisition of Siemens Health Services enhances our organic growth opportunities discussed above. The acquisition provides a larger base into which we can sell our broad range of solutions and services, with opportunities ranging from selling Cerner’s EHR into the Siemens Health Services client base, to selling EHR-agnostic solutions such as population health, to selling services such as ~~RevWorks~~ ~~and~~ ~~ITWorks~~. The acquisition also augments our non-U.S. growth opportunities, increases our ability to continue investing in R&D, and adds thousands of highly-skilled associates that will enhance Cerner’s capabilities.

Software Development

We commit significant resources to developing new health information system solutions and services. As of the end of ~~2014~~2016, approximately ~~4,300~~6,100 associates were engaged in research and development activities. Total expenditures for the development and enhancement of our software solutions were ~~approximately $467.2~~$705 million, $~~418.7~~685 million and $~~319.8~~467 million during the ~~2014~~2016, ~~2013~~2015 and ~~2012~~2014 fiscal years, respectively. These figures include both capitalized and non-capitalized portions and exclude amounts amortized for financial reporting purposes.

As discussed above, continued investment in R&D remains a core element of our strategy. This will include ongoing enhancement of our core solutions and development of new solutions and services.

Intellectual Property

~~Table~~We have a broad portfolio of ~~Contents~~intellectual property rights to protect the proprietary interests in our solutions, services, devices and brands. Our solutions constitute works of authorship protected by copyrights in the U.S. and globally. We own valuable trade secrets embodied in, or related to, our solutions, services and devices and protect these rights through a number of technical and legal measures. We have registered or applied to register certain trademarks and service marks in a number of countries with particular emphasis on the Cerner branding elements. We continue to develop our patent portfolio and own more than 350 issued patents with hundreds of patent applications pending. We do not consider any of our businesses to be dependent upon any one patent, copyright, trademark, or trade secret, or any family or families of the same.

Our solutions, devices and services incorporate or rely on intellectual property rights licensed from third parties, including software subject to open source software licenses. Certain technologies licensed to Cerner are also important for internal use in running our business and supporting our clients. Although replacing any existing licenses could be inconvenient, based on our experiences, existing contractual relationships, and the incentives of our technology suppliers, we believe that Cerner will continue to obtain these technologies or suitable alternatives for commercially reasonable prices on commercially reasonable terms or under open source software licenses acceptable to Cerner.

Sales and Marketing

The markets for Cerner HCIT solutions, health care devices and services include integrated delivery networks, physician groups and networks, managed care organizations, hospitals, medical centers, free-standing reference laboratories, home health agencies, blood banks, imaging centers, pharmacies, pharmaceutical manufacturers, employers, governments and public health organizations. The majority of our sales are ~~sales of~~ clinical and revenue cycle solutions and services to hospitals and health systems, but our solutions and services are highly scalable and sold to organizations ranging from physician practices, to community hospitals, to complex integrated delivery networks, to local, regional and national government agencies.

Sales to large health systems typically take approximately nine to 18 months, while the sales cycle is often shorter when selling to smaller hospitals and physician practices. ~~In some instances, the HITECH provisions of ARRA have shortened the sales process due to the timeline required for hospitals to qualify for stimulus incentives.~~

Our executive marketing management is located at our ~~Innovation~~Realization Campus in Kansas City, Missouri (formerly known as our Innovations Campus), while our client representatives are deployed across the United States and globally. In addition to the United States, through our subsidiaries, we have sales associates and/or offices giving us a presence in more than 2535 countries.

We support our sales force with technical personnel who perform demonstrations of Cerner solutions and services and assist clients in determining the proper hardware and software configurations. Our primary direct marketing strategy is to generate sales contacts from our existing client base and through presentations at industry seminars and tradeshows. We market the PowerWorks^® solutions, offered on a subscription basis, directly to the physician practice market using lead generation activities and through existing acute care clients that are looking to extend Cerner solutions to affiliated physicians. We attend a number of major tradeshows each year and sponsor executive user conferences, which feature industry experts who address the HCIT needs of large health care organizations.

Client Services

Substantially all of Cerner’s clients that buy software solutions also enter into software support agreements with us for maintenance and support of their Cerner systems. In addition to immediate software support in the event of problems, these agreements allow clients to access new releases of the Cerner solutions covered by support agreements. Each client has 24-hour access to the applicable client support ~~team~~teams, including those located at our world headquarters in North Kansas City, Missouri, our Continuous Campus in Kansas City, Kansas, our campus in Malvern, Pennsylvania, and our global support organizations in Germany, England and Ireland.

Most clients who buy hardware through Cerner also enter into hardware maintenance agreements with us. These arrangements normally provide for a fixed monthly fee for specified services. In the majority of cases, we utilize subcontractors to meet our hardware maintenance obligations. We also offer a set of managed services that include remote hosting, operational management services and disaster recovery.

Backlog

At the end of ~~2014~~2016, we had a revenue backlog of ~~$10.6~~$15.9 billion, which compares to ~~$8.9~~$14.2 billion at the end of ~~2013~~2015. Such backlog represents contracted revenue that has not yet been recognized. We currently estimate that approximately 2726% percent of the backlog at the end of ~~2014~~2016 will be recognized as revenue during ~~2015~~2017.

Competition

The market for HCIT solutions, devices and services is intensely competitive, rapidly evolving and subject to rapid technological change. Our principal competitors in the health care solutions and services market include, but are not limited to: Allscripts Healthcare Solutions, Inc., Computer Programs and Systems, Inc. (CPSI), Epic Systems Corporation, GE Healthcare Technologies, Healthland, Inc., McKesson Corporation, MEDHOST, Inc. and Medical Information Technology, Inc., each ~~of which offers~~offer a suite of software solutions that compete with many of our software solutions and services. These competitors include, but are not limited to:



Ÿ Allscripts Healthcare Solutions, Inc.	Ÿ Healthland, Inc.
Ÿ athenahealth, Inc.	Ÿ McKesson Corporation
Ÿ Epic Systems Corporation	Ÿ MEDHOST, Inc.
Ÿ Evident Health Services, LLC	Ÿ Medical Information Technology, Inc.
Ÿ GE Healthcare

Other competitors focus on only a portion of the market that we address. For example, ~~such~~we deem the following competitors, include, without limitation, Clinovations, Inc., Dell, Inc. (Dell), Deloitte Consulting LLP (Deloitte), Encore Health Resources, LLC, IBM Corporation (IBM), Impact Advisors, LLC and Xerox Corporation Ltd., which offer HCIT services that compete directly with some of our service ~~offerings. AmazingCharts.com, Inc., Athenahealth, Inc., eClinicalWorks LLC, e-MDs, Inc., Netsmart Technologies, Practice Fusion, Inc., Quality Systems, Inc., SRSsoft and Vitera Healthcare Solutions~~offerings, as principal competitors in the HCIT services space:



Ÿ Deloitte Consulting, LLP (Deloitte)	Ÿ Impact Advisors
Ÿ Encore Health Resources, LLC	Ÿ S&P Consultants
Ÿ HCI Group	Ÿ The Advisory Board Company (Advisory Board)
Ÿ IBM Corporation (IBM)	Ÿ Xerox Corporation, Ltd.

We view the following competitors that offer solutions to the ~~physician practice~~ambulatory market ~~or niche market, but~~(but do not currently have a significant presence in the broader health systems and independent hospital ~~market.~~market) as principal competitors in this market:



Ÿ AmazingCharts.com, Inc.	Ÿ Practice Fusion, Inc.
Ÿ eClinicalWorks, LLC	Ÿ Quality Systems, Inc.
Ÿ e-MDs, Inc.	Ÿ SRSsoft
Ÿ Greenway Health, LLC	Ÿ Vitera Healthcare Solutions
Ÿ Netsmart Technologies

~~Table of Contents~~

Cerner partners with third parties as a reseller of devices and markets its own competing proprietary health care devices. We view our principal competitors in the health care device market to include, without limitation: ~~Aesynt Inc., CapsuleTech, Inc., CareFusion Corporation, Connexall Company, Ltd., Nanthealth, LLC, Omnicell, Inc., PerfectServe, Inc., Siemens AG and Vocera Communication, Inc.~~



Ÿ Becton, Dickinson and Company	Ÿ Philips N.V.
Ÿ Connexall Company, Ltd.	Ÿ Qualcomm, Inc.
Ÿ Nanthealth, LLC	Ÿ Siemens AG
Ÿ Omnicell, Inc.	Ÿ Vocera Communication, Inc.
Ÿ PerfectServe, Inc.

We view our principal competitors in the health care revenue cycle and transaction services market to include, without limitation: ~~Accretive Health, Inc., Conifer Health Solutions, Dell, Deloitte, Emdeon Corporation, MedAssets, Inc., Optum, Inc. (Optum), Quadramed Corporation, SSI Group, Inc. and 3M Company.~~



Ÿ Accretive Health, Inc.	Ÿ Experian plc
Ÿ Conifer Health Solutions	Ÿ MedAssets, Inc.
Ÿ Dell, Inc.	Ÿ Optum, Inc. (Optum)
Ÿ Deloitte	Ÿ Quadramed Corporation
Ÿ Emdeon Corporation

We view our competitors in the population health market to range from small niche competitors, to large health insurance companies including, without limitation: Aetna Inc., Evolent Health, LLC, Explorys, Inc., IBM, MedeAnalytics, Inc., NetOrange, Inc., Optum, Phytel, Inc., The Advisory Board Company, and WellCentive, Inc. Some of these competitors are larger or have more experience in their respective markets.



Ÿ Advisory Board	Ÿ Influence Health, Inc.
Ÿ Enli Health Intelligence	Ÿ Lightbeam Health Solutions
Ÿ Evolent Health, LLC	Ÿ Lumeris, Inc.
Ÿ i2i, Inc.	Ÿ Optum
Ÿ IBM	Ÿ WellCentive, Inc.

In addition, we expect that major software information systems companies, large information technology consulting service providers and system integrators, start-up companies, managed care companies, healthcare insurance companies, accountable care organizations and others specializing in the health care industry may offer competitive software solutions, devices or services. The pace of change in the HCIT market is rapid and there are frequent new software solutions, devices or services introductions, enhancements and evolving industry standards and requirements. We believe that the principal competitive factors in this market include the breadth and quality of solution and service offerings, the stability of the solution provider, the features and capabilities of the information systems and devices, the ongoing support for the systems and devices and the potential for enhancements and future compatible software solutions and devices.

Number of Employees (Associates)

At the end of ~~2014~~2016, we employed approximately ~~15,800~~24,400 associates worldwide.

Operating Segments

Information about our operating segments, which are geographically based, may be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and in Note ~~(19)~~(18) of the notes to ~~the~~ consolidated financial statements.

Executive Officers of the Registrant

The following table sets forth the names, ages, positions and certain other information regarding the Company’s executive officers as of February ~~6, 2015.~~1, 2017. Officers are elected annually and serve at the discretion of the Board of Directors.



Name	Age	Positions
Neal L. Patterson	6567	Chairman of the Board of Directors and Chief Executive Officer

Clifford W. Illig	6466	Vice Chairman of the Board of Directors

Zane M. Burke	4951	President

Marc G. Naughton	5961	Executive Vice President and Chief Financial Officer

Michael R. Nill	5052	Executive Vice President and Chief Operating Officer

Randy D. Sims	5456	Senior Vice President, Chief Legal Officer and Secretary

Jeffrey A. Townsend	5153	Executive Vice President and Chief of Staff

Julia M. Wilson	5254	Executive Vice President and Chief People Officer

Neal L. Patterson, co-founder of the Company, has been Chairman of the Board of Directors and Chief Executive Officer of the Company for more than five years. Mr. Patterson served as President of the Company from July 2010 to September 2013, which position he also held from March of 1999 until August of 1999.

Clifford W. Illig, co-founder of the Company, has been a Director of the Company for more than five years. He previously served as Chief Operating Officer of the Company until October 1998 and as President of the Company until March of 1999. Mr. Illig was appointed Vice Chairman of the Board of Directors in March of 1999.

Zane M. Burke joined the Company in September 1996. Since that time, he has held a variety of client-facing sales, implementation and support roles, including Corporate Controller and Vice President of Finance. He was promoted to President of the Company’s West region in 2002 and Senior Vice President of National Alignment in 2006. He was further promoted to Executive Vice President - Client Organization in July 2011 and to President of the Company in September 2013.

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Marc G. Naughton joined the Company in November 1992 as Manager of Taxes. In November 1995 he was named Chief Financial Officer and in February 1996 he was promoted to Vice President. He was promoted to Senior Vice President in March 2002 and promoted to Executive Vice President in March 2010.

Michael R. Nill joined the Company in November 1996. Since that time he has held several positions in the Technology, Intellectual Property and CernerWorks Client Hosting Organizations. He was promoted to Vice President in January 2000, promoted to Senior Vice President in April 2006 and promoted to Executive Vice President and named Chief Engineering Officer in February 2009. Mr. Nill was appointed Chief Operating Officer in May 2011.

Randy D. Sims joined the Company in March 1997 as Vice President and Chief Legal Officer and was promoted to Senior Vice President in March 2011. Prior to joining the Company, Mr. Sims worked at Farmland Industries, Inc. for three years where he last served as Associate General Counsel. Prior to Farmland, Mr. Sims was in-house legal counsel at The Marley Company for seven years, holding the position of Assistant General Counsel when he left to join Farmland.

Jeffrey A. Townsend joined the Company in June 1985. Since that time he has held several positions in the Intellectual Property Organization and was promoted to Vice President in February 1997. He was appointed Chief Engineering Officer in March 1998, promoted to Senior Vice President in March 2001, named Chief of Staff in July 2003 and promoted to Executive Vice President in March 2005.

Julia M. Wilson first joined the Company in July 1990. Since that time, she has held several positions in the Functional Group Organization. She was promoted to Vice President and Chief People Officer in August 2003, to Senior Vice President in March 2007 and to Executive Vice President in March 2013.

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Item 1A. Risk Factors

Risks Related to our Business

We may incur substantial costs related to product-related liabilities. Many of our software solutions, health care devices or services (including life sciences/research services) are intended for use in collecting, storing and displaying clinical and health care-related information used in the diagnosis and treatment of patients and in related health care settings such as admissions, billing, etc. We attempt to limit by contract our liability; however, the limitations of liability set forth in the contracts may not be enforceable or may not otherwise protect us from liability for damages. We may also be subject to claims that are not covered by contract. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular claim that has been brought or that may be brought in the future, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful material claim or series of claims brought against us, if uninsured or under-insured, could materially harm our business, results of operations and financial condition. Product-related claims, even if not successful, could damage our reputation, cause us to lose existing clients, limit our ability to obtain new clients, divert management’s attention from operations, result in significant revenue loss, create potential liabilities for our clients and us and increase insurance and other operational costs.

We may be subject to claims for system errors and warranties. Our software solutions and health care devices are very complex and may contain design, coding or other errors, especially when first introduced. It is not uncommon for HCIT providers to discover errors in software solutions and/or health care devices after their introduction to the market. Similarly, the installation of our software solutions and health care devices is very complex and errors in the implementation and configuration of our systems can occur. Our software solutions and health care devices are intended for use in collecting, storing, and displaying clinical and health care-related information used in the diagnosis and treatment of patients and in related health care settings such as admissions, billing, etc. Therefore, users of our software solutions and health care devices have a greater sensitivity to errors than the market for software products and devices generally. Our client agreements typically provide warranties concerning material errors and other matters. ~~Should~~If a client’s Cerner software solution or health care ~~device~~devices fail to meet these warranties or ~~lead~~leads to faulty clinical decisions or injury to patients, it could 1) constitute a material breach under the client agreement, allowing the client to terminate the agreement and possibly obtain a refund or damages or both, or require us to incur additional expense in order to make the software solution or health care device meet these ~~criteria~~criteria; or 2) subject us to claims or litigation by our clients or clinicians or directly by the patient. Additionally, such failures could damage our reputation and could negatively affect future sales. Our client agreements generally limit our liability arising from such claims but such limits may not be enforceable in certain jurisdictions or circumstances. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular claim that has been brought or that may be brought in the future, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. A successful material claim or series of claims brought against us, if uninsured or under-insured, could materially harm our business, results of operations and financial condition.

We may experience interruptions at our data centers or client support ~~facilities.~~facilities, which could interrupt clients’ access to their data, exposing us to significant costs and reputational harm. Our business relies on the secure electronic transmission, data center storage and hosting of sensitive information, including protected health information, personally identifiable information, financial information and other sensitive information relating to our clients, company and workforce. We perform data center and/or hosting services for certain clients, including the storage of critical patient and administrative data and support services through various client support facilities. If any of these systems are interrupted, damaged or breached by an unforeseen event or actions of a Cerner associate or contractor or a third party ~~including a cyber-attack,~~ or fail for any extended period of time, it could have a material adverse impact on our results of operations. Complete failure of all local public power and backup ~~generators,~~generators; impairment of all telecommunications ~~lines,~~lines; a concerted denial of service ~~cyber-attack,~~attack; a significant system, network or data ~~breach,~~breach; damage, injury or impairment (environmental, accidental ~~intentional~~ or ~~pandemic)~~intentional) to the buildings, the equipment inside the buildings housing our data centers, the personnel operating such facilities or the client data contained ~~therein,~~therein; or errors by the personnel trained to operate such facilities could cause a disruption in operations and negatively impact clients who depend on us for data center and system support services. We offer our clients disaster recovery services for additional fees to protect clients from isolated data center failures, leveraging our multiple data center ~~facilities,~~facilities; however only a small percentage of our hosted clients choose to contract for these services. Additionally, Cerner’s core systems are disaster tolerant as we have implemented redundancy across physically diverse data centers. Any interruption in operations at our data centers and/or client support facilities could damage our reputation, cause us to lose existing clients, hurt our ability to obtain new clients, result in significant revenue loss, create potential liabilities for our clients and us and increase insurance and other operating costs.

If our IT security is breached, we could be subject to increased expenses, exposure to legal claims and regulatory actions, and clients could be deterred from using our solutions and services. We are in the information technology business, and in providing our products and services, we store, retrieve, process and manage our clients’ information and data (and that of their patients), as well as our own data. We believe we have a reputation for secure and reliable solution offerings and related services, and we have invested a great deal of time and resources in protecting the security, confidentiality, integrity and availability of our solutions, services and the internal and external data that we manage. At times, we encounter attempts by third parties to identify and exploit solution and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our clients’, partners’ and suppliers’ software, hardware and cloud offerings, networks and systems, any of which could lead to the compromise of personal information or the confidential information or data of Cerner, our clients or their patients.

High-profile security breaches at other companies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting information technology products and businesses. Although this is an industry-wide problem that affects other software and hardware companies, we may be targeted by computer hackers because we are a prominent health care IT company. These risks will increase as we continue to grow our cloud offerings and store and process increasingly large amounts of data, including personal health information, and our clients’ confidential information and data, and host or manage parts of our clients’ businesses in cloud-based IT environments.

The costs we would incur to address and fix these security incidents would increase our expenses, and our efforts to address these problems may not be successful and could result in interruptions, delays, cessation of service and loss of existing or potential clients that may impede our sales, development of solutions, provision of services or other critical functions. If a cyber-attack or other security incident described above were to allow unauthorized access to or modification of our clients’ or suppliers’ data, our own data or our IT systems, or if our solutions or services are perceived as having security vulnerabilities, we could suffer significant damage to our brand and reputation. This in turn could lead to fewer clients using our solutions and services and result in reduced revenue and earnings. These types of security incidents could also lead to lawsuits, regulatory investigations and claims and increased legal liability, including in some cases contractual costs related to notification and fraud monitoring of impacted persons.

Our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or our intellectual property rights may be infringed or misappropriated by others. We rely upon a combination of confidentiality practices and policies, license agreements,

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~~confidentiality policies and procedures,~~ confidentiality provisions in employment agreements, confidentiality agreements with third parties and technical security measures to maintain the confidentiality, exclusivity and trade secrecy of our proprietary information. We also rely on trademark and copyright laws to protect our intellectual property rights in the ~~United States~~U.S. and abroad. We continue to develop our patent portfolio of ~~United States~~U.S. and global patents, but these patents do not provide comprehensive protection for the wide range of solutions, devices and services we offer. Despite our protective measures and intellectual property rights, we may not be able to adequately protect against theft, copying, reverse-engineering, misappropriation, infringement or unauthorized use or disclosure of our intellectual property, which could have an adverse effect on our competitive position.

In addition, we are routinely involved in intellectual property infringement or misappropriation claims, and we expect this activity to continue or even increase as the number of competitors, patents and patent enforcement organizations in the HCIT and broader IT market increases, the functionality of our software solutions, devices and services expands, the use of open-source software increases and we enter new geographies and new ~~markets such as health care device innovation, health care transactions, revenue cycle, population health management and life sciences.~~market segments. These claims, even if ~~not meritorious,~~unmeritorious, are expensive to defend and are often incapable of prompt resolution. If we become liable to third parties for infringing or misappropriating their intellectual property rights, we could be required to pay a substantial damage award, develop alternative technology, obtain a license or cease using, selling, offering for sale, licensing, ~~importing,~~ implementing or supporting the applicable solutions, devices and services.

Many of our solutions and services contain open source software that ~~violate~~may pose particular risks to our proprietary software, solutions, and services in a manner that could have a negative effect on our business. We rely upon open source software in our solutions and services. The licensing terms applicable for certain open source software have not been interpreted by U.S. or foreign courts and could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide and support our solutions or services.

Additionally, we may encounter claims from third parties claiming ownership of the ~~intellectual property rights.~~software purported to be licensed under the open source terms, demanding release of derivative works of open source software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source licenses. These claims could result in

litigation and, even if unmeritorious, could be expensive to defend and incapable of prompt resolution. If we become liable to third parties for such claims, we could be required to make our software source code available under the applicable open source license, utilize or develop alternative technology, or cease using, selling, offering for sale, licensing, implementing or supporting the applicable solutions or services. In addition, use of certain open source software may pose greater risks than use of third-party commercial software, as most open source licensors and distributors do not provide commercial warranties or indemnities or controls on the origin of software.

We may become subject to legal proceedings that could have a material adverse impact on our ~~financial position and~~business, results of ~~operations.~~operations and financial condition. From time to time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in various legal proceedings. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial non-economic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have ana material adverse effect on our business, ~~financial condition and~~ results of ~~operations.~~operations and financial condition.

We are subject to risks associated with our ~~non-U.S.~~global operations. We market, sell and ~~service~~support our solutions, devices and services globally. We have established offices around the world, including in the Americas, Europe, the Middle East and the Asia Pacific region. Our acquisition of the Cerner Health Services business increased our assets and operations within Europe and, accordingly, our exposure to economic conditions in Europe. We plan to continue to expand our non-U.S. operations and enter new global markets. This expansion will require significant management attention and financial resources to develop successful direct and indirect non-U.S. sales and support channels. Our business is generally transacted in the local functional currency. In some countries, our success will depend in part on our ability to form relationships with local partners. There is a risk that we may sometimes choose the wrong partner. For these and other reasons, we may not be able to maintain or increase non-U.S. market demand for our solutions, devices and services.

Non-U.S. operations are subject to inherent risks, and our ~~future~~business, results of operations and financial condition, including our revenue growth and profitability, could be adversely affected by a variety of uncontrollable and changing factors. These include, but are not limited to:

Greater difficulty in collecting accounts receivable and longer collection ~~periods~~periods;

Difficulties and costs of staffing and managing non-U.S. ~~operations~~operations;

The impact of global economic ~~conditions~~and political market conditions;

Effects of sovereign debt conditions, including budgetary ~~constraints~~constraints;

Unfavorable or volatile foreign currency exchange ~~rates~~rates;

Legal compliance costs or business risks associated with our global operations where: i) local laws and customs differ from, or are more stringent than those in the ~~United States,~~U.S., such as those relating to data protection and data security or ii) risk is heightened with respect to laws prohibiting improper payments and bribery, including without limitation the U.S. Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act and similar laws and regulations in foreign ~~jurisdictions~~jurisdictions;

Certification, licensing or regulatory requirements

~~Unexpected~~ and unexpected changes ~~in regulatory requirements~~to those requirements;

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Changes to or reduced protection of intellectual property rights in some ~~countries~~countries;

Potentially adverse tax consequences as a result of changes in tax laws or otherwise, and difficulties associated with repatriating cash generated or held abroad in a tax-efficient ~~manner~~manner;

Different or additional functionality requirements or ~~preferences~~preferences;

Trade protection ~~measures~~measures;

Export control ~~regulations~~regulations;

Health service provider or government spending patterns or government-imposed austerity measures;

Natural disasters, war or terrorist ~~acts~~acts;

Labor disruptions that may occur in a ~~country~~country; or

~~Poor selection of a partner in a country~~

Political ~~conditions~~unrest which may impact sales or threaten the safety of associates or our continued presence in these countries and the related potential impact on global stability.

Fluctuations in foreign currency exchange rates could materially affect our financial results. Our ~~failure to effectively hedge exposure to~~consolidated financial statements are presented in U.S. dollars. In general, the functional currency of our subsidiaries is the local currency. For each subsidiary, assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet dates and revenues and expenses are translated at the average exchange rates prevailing during the month of the transaction. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies affect our revenues, net earnings and the value of balance sheet items denominated in foreign currencies. Future fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, could ~~unfavorably~~materially affect our ~~performance.~~ We currently utilize a non-derivative instrument to hedge our exposure to fluctuations in certain foreign currency exchange rates. This instrument may involve elements of market risk in excess of the amounts recognized in the Consolidated Financial Statements. For additional information about market risk on financial instruments, see Item 7A “Quantitative and Qualitative Disclosures about Market Risk”. Further, our financial results from non-U.S. operations may be negatively affected if we fail to execute or if we improperly hedge our exposure to currency fluctuations.results.

We are subject to tax legislation in numerous countries; tax legislation initiatives or challenges to our tax positions could adversely affect our business, results of operations and financial condition. We are a global corporation with a presence in more than 2535 countries. As such, we are subject to tax laws, regulations and policies of the ~~United States~~U.S. federal, state and local governments and of comparable taxing authorities in other country jurisdictions. From time to time, various legislative initiatives may be proposed that could adversely affect our tax positions and/or our tax liabilities. There can be no assurance that our effective tax rate, or tax payments, tax credits or incentives will not be adversely affected by these initiatives. In addition, ~~United States~~U.S. federal, state and local, as well as other countries’ tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge, which could result in ~~double~~additional taxation, penalties and interest payments.

The vote by the United Kingdom (UK) to leave the European Union (EU) could adversely affect our financial results. In June 2016, UK voters approved a referendumto withdraw the UK's membership from the EU, which is commonly referred to as "Brexit". The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period after the government of the UK formally initiates a withdrawal process. We have operations in the UK and the EU, and as a result, we face risks associated with the potential uncertainty and disruptions that may lead up to and follow Brexit, including with respect to volatility in exchange rates and interest rates and potential material changes to the regulatory regime applicable to our operations in the UK. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. For example, depending on the terms of Brexit, the UK could also lose access to the single EU market and to the global trade deals negotiated by the EU on behalf of its members. Disruptions and uncertainty caused by Brexit may also cause our clients to closely monitor their costs and reduce their spending budget on our solutions and services. Any of these effects of Brexit, and others we cannot anticipate or that may evolve over time, could adversely affect our business, results of operations and financial condition.

Our success depends upon the recruitment and retention of key personnel. To remain competitive in our industries, we must attract, motivate and retain highly skilled managerial, sales, marketing, consulting and technical personnel, including executives, consultants, programmers and systems architects skilled in the HCIT, health care devices, health care transactions, population health management, revenue cycle and life sciences industries and the technical environments in which our solutions, devices and services are ~~needed.~~offered. Competition for such personnel in our industries is intense in both the ~~United States~~U.S. and abroad. Our failure to attract additional qualified personnel to meet our needs could have a material adverse effect on our prospects for long-term growth. In addition, we invest significant time and expense in training our associates, which increases their value to clients and competitors who may seek to recruit them and increases the cost of replacing them. Our success is dependent to a significant degree on the continued contributions of key management, sales, marketing, consulting and technical personnel. The unexpected loss of key personnel could have a material adverse impact on our business, ~~and~~ results of operations and financial condition, and could potentially inhibit development and delivery of our solutions, devices and services and market share advances.

We depend on strategic partners and third party suppliers and our revenue and operating earnings could suffer if we fail to manage ~~suppliers~~these relationships properly. To be successful, we must continue to maintain our existing strategic relationships and establish additional strategic relationships as necessary with leaders in the markets in which we operate. We believe that these relationships contribute to our ability to further build our brand, extend the reach of our solutions and services, and generate additional revenues and cash flows. If we were to lose critical strategic relationships, this could have a material adverse impact on our business, results of operations and financial condition.

We license or purchase certain intellectual property and technology (such as software, hardware and content) from third parties, including some competitors, and ~~incorporate~~depend on such third party intellectual property and software, hardware or content ~~into or sell or license it~~

in ~~conjunction with~~the operation and delivery of our solutions, devices and services. ~~We depend on some of the~~Additionally, we sell or license third party intellectual property and software, hardware or content in ~~the operation and delivery of~~conjunction with our solutions, devices and services. For instance, we currently depend on Microsoft, Oracle and IBM technologies for portions of the operational capabilities of our Millennium solutions. Our remote hosting and cloud services businesses also rely on a limited number of suppliers for certain functions of these businesses, such as Oracle database technologies, CITRIX technologies and Cisco networking technologies. Additionally, we rely on Dell EMC, ~~Hewlett Packard,~~Hewlett-Packard Enterprise, HP Inc., NetApp, IBM and ~~IBM~~others for our hardware technology platforms.

Most of ~~the~~our third party software license support contracts ~~we have~~ expire within one to five years, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of

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time. Most of these third party software licenses are non-exclusive; therefore, our competitors may obtain the right to use any of the technology covered by these licenses and use the technology to compete directly with us.

If any of ~~the~~our third party suppliers were to change product offerings, cease actively supporting the technologies, fail to update and enhance the technologies to keep pace with changing industry standards, encounter technical difficulties in the continuing development of these technologies, significantly increase prices, terminate our licenses or supply contracts, suffer significant capacity or supply chain constraints or suffer significant disruptions, we would need to seek alternative suppliers and incur additional internal or external development costs to ensure continued performance of our solutions, devices and services. Such alternatives may not be available on attractive terms, or may not be as widely accepted or as effective as the intellectual property or technology provided by our existing suppliers. If the cost of licensing, purchasing or maintaining ~~the~~our third party intellectual property or technology significantly increases, our operating earnings could significantly decrease. In addition, interruption in functionality of our solutions, devices or services as a result of changes in third party suppliers could adversely affect our commitments to clients, future sales of solutions, devices and services, and negatively affect our revenue and operating earnings.

We may ~~be unable~~encounter difficulties as we continue to ~~successfully~~ integrate ~~the Siemens~~our Cerner Health Services business ~~with~~into our business or fail to realize the long-term anticipated benefits of the acquisition of ~~Siemens Health Services.~~ ~~On February 2, 2015, we completed~~ the ~~acquisition of the assets of Siemens AG's health information technology business unit, Siemens Health Services~~. ~~The success of the acquisition of Siemens~~Cerner Health Services ~~will depend, in part, on the ability to realize the anticipated synergies, growth opportunities and cost savings from integrating Siemens Health Services’ business with our~~ business. The integration of two independent businesses is a complex, costly and time-consuming process and involves numerous risks, including difficulties in the assimilation of operations, services, solutions and personnel, the diversion of management’s attention from other business concerns, the ~~entry~~expansion into markets in which we have little or no direct prior experience, ~~the potential loss of Siemens Health Services’ key personnel,~~ and the potential inability to maintain the goodwill of existing clients. ~~The~~Potential difficulties ~~of combining the operations~~that we may encounter as part of the ~~companies~~integration process, which may preclude us from fully realizing the anticipated benefits of the acquisition, including the anticipated synergies, growth opportunities and cost savings, include, among other factors:

managing a larger company;

~~the possibility of faulty assumptions underlying expectations regarding the integration process, including the assumption of known and unknown liabilities;~~

integrating two business cultures;

creating uniform standards, controls, procedures, policies and information systems and minimizing the costs associated with such matters;

~~integrating information systems, purchasing, accounting, finance, legal, sales, billing, payroll and regulatory compliance functions;~~

preserving client, supplier, research and development, distribution, marketing, promotion and other important relationships;

commercializing "go forward" solutions under development and increasing revenues from existing marketed solutions;

~~combining the sales force territories~~ and ~~competencies associated with the sale of solutions and services presently sold or provided by us or Siemens Health Services;~~

~~integrating personnel from different businesses while maintaining focus on providing consistent, high-quality solutions and client support and attracting prospective clients;~~

integrating complex technologies and solutions from different businesses in a manner that is seamless to ~~clients; and~~

~~performance shortfalls as a result of the diversion of management’s attention to the Siemens Health Services acquisition.~~clients.

If management is unable to successfully integrate the business of Siemens Health Services into our business in a manner that permits us to achieve the cost savings and operating synergies anticipated to result from the Siemens Health Services acquisition, such anticipated benefits of the Siemens Health Services acquisition may not be realized fully or at all or may take longer to realize than expected. Any significant diversion of management’s attention away from the ongoing businesses, and any difficulties encountered in the transition and integration process, could adversely affect our financial results. Moreover, the failure to achieve the anticipated benefits of the Siemens Health Services acquisition could result in increased costs or decreases in the amount of expected revenues. Any of the above difficulties could adversely affect our ability to maintain relationships with clients, partners, suppliers and associates or our ability to achieve the anticipated benefits of the ~~Siemens~~Cerner Health Services acquisition, or could reduce our earnings or otherwise adversely affect our business, results of operations and financial ~~results.~~condition.

We intend to continue strategic business acquisitions and other combinations, which are subject to inherent risks. In order to expand our solutions, device offerings and services and grow our market and client base, we may continue to

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seek and complete strategic business acquisitions and other combinations that we believe are complementary to our business. Acquisitions have inherent risks which may have a material adverse effect on our business, results of operations, financial condition ~~operating results~~ or prospects, including, but not limited to: 1) failure to successfully integrate the business and financial operations, services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies and procedures; 2) diversion of our management’s attention from other business concerns; 3) entry into markets in which we have little or no direct prior experience; 4) failure to achieve projected synergies and performance targets; 5) loss of clients or key personnel; 6) incurrence of debt or assumption of known and unknown liabilities; 7) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 8) dilutive issuances of equity securities; and, 9) accounting deficiencies that could arise in connection with, or as a result of, the acquisition of an

acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.

We could suffer losses due to asset impairment charges. We assess our goodwill for impairment during the second quarter every year and on an interim date should events or changes in circumstances indicate the carrying value of goodwill may not be recoverable in accordance with provisions of Accounting Standards Codification Topic 350, Intangibles – Goodwill and Other. Declines in business performance or other factors could cause the fair value of a reporting unit to be revised downward and could result in a non-cash impairment charge. This could negatively affect our reported net earnings.

Volatility and disruption resulting from global economic or market conditions could negatively affect our business, results of operations and financial condition. ~~Although certain indices~~Our business, results of operations, financial condition and economic data have shown signs of stabilization in the United States and certain global markets, there can be no assurance that these improvements will be broad-based or sustainable, nor is it clear how, if at all, they will affect the markets relevant to us. As a result, our operating resultsoutlook may be impacted by the health of the global economy. Volatility and disruption in global capital and credit markets may lead to slowdowns or declines in client spending which could adversely affect our business and financial performance. Our business and financial performance, including new business bookings and collection of our accounts receivable, may be adversely affected by current and future economic conditions (including a reduction in the availability of credit, higher energy costs, rising interest rates, financial market volatility and lower than expected economic growth) that cause a slowdown or decline in client spending. Reduced purchases by our clients or changes in payment terms could adversely affect our revenue growth and cause a decrease in our cash flow from operations. Bankruptcies or similar events affecting clients may cause us to incur bad debt expense at levels higher than historically experienced. Further, volatility and disruption in global financial markets may also limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing economic and business conditions. Accordingly, if global financial and economic volatility continues or worsens, our business, results of operations and financial condition could be materially and adversely affected.

If we are unable to manage our growth in the new markets in which we offer solutions, health care devices or services, our business, results of operations and financial ~~results~~condition could suffer. Our future financial results will depend in part on our ability to profitably manage our business in the new markets that we enter. Over the past several years, we have engaged in the identification of, and competition for, growth and expansion opportunities in the areas of analytics, revenue cycle and population health. In order to achieve those initiatives, we will need to, among other things, recruit, train, retain and effectively manage associates, manage changing business conditions and implement and improve our technical, administrative, financial control and reporting systems for offerings in those areas. Difficulties in managing future growth in new markets could have a ~~significant negative~~material adverse impact on our business, ~~financial condition and~~ results of ~~operations.~~operations and financial condition.

~~We will incur significant~~Our work with government clients exposes us to additional ~~expenses~~risks inherent in the government contracting environment. Our clients include national, provincial, state and local governmental entities. Our government work carries various risks inherent in the government contracting process. These risks include, but are not limited to, the following:

Government entities, particularly in the U.S., often reserve the right to audit our contracts and conduct inquiries and investigations of our business practices with respect to government contracts. U.S. government agencies conduct reviews and investigations and make inquiries regarding our systems in connection with our performance and business practices with respect to our government contracts. Negative findings from audits, investigations or inquiries could affect our future sales and profitability by preventing us, by operation of law or in practice, from receiving new government contracts for some period of time.

If a government client discovers improper or illegal activities in the ~~integration~~course of audits or investigations, we may become subject to various civil and criminal penalties, including those under the civil U.S. False Claims Act, and administrative sanctions, which may include termination of contracts, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent or detect all improper or illegal activities.

U.S. government contracting regulations impose strict compliance and disclosure obligations. Disclosure is required if certain company personnel have knowledge of “credible evidence” of a violation of federal criminal laws involving fraud, conflict of interest, bribery or improper gratuity, a violation of the ~~Siemens Health Services business into Cerner.~~ ~~As we work~~civil U.S. False Claims Act or receipt of a significant overpayment from the government. Failure to ~~integrate~~make required disclosures could be a basis for suspension and/or debarment from federal government contracting in addition to breach of the ~~business, we expect~~specific contract and could also

impact contracting beyond the U.S. federal level. Reported matters also could lead to ~~incur significant additional expenses relating~~audits or investigations and other civil, criminal or administrative sanctions.

Government contracts are subject to heightened reputational and contractual risks compared to contracts with commercial clients. For example, government contracts and the proceedings surrounding them are often subject to more extensive scrutiny and publicity. Negative publicity, including allegations of improper or illegal activity, poor contract performance, deficiencies in services or other deliverables, or information security breaches, regardless of accuracy, may adversely affect our reputation.

Terms and conditions of government contracts also tend to be more onerous and are often more difficult to negotiate.

Government entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, government entities usually reserve the right to change the scope of or terminate these projects for lack of approved funding and/or at their convenience. Changes in government or political developments, including budget deficits, shortfalls or uncertainties, government spending reductions (e.g., Congressional sequestration of funds under the Budget Control Act of 2011) or other debt constraints could result in our projects being reduced in price or scope or terminated altogether, which also could limit our recovery of reimbursable expenses. Furthermore, if insufficient funding is appropriated to the ~~integration~~government entity to cover termination costs, we may not be able to fully recover our investments.

The occurrences or conditions described above could affect not only our business with the particular government entities involved, but also our business with other entities of ~~personnel, geographically diverse operations, information technology systems, accounting systems,~~the same or other governmental bodies or with certain commercial clients, and ~~strategic partners~~could have a material adverse effect on our business, results of ~~each business~~operations and the implementation of consistent standards, policies, and procedures, and we may be subject to material write downs in assets and charges to earnings, which are expected to include severance pay and other costs. The integration process will be long-term and will continue to create significant expenses.financial condition.

There are risks associated with our outstanding and future indebtedness. We have customary restrictive covenants in our current debt agreements, which may ~~restrict~~limit our flexibility to operate our business. ~~If we do not comply with these restrictive~~ Thesecovenants ~~our failure could result in material and adverse effects on our operating results and our financial condition.~~ ~~Our debt agreements contain customary restrictive covenants, including~~include limitations on ~~consolidated indebtedness,~~priority debt, liens, ~~investments, subsidiary investments,~~mergers, asset dispositions, and ~~restricted payments,~~transactions with affiliates, and require us to maintain certain leverage and interest coverage ratios. Failure to comply with these covenants

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could result in an event of default that, if not cured or waived, could result in reduced liquidity for the Company and could have a material adverse effect on our ~~operating~~business, results of operations and financial condition.Additionally, our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.

Risks Related to the Health Care Information Technology, Health Care Device, Health Care Transaction, Revenue Cycle Management and Population Health Management ~~Industry~~Industries

The health care industry is subject to changing political, economic and regulatory ~~influences.~~influences, which could impact the purchasing practices and operations of our clients and increase our costs to deliver compliant solutions and services. For example, the Health Insurance Portability and Accountability Act of 1996 (as modified by The Health Information Technology for Economic and Clinical Health Act (HITECH) provisions of the American Recovery and Reinvestment Act of 2009) (collectively, HIPAA) continues to have a direct impact on the health care industry by requiring national provider identifiers and standardized transactions/code sets, operating rules and necessary security and privacy measures in order to ensure the appropriate level of privacy of protected health information. These regulatory factors affect the purchasing practices and operation of health care organizations.

Many health care providers are consolidating to create integrated health care delivery systems with greater market power. These providers may try to use their market power to negotiate price reductions for our solutions, health care devices and services. As the health care industry consolidates, our client base could be eroded, competition for clients could become more intense and the importance of landing new client relationships becomes greater.

The Patient Protection and Affordable Care Act, which was amended by the Health Care and Education Reconciliation Act of 2010, became law in 2010. This comprehensive health care reform legislation included provisions to control health care costs, improve health care quality, and expand access to affordable health insurance. Together with ongoing statutory and budgetary policy developments at a federal level, this health care reform legislation could include changes in Medicare and Medicaid payment policies and other health care delivery administrative reforms that could potentially negatively impact our business and the business of our clients. The results of the November 8, 2016, elections create uncertainty for the future of the Affordable Care Act and other health care-related legislation. Because of that uncertainty, because not all the administrative rules implementing health care reform under ~~the~~current legislation have been finalized, and because of ongoing federal fiscal

budgetary pressures yet to be resolved for federal health programs, we cannot predict the full ~~impact~~effect of ~~the~~ health care ~~reform~~ legislation ~~and of further statutory actions to reform healthcare payment~~ on our business ~~is unknown, but there~~at this time. There can be no assurances that health care reform ~~legislation~~initiatives will not adversely impact either our operational results or the manner in which we operate our ~~business. Health care industry participants~~business,including changes to existing regulatory oversight that may impact operating expenses and increase compliance risk. Purchasers of HCIT may respond to the uncertainty by reducing their investments or postponing investment decisions, including investments in our devices, solutions and services.Future legislation and regulation may ultimately impact the fiscal stability and sustainability of HCIT purchasers. A lower amount of regulatory incentives and/or near-term compliance deadlines that contribute to demand for our solutions and services could impact our financial results. There can be no certainty that incentives will be offered in regard to our solutions and services, nor can there be any assurance that any legislation that may be adopted would be favorable to our business. We cannot predict whether or when future health care reform initiatives at the federal or state level or other initiatives affecting our business will be proposed, enacted or implemented or what impact those initiatives may have on our business, results of operations and financial condition.

The health care industry is highly regulated, and thus, we are subject to a number of laws, regulations and industry initiatives, non-compliance with certain of which could materially adversely affect our operations or otherwise adversely affect our business, results of operations and financial ~~condition and operating results.~~condition. As a participant in the health care industry, our operations and relationships, and those of our clients, are regulated by a number of ~~local,~~U.S. federal, state, ~~federal~~local and foreign governmental entities. The impact of these regulations on us is direct, to the extent that we are ourselves subject to these laws and regulations, and is also indirect, both in terms of the level of government reimbursement available to our clients and because, in a number of situations, even though we may not be directly regulated by specific health care laws and regulations, our solutions, devices and services must be capable of being used by our clients in a way that complies with those laws and regulations. There is a significant and wide-ranging number of regulations both within the ~~United States~~U.S. and abroad, such as regulations in the areas of health care fraud, e-prescribing, claims processing and transmission, health care devices, the security and privacy of patient data and interoperability standards, that may be directly or indirectly applicable to our operations and relationships or the business practices of our clients. Specific risks include, but are not limited to, the following:

Health Care Fraud. ~~Federal~~U.S. federal and state governments continue to enhance regulation of and increase their scrutiny over practices involving health care fraud, waste and abuse ~~affecting~~perpetuated by health care providers and professionals whose services are reimbursed by Medicare, Medicaid and other government health care programs. Our health care provider clients, as well as our provision of products and services to government entities, subject our business to laws and regulations on fraud and abuse which, among other things, prohibit the direct or indirect payment or receipt of any remuneration for patient referrals, or arranging for or recommending referrals or other business paid for in whole or in part by these federal or state health care programs. ~~Federal~~U.S. federal enforcement personnel have substantial funding, powers and remedies to pursue suspected or perceived fraud and abuse. The effect of this government regulation on our clients is difficult to predict. Many of the regulations applicable to our clients and that may be applicable to us, including those relating to marketing incentives offered in connection with health care device sales, are vague or indefinite and have not been interpreted by the courts. They may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could broaden their applicability to us or require our clients to make changes in their operations or the way in which they deal with us. If such laws and regulations are determined to be applicable to us and if we fail to comply with any applicable laws and regulations, we could be subject to civil and criminal

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penalties, sanctions or other liability, including exclusion from government health programs, which could have a material adverse effect on our business, results of operations and financial condition. Even an unsuccessful challenge by a regulatory or prosecutorial authority of our activities could result in adverse publicity, ~~could~~ require a costly response from us and ~~could~~ adversely affect our business, ~~financial condition and~~ results of ~~operations.~~operations and financial condition.

Preparation, Transmission and Submission of Medical Claims for Reimbursement. Our solutions are capable of electronically transmitting claims for services and items rendered by a physician to many patients' payers for approval and reimbursement. We also provide revenue cycle management services to our clients that include the coding, preparation and submission of claims for medical service to payers for reimbursement. Such claims are governed by U.S. federal and state laws. ~~Federal~~U.S. federal law provides civil liability to any ~~person~~persons that knowingly ~~submits~~submit, or cause to be submitted, a claim to a payer, including Medicare, Medicaid and private health plans, seeking payment for any services or items that overbills or bills for services or items that have not been provided to the patient. ~~Federal~~U.S. federal law may also impose criminal penalties for intentionally submitting such false claims. We have policies and procedures in place that we believe result in the accurate and complete preparation, transmission, submission and collection of claims, provided that the information given to us by our clients is also accurate and complete. The HIPAA security, privacy and transaction standards, as discussed below, also have a potentially significant effect on our claims preparation, transmission and submission services, since those services must be structured and provided in a way that supports our clients' HIPAA compliance obligations. In connection with these laws, we may be subjected to U.S. federal or state government investigations and possible penalties may be imposed upon us; false claims actions may have to be defended; private payers may file claims against us; and we may be excluded from Medicare, Medicaid

or other government-funded health care programs. Any investigation or proceeding related to these laws, even if unwarranted or without merit, may have a material adverse effect on our business, results of operations and financial condition.

~~Implementation of ICD-10 Coding for Medical Coding.~~ The Centers for Medicare & Medicaid Services (CMS) has mandated that all providers, payers, clearinghouses and billing services implement the use of new patient codes for medical coding, referred to as ICD-10 codes on or before October 1, 2015. This mandate substantially increases the number of medical billing codes by which providers will seek reimbursement, increasing the complexity of submitting claims for reimbursement. Claims submitted after October 1, 2015 must use ICD-10 codes or they will not be paid. Our efforts to provide services and solutions that enable our clients to comply with the ICD-10 mandate could be time consuming and expensive. In addition, due to the effort and expense of complying with the ICD-10 mandate, our clients may postpone or cancel decisions to purchase our solutions and services. Either of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Regulation of Health Care Devices. The ~~United States~~U.S. Food and Drug Administration ~~(the FDA)~~("FDA") has determined that certain of our solutions are ~~health care~~medical devices that are actively regulated under the Federal Food, Drug and Cosmetic Act ~~(Act)~~("Act") and amendments to the Act. Other countries have similar regulations in place related to ~~health care~~medical devices, that now or may in the future apply to certain of our solutions. If other of our solutions are deemed to be actively regulated ~~health care~~medical devices by the FDA or similar regulatory agencies in countries where we do business, we could be subject to extensive requirements governing pre- and post-marketing activities including pre-market notification clearance. Complying with these ~~health care~~medical device regulations on a global perspective is time consuming and expensive and could be subject to unanticipated and significant delays. Further, it is possible that these regulatory agencies may become more active in regulating software and ~~health care~~ devices that are used in health care. If we are unable to obtain the required regulatory approvals for any such solutions or health care devices, our short and long term business plans for these solutions or health care devices could be delayed or canceled.

There have been eight FDA inspections at various Cerner sites since 2003. Inspections conducted at our ~~World~~ Headquarters Campus and Realization Campus (formerly known as our Innovations ~~Campus~~Campus) in 2010 resulted in the issuance of an FDA Form 483 observation to which we responded promptly. The FDA has taken no further action with respect to the Form 483 observation that was issued in 2010. The remaining FDA inspections, including inspections at our ~~world headquarters~~Headquarters Campus in 2006, 2007 and 2014, resulted in no issuance of a Form 483. We remain subject to periodic FDA inspections and we could be required to undertake additional actions to comply with the Act and any other applicable regulatory requirements. Our failure to comply with the Act and any other applicable regulatory requirements could have a material adverse effect on our ability to continue to manufacture, distribute and deliver our solutions, services and devices. The FDA has many enforcement tools including recalls, product corrections, seizures, injunctions, refusal to grant pre-market clearance of products, civil fines and criminal prosecutions. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

Security and Privacy of Patient Information. ~~Federal,~~U.S. federal, state and local and foreign laws regulate the confidentiality of ~~patient records~~personal information, how that information may be used, and the circumstances under which ~~those records~~such information may be ~~used and~~ released. These regulations govern both the disclosure and use of confidential personal and patient medical record information and require the users of such information to implement specified

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security and privacy measures. ~~United States~~U.S. regulations currently in place governing electronic health data transmissions continue to evolve and are often unclear and difficult to apply. Laws in non-U.S. jurisdictions are also evolving and may have similar or even stricter requirements related to the treatment of personal or patient information.

In the ~~United States,~~U.S., HIPAA regulations ~~require~~apply national standards for some types of electronic health information transactions and the data elements used in those transactions to ensure the integrity, security and confidentiality of health information and standards to protect the privacy of individually identifiable health information. Covered entities under HIPAA, which include health care organizations such as our clients, our employer clinic business ~~model~~ and our claims processing, transmission and submission services, are required to comply with ~~the~~HIPAA privacy standards, ~~the~~ transaction regulations and ~~the~~ security regulations. Moreover, the HITECH provisions of ARRA, and associated regulatory requirements, extend many of the HIPAA obligations, formerly imposed only upon covered entities, to business associates as well. As a business associate of our clients who are covered entities, we were in most instances already contractually required to ensure compliance with the HIPAA regulations as they pertain to handling of covered client data. However, the extension of these HIPAA obligations to business associates by law has created additional liability risks related to the privacy and security of individually identifiable health information.

Evolving HIPAA and HITECH-related laws or regulations in the U.S. and data privacy and security laws or regulations in non-U.S. jurisdictions could restrict the ability of our clients to obtain, use or disseminate patient information. This could adversely affect demand for our solutions if they are not re-designed in a timely manner in order to meet the requirements of any new interpretations or regulations that seek to protect the privacy and security of patient data or enable our clients to execute new or modified health care transactions. We may need to expend additional capital, software development and other resources to modify our solutions and devices to address these evolving data security and privacy issues. Furthermore, our failure to maintain confidentiality of sensitive personal information in accordance with the applicable regulatory requirements could damage our reputation and expose us to claims, fines and penalties.

In Europe, we are subject to ~~the European Union (“EU”)~~EU data protection ~~regulations,~~legislation, including the ~~EU Directive on~~1995 Data Protection Directive, which requires member states to impose minimum restrictions on the collection and use of personal data that, in some respects, are more stringent, and impose more significant burdens on subject businesses, than current privacy standards in the ~~United States.~~U.S. The EU ~~regulations~~directives establish several obligations that organizations must follow with respect to use of personal data, including a

prohibition on the transfer of personal information from the EU to other countries whose laws do not adequately protect the privacy and security of personal data to ~~an adequate level of privacy or security.~~European standards. In addition to this EU-wide legislation, certain member states have adopted more stringent data protection standards. ~~Cerner has~~We have addressed these requirements, relative to data transfers, by ~~certification~~self-certifying our compliance with the EU-U.S. Privacy Shield Framework to the ~~US -~~U.S. Department of Commerce International Trade Administration ("ITA"). The ITA has approved our self-certification. However, continued criticism of the Privacy Shield by officials in Europe casts uncertainty as to the long-term effectiveness of the Privacy Shield to support EU-U.S. transfers of personal data. For that reason, we are pursuing alternative methods of compliance, but those methods also may be subject to scrutiny by data protection authorities in European member states.

On April 14, 2016, the European Parliament approved the General Data Protection Regulation ("GDPR"). The GDPR will replace the 1995 Data Protection Directive and will become enforceable on May 24, 2018. The GDPR will have significant impacts on how businesses, including both us and our clients, can collect and process the personal data of EU individuals. We may incur increased development costs and ~~US - Switzerland Safe Harbor Frameworks.~~delays in delivering solutions as we need to update our software, devices or health care devices to enable our European clients to comply with these varying and evolving standards to the extent that they differ from the standards of the previous 1995 Data Protection Directive. In addition, delays in interpreting the GDPR's standards may result in postponement or cancellation of our clients' decisions to purchase our solutions or health care devices. The costs of compliance with, and other burdens imposed by, such laws, regulations and policies, or modifications thereto, that are applicable to us may limit the use and adoption of our solutions and could have a material adverse impact on our business, results of ~~operations.~~operations and financial condition.

~~Applicable statutes~~Both the 1995 Data Protection Directive and ~~regulations have granted~~the GDPR grant broad enforcement powers to regulatory agencies to investigate and enforce our compliance with ~~these~~their data privacy and security ~~laws and regulations.~~requirements. Governmental enforcement personnel, particularly in the EU, have substantial funding, powers and remedies to pursue suspected or perceived violations. If we fail to comply with any applicable laws or regulations, we could be subject to civil penalties, sanctions or other liability. Enforcement investigations, even if meritless, could have a negative impact on our reputation, cause us to lose existing clients or limit our ability to attract new clients.

Interoperability Standards. Our clients are concerned with and often require that our software solutions and health care devices be interoperable with other third party HCIT suppliers. Market forces or governmental/regulatory authorities could create software interoperability standards that would apply to our solutions, health care devices or solutions, and if our software solutions, health care devices or services are not consistent with those standards, we could be forced to incur substantial additional development costs to conform. The Office of the National Coordinator for Health Information Technology (ONC) has developed a comprehensive set of criteria for the functionality, interoperability and security of various software modules in the HCIT industry. ONC, however, continues to modify and refine those standards. Achieving certification is becoming a competitive ~~requirement, resulting in~~requirement. We may incur increased software development and administrative expense and delays in delivering solutions if we need to update our software, devices or health care devices to conform to these varying and evolving requirements.In addition, delays in interpreting these standards may result in postponement or cancellation of our clients’ decisions to purchase our solutions or health care devices. If our software solutions, devices or health care devices are not compliant with these evolving standards, our market position and sales could be impaired and we may have to invest significantly in changes to our software solutions, devices or health care devices.

~~ARRA Meaningful Use Program~~Federal Requirements for Certified Health Information Technology. Various U.S. federal and state and non-U.S. government agencies are also developing standards for the use of information technology that ~~could~~in some cases have become prerequisite to or mandatory as requirements for ~~systems purchased~~providing health care services to beneficiaries of federal health insurance programs that are paid for by these agencies. ~~For example,~~Hospitals and physicians participating in the statutory ARRA ~~requires~~HITECH program for “meaningful use of certified electronic health record ~~technology” by health care providers~~technology ("CEHRT")” first started receiving stimulus funds in ~~order to receive stimulus funds~~2011 as incentive payments for adoption of EHRs from the U.S. federal government. In most cases, these incentives have now evolved into negative payment adjustments for providers who do not adopt CEHRT. In the last year, the requirements for adoption of CEHRT have expanded to be linked to other federal statutory and regulatory requirements for providers to participate in “alternative payment models” for Medicare as the federal government moves to adopt more “value” (or quality) based payment methods in lieu of traditional “fee for service” payment methodologies. The use of CEHRT has also been folded into the physician payment reforms adopted under MACRA, for which the federal government has adopted final regulations that will go into effect starting in 2017. Regulations have been issued that identify standards and implementation specifications and establish the certification standards for qualifying electronic health record ~~technology.~~technology to become CEHRT. Nevertheless, these standards and specifications are subject to interpretation by the entities designated to certify such technology. While a combination of our solutions have

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been certified as meeting the ~~initial~~2011 and 2014 editions of the CEHRT standards, ~~for certified health record technology,~~ the regulatory ~~standards~~requirements to achieve certification ~~will~~ continue to evolve, ~~over time.~~ and we will need to meet the requirements set forth in the 2015 edition of these standards applicable to Stage 3and other federal programs by January 1, 2018.

We may incur increased development costs and delays in delivering solutions ifas we need to ~~upgrade~~update our software, devices or health care devices to be in compliance with these varying and evolving standards. In addition, delays in interpreting these standards may result in postponement or cancellation of our clients’ decisions to purchase our solutions or health care devices. If our software solutions, devices or health care devices are not compliant with these evolving standards, our market position and sales could be impaired and we may have to invest significantly in changes to our software solutions, devices or health care devices. Further, we bear potential financial risks where we have entered into agreements with clients to warrant their ability to meet future stage meaningful use certification requirements. While a client’s ability to meet future stage meaningful use attestation requirements may be dependent on such client’s ability to adopt, rollout and attain sufficient use of our certified solutions on a timely basis, we may face risks that come from issues in full adoption of our certified solutions, which in turn could lead to a client missing its attestation targets. These risks are enhanced when we are under agreements to provide application management services to our clients that place responsibilities on us for application configuration and implementation as a prerequisite to or impactful to meaningful use attainment ordinarily borne by the client in other circumstances.

We operate in intensely competitive and dynamic industries, and our ability to successfully compete and continue to grow our business depends on our ability to respond quickly to market changes and changing technologies and to bring competitive new solutions, devices, features and services to market in a timely fashion. The market for health care information systems, health care solutions and services to the health care industry is intensely competitive, dynamically evolving and subject to rapid technological and innovative changes. Development of new proprietary technology or services is complex, entails significant time and expense and may not be successful. We cannot guarantee that the market for our solutions, devices and services will develop as quickly as expected. We cannot guarantee that we will be able to introduce new solutions, devices or services on schedule, or at all, nor can we guarantee that such solutions, devices or services will achieve market acceptance. Moreover, we cannot guarantee that errors will not be found in our new solution releases, devices or services before or after commercial release, which could result in solution, device or service delivery redevelopment costs, harm to our reputation, lost sales, license terminations or renegotiations, product liability claims, diversion of resources to remedy errors and loss of, or delay in, market acceptance.

Certain of our competitors have greater financial, technical, product development, marketing or other resources than us and some of our competitors offer software solutions, devices or services that we do not offer. Our principal existing competitors are set forth above under Part I, Item 1 "Competition".

In addition, we expect that major software information systems companies, large information technology consulting service providers and system integrators, start-up companies and others specializing in the health care industry may offer competitive software solutions, devices or services. As we continue to develop new health care devices and services to address areas such as analytics, transaction services, HCIT and device integration, revenue cycle and population health management, we expect to face new competitors, and these competitors may have more experience in these markets, better brand recognition and/or more established relationships with prospective clients. We face strong competition and often face downward price pressure, which could adversely affect our results of operations or liquidity. Additionally, the pace of change in the health care information systems market is rapid and there are frequent new software solution introductions, software solution enhancements, device introductions, device enhancements and evolving industry standards and requirements. There are a limited number of hospitals and other health care providers in the ~~United States~~U.S. market and in recent years, the health care industry has been subject to increasing consolidation. If we are unable to recognize the impact of industry consolidation, falling costs and technological advancements in a timely manner, or we are too inflexible to rapidly adjust our business models, our ~~growth ambitions~~prospects and financial results could be negatively affected materially.

Long sales cycles for our solutions and services could have a material adverse impact on our future results of operations. Some of our solutions have long sales cycles, ranging from several months to eighteen months or more beginning at initial contact with the client through execution of a contract. How and when to implement, replace, or expand an information system, or modify or add business processes, are major decisions for health care organizations. Many of the solutions we provide require a substantial capital investment and time commitments by the client or prospective client. Any decision by our clients or prospective clients to delay a purchasing decision could have a material adverse impact on our results of operations.

Risks Related to Our Common Stock

Our quarterly operating results may vary, which could adversely affect our stock price. Our quarterly operating results have varied in the past and may continue to vary in future periods, including variations from guidance, expectations or historical results or trends. Quarterly operating results may vary for a number of reasons including demand for our solutions, devices and services, the financial condition of our current and potential clients, our long sales cycle, potentially long installation and implementation cycles for larger, more complex systems, accounting policy changes and other factors described in this section and elsewhere in this report. As a result of health care industry trends and the market for our solutions, a large percentage of our revenues are generated by the sale and installation of larger, more complex and higher-priced systems. The sales process for these systems is lengthy and involves a significant technical evaluation and commitment of capital and other resources by the client. Sales may be subject to delays due to changes in clients’ internal budgets, procedures for approving large capital expenditures, competing needs for other capital expenditures, additions or amendments to U.S. federal, state or local regulations, availability of personnel resources or by actions taken by competitors. Delays in the expected sale, installation or implementation of these large systems may have a significant negative impact on our anticipated quarterly revenues and consequently our earnings, since a significant percentage of our expenses are relatively fixed. Because of the complexity and value of our contracts, the loss of even a small number of clients could have a significant negative effect on our financial results.

Revenue recognized in any quarter may depend upon our or our clients’ abilities to meet project milestones. Delays in meeting these milestone conditions or modification of the project plan could result in a shift of revenue recognition from one quarter to another and could have a material adverse effect on results of operations for a particular quarter.

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Our revenues from system sales historically have been lower in the first quarter of the year and greater in the fourth quarter of the year, primarily as a result of clients’ year-end efforts to make final capital expenditures for the then-current year.

Our sales forecasts may vary from actual sales in a particular quarter. We use a “pipeline” system, a common industry practice, to forecast sales and trends in our business. Our sales associates monitor the status of all sales opportunities, such as the date when they estimate that a client will make a purchase decision and the potential dollar amount of the sale. These estimates are aggregated periodically to generate a sales pipeline. We compare this pipeline at various points in time to evaluate trends in our business. This analysis provides guidance in business planning and forecasting, but these pipeline estimates are by their nature speculative. Our pipeline estimates are not necessarily reliable predictors of revenues in a particular quarter or over a longer period of time, partially because of changes in the pipeline and in conversion rates of the pipeline into contracts that can be very difficult to estimate. A negative variation in the expected conversion rate or timing of the pipeline into contracts, or in the pipeline itself, could cause our plan or forecast to be inaccurate and thereby adversely affect business results. For example, a slowdown in information technology spending, adverse economic conditions, new or changed U.S. federal, state or local regulations related to our industry or a variety of other factors can cause purchasing decisions to be delayed, reduced in amount or cancelled, which would reduce the overall pipeline conversion rate in a particular period of time. Because a substantial portion of our contracts are completed in the latter part of a quarter, we may not be able to adjust our cost structure quickly enough in response to a revenue shortfall resulting from a decrease in our pipeline conversion rate in any given fiscal quarter.

The trading price of our common stock may be volatile. The market for our common stock may experience significant price and volume fluctuations in response to a number of factors including actual or anticipated variations in operating results, articles or rumors about our performance or solutions, devices or services, announcements of technological innovations or new services or products by our competitors or us, changes in expectations of future financial performance or estimates of securities analysts, governmental regulatory action, health care reform measures, client relationship developments, economic conditions and changes occurring in the securities markets in general and other factors, many of which are beyond our control. For instance, our quarterly operating results have varied in the past and may continue to vary in future periods, due to a number of reasons including, but not limited to, demand for our solutions, devices and services, the financial condition of our current and potential clients, our long sales cycle, potentially long installation and implementation cycles for larger, more complex and higher-priced systems, key management changes, accounting policy changes and other factors described herein. As a matter of policy, we do not generally comment on our stock price or rumors.

Furthermore, the stock market in general, and the markets for software, health care devices, other health care solutions and services and information technology companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of actual operating performance.

Our Directors have authority to issue preferred stock and our corporate governance documents contain anti-takeover provisions. Our Board of Directors has the authority to issue up to 1,000,000 shares of preferred stock and to determine the preferences, rights and privileges of those shares without any further vote or action by the shareholders. The rights of the holders of common stock may be harmed by rights granted to the holders of any preferred stock that may be issued in the ~~future.~~future and issuances of preferred stock could be used to delay or hinder a change of control of the Company.

In addition, some provisions of our Certificate of Incorporation and Bylaws could make it more difficult for a potential acquirer to acquire a majority of our outstanding voting ~~stock.~~stock or otherwise effect a change of control of the Company. These include provisions that provide for a classified board of directors, require advance notice of stockholder proposals at stockholder meetings, prohibit shareholders from taking action by written consent and restrict the ability of shareholders to call special meetings. We are also subject to provisions of Delaware law that prohibit us from engaging in any business combination with any interested shareholder for a period of three years from the date the person became an interested shareholder, unless certain conditions are met, which could have the effect of delaying or preventing a change of control.

~~Factors~~Changes in accounting standards issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies may adversely affect our financial statements. Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB and the SEC. It is possible that ~~May Affect Future Results~~future accounting standards we are required to adopt, such as amended guidance for revenue recognition, leases, and share based payments, may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changes could result in a material adverse impact on our business, results of ~~Operations, Financial Condition or Business~~operations and financial condition.

Cautions about Forward-looking Statements

Statements made in this report, the Annual Report to Shareholders of which this report is made a part, other reports and proxy statements filed with the ~~Securities and Exchange Commission (SEC),~~SEC, communications to shareholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company’s or management’s intentions, hopes, beliefs, expectations, plans, goals or predictions of future events or performance, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~"Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as ~~“could,” “should,” “will,” “intended,” “continue,” “believe,”~~

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~~“may,” “expect,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” “guidance”~~"could," "should," "will," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast," "plan," "guidance," "opportunity," "prospects" or ~~“estimate”~~"estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Item 1A. Risk Factors and elsewhere herein or in other reports filed with the SEC. Other unforeseen factors not identified herein could also have such an effect. WeAny forward-looking statements made in this report speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in ~~future operating~~our business, results of operations, financial condition or business over time.

Market and Industry Data

This Annual Report on Form 10-K contains market, industry and government data and forecasts that have been obtained from publicly available information, various industry publications and other published industry sources. We have not independently verified the information and cannot make any representation as to the accuracy or completeness of such information. None of the reports and other materials of third party sources referred to in this Annual Report on Form 10-K were prepared for use in, or in connection with, this Annual Report.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

Our properties consist mainly of owned and leased office and data center facilities.

Our ~~United States~~ corporate world headquarters is located in a Company-owned office park (the Headquarters Campus) in North Kansas City, Missouri. The Headquarters Campus and ~~three~~two other nearby locations, collectively contain approximately 2.22 million gross square feet of useable space situated on 278 acres of land. The Headquarters Campus and the nearby properties primarily house office space, but also include space for other business needs, such as our Healthe Clinic and our Headquarters Campus data centers.

Company-owned office space, known as the ~~Innovation~~Realization Campus (formerly known as our Innovations Campus), primarily houses associates from our intellectual property organization and consists of ~~790,000~~830,000 gross square feet of useable space located in Kansas City, Missouri.

~~Owned~~Company-owned office space known as the Continuous Campus, primarily houses associates who manage and support our clients' IT systems and consists of ~~611,000~~650,000 gross square feet of useable space located in Kansas City, Kansas. ~~Construction~~

Company-owned office space known as the Malvern Campus, houses associates who joined Cerner in connection with our acquisition of ~~the Continuous Campus was completed~~Siemens Health Services on February 2, 2015, and consists of approximately 110 acres of property in ~~February 2014.~~Malvern, Pennsylvania. This property includes approximately 675,000 gross square feet of office space, and a 100,000 square foot data center.

Our Cerner-operated data center facilities, which are used to provide remote hosting, disaster recovery and other services to our clients, are located at the Headquarters Campus, Malvern Campus and ~~a leased facility~~office space in Lee’s Summit, ~~Missouri.~~Missouri, known as the Lee's Summit Tech Center. The Lee's Summit Tech Center consists of 550,000 gross square feet and houses data center space and certain third-party tenants in a multi-tenant office building.

We have purchased approximately ~~260~~286 acres of land located in Kansas City, ~~Missouri. This property,~~Missouri, known as the Innovations Campus (formerly known as our Trails ~~Campus, was acquired as a site for future office space development to further accommodate our anticipated growth.~~Campus). Construction on the ~~Trails~~Innovations Campus began in November 2014. The first two phases of the project include approximately 859,000 gross square feet of office space, and were completed in January of 2017.

In November 2016, we purchased approximately 700,000 gross square feet of useable office and warehouse space located in Kansas City, Missouri. Such space was acquired to accommodate our anticipated growth, and is located adjacent to our Realization Campus.

As of the end of ~~2014,~~2016, we leased additional domestic office space in Tempe, Arizona; Carlsbad, Culver City and Garden Grove, California; Denver, Colorado; Lenexa, Kansas; Waltham, Massachusetts; Minneapolis and Rochester, Minnesota; Columbia, Nevada, Lee’s Summit and Kansas City, Missouri; Durham, North Carolina; New Concord, Ohio; Franklin, Tennessee; Salt Lake City, Utah; Burlington, Vermont; and Vienna, Virginia. the following locations:



Ÿ Brooklyn, New York	Ÿ Downingtown, Pennsylvania	Ÿ New Concord, Ohio
Ÿ Burlington, Vermont	Ÿ Durham, North Carolina	Ÿ New York, New York
Ÿ Carlsbad, California	Ÿ Franklin, Tennessee	Ÿ North Kansas City, Missouri
Ÿ Columbia, Missouri	Ÿ Kansas City, Missouri	Ÿ Rochester, Minnesota
Ÿ Costa Mesa, California	Ÿ Mason, Ohio	Ÿ Salt Lake City, Utah
Ÿ Culver City, California	Ÿ Minneapolis, Minnesota	Ÿ Tempe, Arizona
Ÿ Denver, Colorado	Ÿ Nevada, Missouri	Ÿ Waltham, Massachusetts

Globally, we also leased office space in: Brisbane, Sydney and Melbourne, Australia; Sao Paulo, Brazil; Peterborough and Toronto, Ontario, Canada; Cairo, Egypt; London, England; Paris, France; Idstein, Germany; Bangalore, India; Dublin, Ireland; Kuala Lumpur, Malaysia; Riyadh, Saudi Arabia; Singapore; Madrid, Spain; Doha, Qatar; and Abu Dhabi and Dubai, United Arab Emirates.in the following locations:



Ÿ Abu Dhabi, United Arab Emirates	Ÿ Gmund, Austria	Ÿ Paris, France
Ÿ Augsburg, Germany	Ÿ Gothenburg, Sweden	Ÿ Perth, Australia
Ÿ Bangalore, India	Ÿ Hamburg, Germany	Ÿ Peterborough, Ontario, Canada
Ÿ Berlin, Germany	Ÿ Idstein, Germany	Ÿ Riyadh, Saudi Arabia
Ÿ Brasov, Romania	Ÿ Kolkata, India	Ÿ Sao Paulo, Brazil
Ÿ Brisbane, Australia	Ÿ Kosice, Slovakia	Ÿ Singapore
Ÿ Cairo, Egypt	Ÿ Kuala Lumpur, Malaysia	Ÿ St. Wolfgang, Germany
Ÿ Doha, Qatar	Ÿ Lisbon, Portugal	Ÿ Stockholm, Sweden
Ÿ Dubai, United Arab Emirates	Ÿ London, England	Ÿ Sydney, Australia
Ÿ Dublin, Ireland	Ÿ Madrid, Spain	Ÿ The Hague, Netherlands
Ÿ Erlangen, Germany	Ÿ Melbourne, Australia	Ÿ Toronto, Ontario, Canada
Ÿ Essen, Germany	Ÿ Oslo, Norway	Ÿ Vienna, Austria

In connection with our acquisition of Siemens Health Services on February 2, 2015, we acquired approximately 110 acres of property in Malvern, Pennsylvania. This property includes approximately 675,000 square feet of office space, and a 102,000 square foot data center. We also now lease additional office space in various locations, globally.

Item 3. Legal Proceedings

We are not a party to and none of our property is subject to any material pending legal proceedings, other than ordinary routine litigation incidental to our business.

Item 4. Mine Safety Disclosures

Not applicable

~~Table of Contents~~

Part II

Item 5. Market for ~~the~~ Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity ~~Securities~~Securities.

Our common stock trades on ~~The~~the NASDAQ Global Select Market^SM under the symbol CERN. The following table sets forth the high, low and last sales prices for the fiscal quarters of ~~2014~~2016 and ~~2013~~2015 as reported by ~~The Nasdaq Stock~~the NASDAQ Global Select Market^®.

2014 2013(a)

High Low Last High Low Last

First Quarter $ 63.07
$ 51.65
$ 56.15
$ 47.37
$ 38.76
$ 47.37
Second Quarter 56.94
48.39
51.27
49.68
45.60
48.05
Third Quarter 60.07
50.30
58.66
52.61
46.06
52.61
Fourth Quarter 66.45
55.75
65.03
58.24
52.55
55.58

~~(a) Sales prices have been retroactively adjusted to give effect to the 2-for-1 stock split effective June 28, 2013.~~



	2016						2015

	High		Low		Last		High		Low		Last

First Quarter	$	59.92	$	49.59	$	54.08	$	74.83	$	63.19	$	72.77
Second Quarter	59.14		52.84		58.91		75.72		65.67		68.48
Third Quarter	67.50		57.59		61.75		75.00		57.42		61.34
Fourth Quarter	62.53		47.01		47.37		68.31		55.82		60.17

At February ~~6, 2015,~~1, 2017, there were approximately ~~940~~960 owners of record. To date, we have paid no cash dividends and we do not intend to pay cash dividends in the foreseeable future. We believe it is in the shareholders’ best interest for us to reinvest funds in the operation of the business.

The following table provides information with respect to Common Stock purchases by the Company during the fourth fiscal quarter of ~~2014~~2016:

(In millions, except share data)

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
September 28, 2014 - October 25, 2014 —
—
—
$ 100.0
October 26, 2014 - November 22, 2014 658
$ 63.34
—
100.0
November 23, 2014 - January 3, 2015 —
—
—
100.0
Total 658
$ 63.34
—



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a)
Period	Total Number of Shares Purchased	Average Price Paid per Share
October 2, 2016 - October 29, 2016	—	$	—	—	$	100,000,000
October 30, 2016 - November 26, 2016	7,742,399	50.15		7,742,399	211,730,000
November 27, 2016 - December 31, 2016	2,238,243	49.92		2,238,243	100,000,000
Total	9,980,642	$	50.10	9,980,642

(a)

~~All of the shares of common stock, par value $0.01 per share, presented~~As announced on the table above 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 minimum tax obligations due upon the vesting of restricted stock. Pursuant to the Omnibus Plan, the shares reflected above were relinquished by employees in exchange for our agreement to pay federal and state withholding obligations resulting from the vesting of the Company’s restricted stock.

~~(b)~~

~~In May 2014,~~March 8, 2016, our Board of Directors ~~approved an amendment to the stock~~authorized a share repurchase program ~~that was authorized in December 2013. Under the amendment, the Company may repurchase shares~~for an aggregate purchase of up to $300 million of our common stock, ~~up to an aggregate of $317.0 million,~~ excluding transaction costs. That program was completed in November 2016. As announced on November 14, 2016, our Board of Directors authorized a new share repurchase program for an aggregate purchase of up to $500 million of our common stock, excluding transaction costs. As of December 31, 2016, $100 million remained available for repurchase. No time limit has been set for the completion of the program. During ~~2014,~~2016, the Company repurchased ~~4.1~~13.7 million shares for total consideration of ~~$217.0~~$700 million ~~excluding transaction costs,~~ pursuant to a Rule 10b5-1 ~~plan. As~~plans. Refer to Note (14) of ~~January 3, 2015, $100.0 million remains available under~~ the ~~authorized program.~~notes to consolidated financial statements for further information regarding our share repurchase programs.

See Part III, Item 12 for information relating to securities authorized for issuance under our equity compensation plans.

~~Table of Contents~~

Item 6. Selected Financial Data


(In thousands, except per share data)	2014		2013		2012		2011		2010		2016		2015⁽¹⁾		2014		2013⁽²⁾		2012
	(1)(2)		(1)(3)		(1)		(1)		(1)

Statement of Operations Data:
Revenues	$	3,402,703	$	2,910,748	$	2,665,436	$	2,203,153	$	1,850,222	$	4,796,473	$	4,425,267	$	3,402,703	$	2,910,748	$	2,665,436
Operating earnings	763,084		576,012		571,662		459,798		359,333		911,013		781,136		763,084		576,012		571,662
Earnings before income taxes	774,174		588,054		587,708		469,694		362,212		918,434		781,380		774,174		588,054		587,708
Net earnings	525,433		398,354		397,232		306,627		237,272		636,484		539,362		525,433		398,354		397,232

Earnings per share:
Basic	1.54		1.16		1.16		0.91		0.72		1.88		1.57		1.54		1.16		1.16
Diluted	1.50		1.13		1.13		0.88		0.69		1.85		1.54		1.50		1.13		1.13

Weighted average shares outstanding:
Basic	342,150		343,636		341,861		337,267		329,833		337,740		343,178		342,150		343,636		341,861
Diluted	350,386		352,281		351,394		347,734		341,695		343,653		350,908		350,386		352,281		351,394

Balance Sheet Data:
Working capital	$	1,714,471	$	1,121,276	$	1,210,394	$	1,063,593	$	840,129	$	773,960	$	1,049,967	$	1,714,471	$	1,121,276	$	1,210,394
Total assets	4,530,565		4,098,364		3,704,468		3,000,358		2,422,790		5,629,963		5,561,984		4,530,565		4,098,364		3,704,468
Long-term debt and capital lease obligations, excl. current installments	62,868		111,717		136,557		86,821		67,923		537,552		563,353		62,868		111,717		136,557
Shareholders' equity	3,565,968		3,167,664		2,833,650		2,310,681		1,905,297		3,927,947		3,870,384		3,565,968		3,167,664		2,833,650


(1)	~~Includes share-based compensation expense. The impact of this expense is as follows:~~

(In thousands, except share data) 2014 2013 2012 2011 2010

Total share-based compensation expense $ 62,965
$ 48,954
$ 38,112
$ 29,479
$ 24,903
Amount of related income tax benefit (22,101 ) (18,607 ) (14,578 ) (11,256 ) (9,329 )
Net impact on earnings $ 40,864
$ 30,347
$ 23,534
$ 18,223
$ 15,574

Decrease to diluted earnings per share $ 0.12
$ 0.09
$ 0.07
$ 0.05
$ 0.05


~~(2)~~	~~Includes $15.8 million of pre-tax costs in connection with our acquisition of~~In 2015 we acquired Siemens Health Services, as further described in Note 2 of the notes to consolidated financial statements.


~~(3)~~(2)	Includes a pre-tax settlement charge of ~~$106.2 million, as further described in Note 11 of the notes to consolidated financial statements.~~$106 million.

~~Table of Contents~~

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management Discussion and Analysis (MD&A) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements (Notes).

Our fiscal year ends on the Saturday closest to December 31. Fiscal ~~year~~ ~~2014~~ ~~consisted of 53 weeks and ended on~~ ~~January 3, 2015, and fiscal~~ years ~~2013~~2016 and ~~2012~~2015 each consisted of 52 weeks and ended on December ~~28, 2013~~31, 2016 and ~~December 29, 2012~~,January 2, 2016, respectively. Fiscal year 2014 consisted of 53 weeks and ended on January 3, 2015. The additional week in fiscal year 2014 impacts the results of operations discussion ~~below, for the comparison of fiscal years 2014 and 2013.~~below. All references to years in this MD&A represent fiscal years unless otherwise noted.

Management Overview

Our revenues are primarily derived by selling, implementing and supporting software solutions, clinical content, hardware, devices and services that give health care providers and other stakeholders secure access to clinical, administrative and financial data in real or near-real time, ~~allowing~~helping them to improve quality, safety and efficiency in the delivery of health care.

Our fundamental strategic focus is the creation of organic growth by investing in research and development (R&D) to create solutions and services for the health care industry. This strategy has driven strong growth over the long-term, as reflected in five- and ten-year compound annual revenue growth rates of ~~14%~~13% or more. This growth has also created an important strategic footprint in health care, with Cerner^® solutions in more than ~~18,000~~25,000 facilities worldwide, including hospitals, physician practices, laboratories, ambulatory centers, behavioral health centers, cardiac facilities, radiology clinics, surgery centers, extended care facilities, retail pharmacies, and employer sites. Selling additional solutions and services back into this client base is an important element of our future revenue growth. We are also focused on driving growth through market share expansion by strategically aligning with health care providers that have not yet selected a supplier and by displacing competitors in health care settings that are looking to replace their current supplier. We may also supplement organic growth with acquisitions.

We expect to drive growth through solutions and services that reflect our ongoing ability to innovate and expand our reach into health care. Examples of these include our CareAware^® health care device architecture and devices, Cerner ITWorks services, revenue cycle solutions and services, andHealtheIntent population health solutions and services. Finally, we believe there is significant opportunity for growth outside of the United States, with many non-U.S. markets focused on health care information technology as part of their strategy to improve the quality and lower the cost of health care.

Beyond our strategy for driving revenue growth, we are also focused on earnings growth. Similar to our history of growing revenue, our net earnings have increased at compound annual rates of ~~20%~~15% or more over the most recent five- and ten-year periods. We expect to drive continued earnings growth through ongoing revenue growth coupled with margin expansion, which we expect to achieve through efficiencies in our implementation and operational processes and by leveraging R&D investments and controlling general and administrative expenses.

We are also focused on continuing to deliver strong levels of cash flow, which we expect to do by continuing to grow earnings and prudently managing capital expenditures.

Siemens Health Services

On February 2, 2015, we acquired the Cerner Health Services business, as further described in Note (2) of the notes to consolidated financial statements. The addition of this business impacts the comparability of our 2015 consolidated financial statements in relation to the comparative periods presented herein.

Results Overview

The Company delivered ~~strong~~good levels of bookings, revenues, earnings and operating cash flows in ~~2014~~.2016.

New business bookings revenue, in ~~2014~~, which reflects the value of executed contracts for software, hardware, professional services and managed services, was ~~$4.3 billion, which is an increase of 13% compared to $3.8~~flat year-over-year at $5.4 billion in ~~2013. Our~~both 2016 and 2015, but we still view 2016 bookings as solid given 2015 had grown 28% over 2014, ~~revenues~~creating a difficult comparable.

Revenues for 2016 increased ~~17%~~8% to ~~$3.4~~$4.8 billion compared to ~~$2.9~~$4.4 billion in ~~2013.~~2015. The ~~year-over-year~~ increase in revenue reflects ongoing demand for Cerner's core solutions and services driven by our ~~clients’~~clients' needs to keep up with regulatory ~~requirements, increased~~requirements; contributions from Cerner ITWorks and ~~Cerner~~ revenue cycle solutions and ~~services,~~services; and attaining new clients.

Our ~~2014~~2016 net earnings were ~~$525.4~~$636 million compared to $~~398.4~~539 million in ~~2013~~2015. Diluted earnings per share were ~~$1.50~~$1.85 in ~~2014~~2016 compared to ~~$1.13~~$1.54 in ~~2013.~~2015. The ~~2014~~ ~~and~~ ~~2013~~overall increase in net earnings and diluted earnings per share ~~reflect the impact~~was primarily a result of ~~stock-based compensation expense. The effect of these expenses reduced the~~ ~~2014~~ ~~net earnings and diluted earnings per share by $40.9 million and $0.12, respectively, and the~~ ~~2013~~ ~~net earnings and diluted earnings per share by~~ ~~$30.3 million~~ ~~and~~ ~~$0.09, respectively. The 2014 net earnings and diluted earnings per share also reflect the impact of acquisition~~increased revenues, combined with a decline in costs ~~related to~~associated with our acquisition of ~~Siemens~~the Cerner Health Services ~~as further described below. These costs reduced net earnings and diluted~~

~~Table of Contents~~

~~earnings per share by $10.1 million and $0.03, respectively. The 2013 net earnings and diluted earnings per share also reflect the impact of a settlement charge, as further described~~business in ~~Note (11) of our notes to consolidated financial statements. The effect of this charge reduced 2013 net earnings and diluted earnings per share by $68.1 million and $0.19, respectively.~~2015.

We had cash collections of receivables of ~~$3.5~~$5.2 billion in ~~2014~~2016 compared to ~~$3.1~~$4.4 billion in ~~2013.~~2015. Days sales outstanding was 6669 days for the ~~2014~~2016 fourth quarter compared to 6776 days for ~~both~~ the ~~2014~~2016 third quarter and 80 days for the ~~2013~~2015 fourth quarter. Operating cash flows for ~~2014~~2016 were ~~strong at $847.0 million~~$1.2 billion compared to $~~695.9~~948 million in ~~2013~~2015.

~~Siemens Health Services~~

On February 2, 2015, we acquired substantially all of the assets, and assumed certain liabilities of Siemens Health Services, the health information technology business unit of Siemens AG, a stock corporation established under the laws of Germany. Siemens Health Services offers a portfolio of enterprise-level clinical and financial health care information technology solutions, as well as departmental, connectivity, population health, and care coordination solutions globally. Solutions are offered on the Soarian, Invision, and i.s.h.med platforms, among others. Siemens Health Services also offers a range of complementary and support services including hosting and managed services, implementation services, and strategic consulting.

We believe the acquisition enhances our organic growth opportunities as it provides us a larger base into which we can sell our combined portfolio of solutions and services. The acquisition also augments our non-U.S. footprint and growth opportunities, increases our ability and scale for R&D investment, and adds approximately 5,500 highly-skilled associates that will enhance our capabilities. These factors, combined with the synergies and economies of scale expected from combining the operations of Cerner and Siemens Health Services, are the basis for the acquisition.

Consideration for the acquisition was $1.37 billion of cash, consisting of the $1.3 billion agreed upon price plus working capital adjustments. The purchase price is subject to certain post-closing adjustments for working capital and pension obligations, as specified in the Master Sale and Purchase Agreement dated August 5, 2014, as amended.

The operating results of Siemens Health Services will be combined with our operating results subsequent to the purchase date of February 2, 2015. We expect the acquisition of Siemens Health Services to have a significant impact on our results of operations in 2015. As a reference for magnitude, we expect the Siemens Health Services business to contribute approximately $1.0 billion of revenues in 2015. We are currently unable to provide estimates of contributions to GAAP net earnings and diluted earnings per share, primarily due to the timing of the transaction in proximity to the date of this filing. The initial accounting for the acquisition, including the preliminary allocation of purchase price, is incomplete as of the filing date.

Health Care Information Technology Market Outlook

We have provided an assessment of the health care information technology market under “Health Care and Health Care IT Industry” in Part I, Item 1 ~~"Business.~~"Business," which is incorporated herein by reference.

~~Table of Contents~~

Results of Operations

Fiscal Year ~~2014~~2016 Compared to Fiscal Year ~~2013~~2015


(In thousands)	2014			% of Revenue		2013			% of Revenue		% Change		2016			% of Revenue		2015			% of Revenue		% Change
Revenues
System sales	$	945,858		28	%	$	847,809		29	%	12	%	$	1,265,962		26	%	$	1,281,890		29	%	(1	)%
Support and maintenance	724,840			21	%	661,979			23	%	9	%	1,015,811			21	%	975,701			22	%	4	%
Services	1,642,119			48	%	1,330,851			46	%	23	%	2,426,155			51	%	2,094,874			47	%	16	%
Reimbursed travel	89,886			3	%	70,109			2	%	28	%	88,545			2	%	72,802			2	%	22	%

Total revenues	3,402,703			100	%	2,910,748			100	%	17	%	4,796,473			100	%	4,425,267			100	%	8	%

Costs of revenue
Costs of revenue	604,377			18	%	514,722			18	%	17	%	779,116			16	%	750,781			17	%	4	%

Total margin	2,798,326			82	%	2,396,026			82	%	17	%	4,017,357			84	%	3,674,486			83	%	9	%

Operating expenses
Sales and client service	1,395,568			41	%	1,173,051			40	%	19	%	2,071,926			43	%	1,838,600			42	%	13	%
Software development	392,805			12	%	338,786			12	%	16	%	551,418			11	%	539,799			12	%	2	%
General and administrative	246,869			7	%	308,177			11	%	(20	)%	392,454			8	%	423,424			10	%	(7	)%
Amortization of acquisition-related intangibles													90,546			2	%	91,527			2	%	(1	)%

Total operating expenses	2,035,242			60	%	1,820,014			63	%	12	%	3,106,344			65	%	2,893,350			65	%	7	%

Total costs and expenses	2,639,619			78	%	2,334,736			80	%	13	%	3,885,460			81	%	3,644,131			82	%	7	%

Operating earnings	763,084			22	%	576,012			20	%	32	%	911,013			19	%	781,136			18	%	17	%

Other income, net	11,090					12,042							7,421					244
Income taxes	(248,741		)			(189,700		)					(281,950		)			(242,018		)

Net earnings	$	525,433				$	398,354				32	%	$	636,484				$	539,362				18	%

Revenues & Backlog

Revenues increased ~~17%~~8% to ~~$3.4~~$4.8 billion in ~~2014~~2016, as compared to $~~2.9~~4.4 billion in ~~2013~~2015.

System sales, which include revenues from the sale of licensed software (including perpetual license sales and software as a service), technology resale (hardware, devices, and sublicensed software), deployment period

licensed software upgrade rights, installation fees, transaction processing and subscriptions, ~~increased 12%~~decreased 1% from 2016 to ~~$945.9 million in~~ ~~2014~~ ~~from~~ ~~$847.8 million~~ ~~in 2013.~~2015. The ~~increase~~decrease in system sales was primarily driven by ~~strong growth~~a decline in ~~software and subscriptions of $65.4 million and $22.9 million, respectively.~~

technology resale.

Support and maintenance revenues increased 9%4% to ~~$724.8~~$1.0 billion in 2016 compared to $976 million in ~~2014~~ ~~compared to~~ ~~$662.0 million~~ in ~~2013~~.2015. This increase was primarily attributable to continued success at selling Cerner Millennium applications and implementing them at client sites. ~~We expect that support~~

Services revenue, which includes professional services (excluding installation) and ~~maintenance revenues will continue~~managed services, increased 16% to ~~grow~~$2.4 billion in 2016 from $2.1 billion in 2015. This increase was driven by a $207 million increase in professional services due to growth in implementation and consulting activities and growth in managed services of $124 million as ~~the base~~a result of ~~installed~~ ~~Cerner Millennium~~ ~~systems grows.~~continued demand for our hosting services.

•

Services revenue, which includes professional services, excluding installation, and managed services, increased 23% to $1.6 billion in 2014 from $1.3 billion in 2013. This increase was driven by growth in ~~CernerWorks~~managed services of $70.0 million as a result of continued demand for our hosting services and a $241.3 million increase in professional services due to increased implementation and consulting activities.

Revenue backlog, which reflects contracted revenue that has not yet been recognized as revenue, increased ~~19%~~12% to ~~$10.6~~$15.9 billion in ~~2014~~2016 compared to ~~$8.9~~$14.2 billion in ~~2013~~.2015. This increase was driven by ~~growth in~~solid levels of new business bookings revenue during the past four quarters, including ~~continued~~ strong levels of managed ~~services,~~ ~~CernerITWorks~~ ~~and Cerner revenue cycle~~ services bookings that typically have longer contract terms.

~~Table of Contents~~

Costs of Revenue

~~Cost~~Costs of ~~revenues~~revenue as a ~~percentage~~percent of total revenues were 16% in 2016 compared to 17% in 2015. The lower costs of revenue as a percent of total revenues was ~~18% in both~~ ~~2014~~ ~~and~~ ~~2013~~.primarily driven by a lower mix of technology resale, which carries a higher cost of revenue.

~~Cost~~Costs of ~~revenues~~revenue includes the cost of reimbursed travel expense, sales commissions, third party consulting services and subscription content and computer hardware, devices and sublicensed software purchased from manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers. Such costs, as a percent of total revenues, typically have varied as the mix of revenue (software, hardware, devices, maintenance, support, services and reimbursed travel) carrying different margin rates changes from period to period. ~~Cost~~Costs of ~~revenues~~revenue does not include the costs of our client service personnel who are responsible for delivering our service offerings. Such costs are included in sales and client service expense.

Operating Expenses

Total operating expenses increased ~~12%~~7% to ~~$2.0~~$3.1 billion in ~~2014~~2016, compared with $~~1.8~~2.9 billion in ~~2013~~2015.

Sales and client service expenses as a percent of total revenues were ~~41%~~43% in ~~2014,~~2016, compared to ~~40%~~42% in ~~2013.~~2015. These expenses increased ~~19%~~13% to ~~$1.4~~$2.1 billion in ~~2014,~~2016, from $~~1.2~~1.8 billion in ~~2013~~2015. Sales and client service expenses include salaries and benefits of sales, marketing, support, and services personnel, depreciation and other expenses associated with our ~~CernerWorks~~managed ~~service~~services business, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The growth in services expense and increase as a percent of ~~revenue~~total revenues reflects ~~a higher mix~~hiring of services ~~during~~personnel to support the ~~period that was driven by~~ strong growth in services ~~revenue growth.~~revenue.

Software development expenses as a percent of ~~revenue~~total revenues were 11% in 2016, compared to 12% in ~~2014~~ ~~and~~ ~~2013~~2015. Expenditures for software development ~~reflect~~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 ~~2014~~2016 and ~~2013~~2015 is as follows:


	For the Years Ended						For the Years Ended
(In thousands)	2014			2013			2016			2015

Software development costs	$	467,158		$	418,747		$	704,882		$	685,260
Capitalized software costs	(175,262		)	(172,211		)	(290,911		)	(262,177		)
Capitalized costs related to share-based payments	(2,538		)	(2,438		)	(2,785		)	(2,479		)
Amortization of capitalized software costs	103,447			94,688			140,232			119,195

Total software development expense	$	392,805		$	338,786		$	551,418		$	539,799

General and administrative expenses as a percent of total revenues were 7%8% in ~~2014,~~2016, compared to ~~11%~~10% in ~~2013.~~2015. These expenses decreased ~~20%~~7% to ~~$246.9~~$392 million in ~~2014,~~2016, from $~~308.2~~423 million in ~~2013~~2015. 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 ~~acquisition costs. The 2013 amount includes a $106.2 million settlement charge, as further described in Note (11) of our notes to consolidated financial statements.~~related adjustments. The decrease as a percent of ~~$61.3 million~~total revenues was primarily ~~driven by~~ the ~~2013 settlement charge, offset by $15.8 million~~result of decreased expenses in 2016 related to acquisition costs and related ~~to the~~adjustments associated with our acquisition of ~~Siemens~~the Cerner Health Services business and ~~a $14.8~~our voluntary separation plans. General and administrative expenses in 2016 and 2015 include acquisition costs and related adjustments associated with our Cerner Health Services business of $4 million ~~increase~~and $46 million, respectively. General and administrative expenses in ~~corporate personnel~~2016 and 2015 include costs ~~as we have continued~~associated with our voluntary separation plans of $36 million and $46 million, respectively. We expect expenses in 2017 for acquisition costs and related adjustments associated with our acquisition of the Cerner Health Services business to ~~increase such personnel~~be de minimis. We do not expect to ~~support~~record expenses in 2017 associated with our ~~overall revenue growth.~~

~~Non-Operating Items~~

In January 2013, the research and development tax credit was extended retroactively from January 1, 2012 to December 31, 2013. In the first quarter of 2013, we recognized the research and development tax credit related to 2012 as a favorable discrete item and the credit related to 2013 as a component of the overall 2013 effective tax rate. The credit expired on December 31, 2013, but in the fourth quarter of 2014, was retroactively reinstated

from January 1, 2014 to December 31, 2014. We recognized the research and development tax credit related to 2014 in the fourth quarter of 2014. We estimate the expiration of the research and development tax credit on December 31, 2014 will negatively impact our effective tax rate for 2015 by approximately one percentage point, unless such credit is reinstated.

Operations by Segment

We have two operating segments: Domestic and Global. The Domestic segment includes revenue contributions and expenditures associated with business activity in the United States. The Global segment includes revenue contributions and expenditures linked to business activity in Aruba, Australia, Austria, the Bahamas, Belgium, Bermuda, Brazil, Canada, Cayman Islands, Chile, Denmark, Egypt, England, Finland, France, Germany, Guam, India, Ireland, ~~Israel,~~Kuwait, Luxembourg, Malaysia, Mexico, Netherlands, Norway, Portugal, Qatar, Romania, Saudi Arabia, Singapore, Slovakia, Spain, Sweden, Switzerland and the United Arab Emirates. Refer to Note (18) of the notes to consolidated financial statements for further information regarding our reportable segments.

The following table presents a summary of our operating segment information for the years ended ~~2014~~2016 and ~~2013~~2015:

Revenues increased ~~18%~~9% to ~~$3.0~~$4.2 billion in ~~2014~~2016 from ~~$2.6~~$3.9 billion in ~~2013.~~2015. This increase was primarily driven by ~~strong~~ growth ~~across most of our business.~~in services revenue.

Revenues increased 6% to ~~$380.9~~$551 million in ~~2014~~2016 from ~~$360.6~~$521 million in ~~2013.~~2015. This increase was ~~primarily~~ driven by ~~increases in managed services and professional services~~growth across most of ~~$11.3 million and $12.7 million, respectively, partially offset by a decline in software revenues of $7.3 million.~~our business.

~~Cost~~Costs of revenue as a percent of revenues ~~was 16% of revenues~~were 19% in both ~~2014~~2016 and ~~2013~~2015.

Operating expenses ~~increased 14% to $131.1 million~~as a percent of revenues were 45% in ~~2014~~ ~~from~~ ~~$115.3 million~~ in ~~2013, due primarily to an increase in bad debt expense.~~

Operating results not attributed to an operating segment include expenses, such as ~~centralized professional services costs,~~ software development, ~~marketing,~~ general and administrative ~~stock-based~~expenses, acquisition costs and related adjustments, share-based compensation ~~acquisition costs,~~

~~depreciation~~expense, and ~~amortization.~~certain amortization and depreciation. These expenses ~~increased 11% to $1.2~~were flat at $1.1 billion in ~~2014~~ ~~from~~ ~~$1.1 billion~~ in ~~2013~~. The increase was driven by an increase in corporate personnel costs of $182.7 million, as we have continued to increase such personnel to support our overall revenue growth, combined with $15.8 million of acquisition costs related to our acquisition of Siemens Health Services. This is partially offset by the 2013 settlement charge of $106.2 million, as further described in Note (11) of our notes to consolidated financial statements.both 2016 and 2015.

Fiscal Year ~~2013~~2015 Compared to Fiscal Year ~~2012~~2014

Revenues increased 9%30% to $~~2.9~~4.4 billion in ~~2013~~2015, as compared to $~~2.7~~3.4 billion in ~~2012~~2014.

System sales ~~decreased~~increased 6%36% to ~~$847.8 million~~$1.3 billion in ~~2013~~2015 from ~~$902.8~~$946 million in ~~2012~~2014. The ~~decrease~~increase in system sales was primarily driven by ~~lower levels of technology resale, which more than offset growth in licensed software, subscriptions, and software as a service.~~contributions from the Cerner Health Services business.

Support and maintenance revenues increased ~~10%~~35% to ~~$662.0~~$976 million in ~~2013~~2015 compared to ~~$604.2~~$725 million in ~~2012~~.2014. This increase was primarily attributable to ~~continued success at selling~~ contributions from the Cerner ~~Millennium~~ ~~systems and implementing them at client sites.~~Health Services business.

~~Services revenue increased~~ ~~21%~~ to ~~$1.3 billion~~ in ~~2013~~ ~~compared to~~ ~~$1.1 billion~~ in ~~2012. This increase was driven by growth in~~ ~~CernerWorksmanaged services as a result of continued demand for our hosting services and an increase in professional services due to increased implementation and consulting activities and growth in~~ ~~Cerner ITWorks~~ ~~and~~ ~~Cerner RevWorks~~ ~~services.~~

Revenue backlog increased ~~23%~~34% to ~~$8.9~~$14.2 billion in ~~2013~~2015 compared to ~~$7.3~~$10.6 billion in ~~2012~~2014. This increase was driven by growth in new business bookings during the past four quarters, including continued strong levels of managed services, Cerner ITWorks and Cerner revenue cycle services bookings that typically have longer contract ~~terms.~~terms, coupled with contributions from the Cerner Health Services business.

~~Cost~~Costs of ~~revenues~~revenue as a ~~percentage~~percent of total revenues were 17% in 2015 compared to 18% in 2014. The lower costs of revenue as a percent of total revenues was ~~18%~~ ~~of total revenues in~~ ~~2013, as compared to~~ ~~23%~~ ~~of total revenues in~~ ~~2012. The lower cost of revenues as a percent of revenue was~~primarily driven by a lower mix of technology resale, which carries a higher cost of revenue.

Total operating expenses increased ~~23%~~42% to $2.9 billion in ~~2013~~ to ~~$1.8~~2015, compared with $2.0 billion ~~as compared to~~ ~~$1.5 billion~~ in ~~2012~~.2014.

Sales and client service expenses as a percent of total revenues were ~~40%~~42% in ~~2013~~2015, as compared to ~~38%~~41% in ~~2012~~2014. These expenses increased ~~15%~~32% to $~~1.2~~1.8 billion in ~~2013~~2015, from $~~1.0~~1.4 billion in ~~2012~~2014. The increase ~~as a percent of revenue reflects a higher mix of services during 2013 that~~ was primarily driven by ~~strong services revenue growth and~~ the ~~decline in technology resale revenue.~~addition of the Cerner Health Services business.

Software development expenses as a percent of ~~revenue~~total revenues were 12% in ~~2013, as compared to~~ ~~11%~~ in ~~2012. These expenses increased~~ ~~12%~~ in ~~2013~~ to ~~$338.8 million, from~~ ~~$301.4 million~~ in ~~2012. The increase~~ in both ~~expensed~~2015 and ~~capitalized~~2014. Expenditures for software development ~~expenditures reflects a focus on~~reflect ongoing development and enhancement of ~~solutions that support~~the Cerner Millennium and HealtheIntent platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle, and population ~~health.~~health solutions. Software development expenses in 2015 also include expenditures related to the Cerner Health Services solutions. A summary of our total software development expense in ~~2013~~2015 and ~~2012~~2014 is as follows:

General and administrative expenses as a percent of total revenues were ~~11%~~10% in ~~2013~~,2015, compared to 6%7% in ~~2012~~.2014. These expenses increased ~~88%~~81% to ~~$308.2~~$423 million in ~~2013~~2015 from ~~$163.6~~$233 million in ~~2012~~.2014. The ~~2013 amount includes a $106.2 million settlement charge, as further described in Note (11) of our notes to consolidated financial statements. Absent this charge, the~~ increase in general and administrative expenses was primarily driven by ~~an increase~~the addition of the Cerner Health Services business. General and administrative expenses in ~~corporate personnel~~2015 and 2014 include acquisition costs ~~as we have continued~~and related adjustments associated with our Cerner Health Services business of $46 million and $16 million, respectively. General and administrative expenses in 2015 also include $46 million of costs associated with our 2015 voluntary separation plan.

~~Interest~~Other income, ~~decreased to $15.3~~net was less than $1 million in ~~2013~~2015 ~~from $16.5~~and $11 million in ~~2012~~2014. This decline was primarily due ~~primarily~~ to increased interest expense as a ~~slight decrease~~result of the issuance of Senior Notes in January 2015, as further discussed in Note (9) of the notes to consolidated financial statements. Interest income also declined in 2015 due to lower average investment ~~returns. Interest expense decreased~~balances throughout the year. Refer to ~~$4.2 million in~~ ~~2013~~ ~~from $5.1 million in~~ ~~2012~~ ~~due primarily~~Note (11) of the notes to ~~payments on our long-term debt, offset by increased capital lease obligations. Other income in 2012 also includes a $4.5 million gain recognized~~consolidated financial statements for further detail on the ~~disposition~~composition of ~~one of our cost-method investments.~~other income.

Our effective tax rate was ~~32%~~31% in ~~both~~ ~~2013~~ ~~and~~ ~~2012~~.2015 compared to 32% in 2014. The ~~rate includes~~rates include net favorable permanent differences recognized in both periods. Refer to Note ~~(13)~~(12) of the notes to consolidated financial statements for further information regarding our effective tax rate.

The research and development credit expired on December 31, 2013, but in the fourth quarter of 2014, was retroactively reinstatedfrom January 1, 2014 to December 31, 2014. We recognized the research and development tax credit related to 2014 in the fourth quarter of 2014. In the fourth quarter of 2015, the research and development credit was made permanent for amounts paid or incurred after December 31, 2014. We recognized the research and development tax credit related to 2015 in the fourth quarter of 2015.

Operations by Segment

The following table presents a summary of our operating segment information for the years ended ~~2013~~2015 and ~~2012~~:2014:

Revenues increased 9%29% to $3.9 billion in 2015 from $~~2.6~~3.0 billion in ~~2013~~ ~~from~~ ~~$2.3 billion~~ ~~in the same period in~~ ~~2012~~2014. This increase was primarily driven by ~~strong growth across most of our business, partially offset by lower levels of technology resale.~~contributions from the Cerner Health Services business.

~~Cost~~Costs of revenue as a percent of revenues ~~was~~were ~~18%~~ ~~of revenues in~~ ~~2013, compared to~~ ~~23%~~17% in ~~2012~~2015 compared to 18% in 2014. The lower ~~cost~~costs of ~~revenues~~revenue as a percent of ~~revenue~~revenues was primarily driven by a lower mix of technology resale, which carries a higher cost of revenue.

Operating expenses ~~increased~~ ~~19%~~as a percent of revenues were 40% in 2015 compared to ~~$600.3 million~~39% in ~~2013, from~~ ~~$506.2 million~~ in ~~2012, due~~2014. The slight increase as a percent of revenues was primarily ~~to growth in managed services and professional services expenses.~~

Revenues increased ~~11%~~37% to ~~$360.6~~$521 million in ~~2013~~2015 from ~~$324.1~~$381 million in ~~2012~~2014. This increase was primarily driven by ~~growth across most of our business, partially offset by lower levels of technology resale.~~contributions from the Cerner Health Services business.

~~Cost~~Costs of revenue as a percent of revenues ~~was~~ ~~16%~~were 19% in ~~2013~~,2015 compared to ~~18%~~16% in ~~2012~~.2014. The ~~lower cost~~higher costs of ~~revenues~~revenue as a percent of revenue ~~was~~in 2015 were primarily driven by a ~~lower mix~~higher amount of ~~technology resale, which carries a higher cost of revenue.~~

Operating expenses ~~decreased~~ ~~12%~~increased 27% to ~~$115.3~~$233 million in ~~2013~~2015 from ~~$131.6~~$183 million in ~~2012~~,2014, due primarily to ~~a decrease in non-personnel and bad debt expense.~~

These expenses increased ~~30%~~57% to ~~$1.1~~$1.1 billion in ~~2013~~2015 from ~~$847.7~~$689 million in ~~2012. The 2013 amount includes a $106.2 million settlement charge, as further described in Note (11) of our notes to consolidated financial statements. Absent this charge, the~~2014. This increase ~~was~~is primarily due to ~~growth in~~the addition of corporate and development personnel from our acquisition of the Cerner Health Services business. Additionally, 2015 included amortization of acquisition-related intangibles associated with our Cerner Health Services business, acquisition costs ~~along with increased depreciation~~ and ~~amortization~~related adjustments, and costs related to ~~acquired intangibles. This was partially offset by increased software capitalization.~~our voluntary separation plan of $79 million, $46 million, and $46 million, respectively. Our 2014 fiscal year includes acquisition costs and related adjustments of $16 million.

~~Table of Contents~~

Liquidity and Capital Resources

Our liquidity is influenced by many factors, including the amount and timing of our revenues, our cash collections from our clients and the amount we invest in software development, acquisitions, capital expenditures, and ~~capital expenditures.~~in recent years, our share repurchase programs.

Our principal sources of liquidity are our cash, cash equivalents, which primarily consist of money market funds ~~commercial paper,~~ and time deposits with original maturities of less than 90 days, and short-term investments. At the end of ~~2014~~,2016, we had cash and cash equivalents of ~~$635.2~~$171 million and short-term investments of ~~$785.7~~$186 million, as compared to cash and cash equivalents of ~~$202.4~~$402 million and short-term investments of ~~$677.0~~$111 million at the end of ~~2013~~2015.

The non-U.S. subsidiaries for which we have elected to indefinitely reinvest earnings outside the U.S. held approximately ~~11%~~45% of our aggregate cash, cash equivalents and short-term investments at ~~January 3, 2015~~December 31, 2016. As part of our current business strategy, we plan to indefinitely reinvest the earnings of these foreign operations; however, should the earnings of these foreign operations be repatriated, we would accrue and pay tax on such earnings, which may be material.

In January 2015, we issued $500.0 million aggregate principal amount of Senior Notes. Proceeds from the Senior Notes are available for general corporate purposes. Refer to Note (9) of the notes to consolidated financial statements for additional information regarding the Senior Notes.

We maintain a ~~$100.0~~$100 million multi-year revolving credit facility, which expires in ~~February 2017.~~October 2020. The facility provides an unsecured revolving line of credit for working capital purposes, ~~along with~~which includes a letter of credit facility. We have the ability to increase the maximum capacity to $200 million at any time during the facility's term, subject to lender participation. As of the end of ~~2014,~~2016, we had no outstanding borrowings under this ~~agreement;~~facility; however, we had ~~$16.6~~$32 million of outstanding letters of credit, which reduced our available borrowing capacity to ~~$83.4~~$68 million. Refer to Note (9) of the notes to consolidated financial statements for additional information regarding our credit facility.

On February 2, 2015 we acquired Siemens Health Services, as discussed above. Consideration for the acquisition was $1.37 billion of cash, consisting of the $1.3 billion agreed upon price plus working capital adjustments. We used a combination of cash on hand and proceeds from the sale of investments to fund the acquisition.

We believe that our present cash position, together with cash generated from operations, short-term investments and, if necessary, our available line of credit, will be sufficient to meet anticipated cash requirements during ~~2015~~2017.

The following table summarizes our cash flows in ~~2014~~2016, ~~2013~~2015 and ~~2012~~2014:


	For the Years Ended									For the Years Ended
(In thousands)	2014			2013			2012			2016			2015			2014

Cash flows from operating activities	$	847,027		$	695,865		$	708,314		$	1,155,612		$	947,526		$	847,027
Cash flows from investing activities	(284,567		)	(688,429		)	(701,631		)	(789,774		)	(1,405,943		)	(284,567		)
Cash flows from financing activities	(120,324		)	(119,389		)	66,034			(586,652		)	236,249			(120,324		)
Effect of exchange rate changes on cash	(9,310		)	(2,790		)	1,257			(10,447		)	(10,913		)	(9,310		)
Total change in cash and cash equivalents	432,826			(114,743		)	73,974			(231,261		)	(233,081		)	432,826

Cash and cash equivalents at beginning of period	202,377			317,120			243,146			402,122			635,203			202,377

Cash and cash equivalents at end of period	$	635,203		$	202,377		$	317,120		$	170,861		$	402,122		$	635,203

Free cash flow (non-GAAP)	$	392,643		$	168,339		$	424,696		$	402,489		$	320,738		$	392,643

Cash from Operating Activities

Cash flow from operations increased ~~$151.2~~$208 million in ~~2014~~2016 compared to ~~2013~~,2015, due primarily to ~~2013 including~~ a ~~payment related~~reduction in cash used to ~~the previously mentioned settlement charge,~~fund working capital requirements, along with an increase in ~~2014 of~~ cash impacting earnings. Cash flow from operations ~~decreased $12.4~~increased $100 million in ~~2013~~2015 compared to ~~2012,~~2014, due primarily to ~~the aforementioned settlement charge.~~an increase in cash impacting earnings. During ~~2014~~, ~~2013~~2016, 2015 and ~~2012~~,2014, we received total client cash collections of $5.2 billion, $4.4 billion and $3.5 billion, ~~$3.1 billion and $2.7 billion, respectively, of which 2%,~~ 2% ~~and~~ 3%~~, respectively, were received from third party client financing arrangements and non-recourse payment assignments.~~respectively. Days sales outstanding was 6669 days in the fourth quarter of ~~2014~~2016, compared to 6776 days for ~~both~~ the ~~2014~~2016 third quarter and 80 days for the ~~2013~~2015 fourth

quarter. Revenues provided under support and maintenance agreements represent recurring cash flows. ~~Support and maintenance revenues increased 9% in~~ ~~2014~~ ~~and~~ ~~10%~~ in ~~2013~~. We expect these revenues to continue to grow as the base of installed ~~Cerner Millennium~~systems grows.

Cash from Investing Activities

Cash flows from investing activities consist primarily of capital spending, short-term investment, and acquisition activities.

Our capital spending in ~~2014 has been~~2016 was driven by capitalized equipment purchases primarily to support growth in our~~CernerWorks~~ managed services business, investments in a cloud infrastructure to support cloud-based solutions, building and improvement purchases to support our facilities requirements and capitalized spending to support our ongoing software development initiatives. Capital ~~spending is~~purchases are expected to ~~increase~~decrease in ~~2015,~~2017, as we ~~continue our current capital and software development initiatives, fund equipment purchases necessary in connection with our acquisition~~completed the first two phases of ~~Siemens Health Services, and~~ construction on our ~~Trails Campus.~~Innovations Campus in January of 2017.

Short-term investment activity historically consists of the investment of cash generated by our business in excess of what is necessary to fund operations. The 2014 activity is impacted by a change in investment mix, whereas we ~~have~~ invested more heavily in cash equivalents versus short-term and long-term investments, as we prepared to fund our acquisition of ~~Siemens~~the Cerner Health ~~Services. Refer~~Services business in February 2015. The increase in net cash from investments in 2015 is due to ~~Notes (2)~~the use of proceeds from additional investment sales and ~~(3)~~maturities to partially fund our acquisition of the ~~notes~~Cerner Health Services business. In 2016, we returned to ~~consolidated financial statements. We~~net purchases of investments, which we expect ~~short-term investment activity~~ to ~~moderate~~continue in ~~2015~~2017, as ~~excess~~we expect strong levels of cash ~~will primarily be used to fund capital spending and acquisition activity.~~flow.

During 2015, we paid cash to acquire the Cerner Health Services business and the Lee's Summit Tech Center of $1.39 billion and $85 million, respectively. In 2014, we acquired 100% of the outstanding membership interests of InterMedHx, LLC for ~~$7.5~~$7 million. In 2013, we acquired the net assets of Kaufman & Keen, LLC (doing business as PureWellness) and 100% of the outstanding stock of Labotix Corporation for $67.5 million, net of cash acquired. During 2012, we completed our acquisition of Anasazi Software, Inc. for $40.5 million, net of cash acquired. We expect to continue seeking and completing strategic business acquisitions that are complementary to our business.

~~Table~~ Refer to Note (2) of ~~Contents~~the notes to consolidated financial statements for additional information regarding our business acquisitions.

Cash from Financing Activities

In January 2015, we issued $500 million in aggregate principal amount of Senior Notes. Proceeds from the Senior Notes were available for general corporate purposes. Refer to Note (9) of the notes to consolidated financial statements for additional information regarding the Senior Notes.

Cash inflows from stock option exercises are dependent on a number of factors, including the price of our common stock, grant activity under our stock option and equity plans, and overall market volatility. We expect cash inflows from stock option exercises to continue in ~~2015~~2017 based on the number of exercisable options at the end of ~~2014~~2016 and our current stock price.

During 2016, 2015 and 2014, ~~our Board of Directors approved an amendment to the stock repurchase program that was authorized in December 2013. Under the amendment, the Company may repurchase~~we repurchased 13.7 million shares of our common stock ~~up to an aggregate of $317.0 million, excluding transaction costs. In 2014, we purchased 4.1 million shares~~ for total consideration of ~~$217.1 million.~~$700 million, 5.7 million shares of our common stock for total consideration of $345 million, and 4.1 million shares of our common stock for total consideration of $217 million, respectively. At the end of ~~2014, $100.0~~2016, $100 million remains available for ~~purchases~~repurchase under our current repurchase program. Although we may continue to repurchase shares, there is no assurance that we will repurchase up to the full amount of shares remaining available under the program. ~~We may continue~~Refer to ~~purchase shares under this program in~~Note (14) of the notes to consolidated financial statements for further information regarding our share repurchase programs.

During 2016, we paid $2 million of contingent consideration related to our acquisition of InterMedHx, LLC. In 2015 ~~which will be dependent on a number~~we paid an aggregate of ~~factors, including the price~~$11 million of contingent consideration related to our ~~common stock.~~

~~In December 2012, our Board~~acquisitions of Directors authorized a stock repurchase program of up to $170.0 million, excluding transaction costs, of our common stock. During 2013, we repurchased 3.6 million shares for total consideration of $170.0 million. This program is now complete.

InterMedHx, LLC and Kaufman & Keen, LLC (doing business as PureWellness). In ~~September~~ 2014, we paid ~~$10.6~~$11 million of ~~the~~ contingent consideration related to our acquisition of PureWellness. We expect additional contingent consideration payments in ~~2015~~2017 related to our acquisitions of ~~PureWellness~~the Lee's Summit Tech Center and InterMedHx. Refer to Note (2) of the notes to consolidated financial statements for additional information regarding our contingent consideration arrangements.

In January 2014 we received ~~$48.0~~$48 million of cash grants from the Kansas Department of Commerce for project costs in connection with the construction of our Continuous Campus. Refer to Note ~~(17)~~(16) of the notes to consolidated financial statements for additional information.

Free Cash Flow (Non-GAAP)

Free cash flow increased ~~$224.3~~$82 million ~~from~~ ~~2013~~in 2016, compared to ~~2014.~~2015. This increase is ~~largely~~ due to an increase in cash flows from operations, ~~combined with a decrease in~~partially offset by higher levels of both capital purchases, primarily due to the completion of construction on our Continuous Campus. Free cash flow for 2013 also includes a payment related to the settlement charge, described in Note (11) of our notes to consolidated financial statements. Free cash flow decreased ~~$256.4 million~~ ~~from 2012 to~~ ~~2013. This decrease was primarily due to the previously mentioned settlement charge, combined with increased capital~~ spending ~~in 2013~~ to support our growth initiatives and facilities requirements, and capitalized spending to support our ongoing software development initiatives. ~~We believe our free~~Free cash flow decreased $72 million in 2015, compared to 2014. The decrease was due to higher levels ~~reflect continued strength~~of both capital spending to support our growth initiatives and facilities requirements, and capitalized spending to support our ongoing software development initiatives, partially offset by an increase in ~~our earnings.~~ cash flows from operations.

Free cash flow is a non-GAAP financial measure used by management along with GAAP results to analyze our earnings quality and overall cash generation of the business. We define free cash flow as cash flows from operating activities reduced by capital purchases and capitalized software development costs. The table above sets forth a reconciliation of free cash flow to cash flows from operating activities, which we believe to be the GAAP financial measure most directly comparable to free cash flow. The presentation of free cash flow is not meant to be considered in isolation, nor as a substitute for, or superior to, GAAP results, and investors should be aware that non-GAAP measures have inherent limitations and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Free cash flow may also be different from similar non-GAAP financial measures used by other companies and may not be comparable to similarly

Contractual Obligations, Commitments and Off Balance Sheet Arrangements

The following table represents a summary of our contractual obligations and commercial commitments at the end of ~~2014~~2016, except short-term purchase order commitments arising in the ordinary course of business.

Balance sheet obligations^(a):

Long-term debt obligations ^(b)

(a) At the end of ~~2014~~,2016, liabilities for unrecognized tax benefits were ~~$7.2~~$10 million.

~~(b) Amounts do not include the long-term debt issued in January 2015.~~

Recent Accounting Pronouncements

Refer to Note (1) of the notes to consolidated financial statements for information regarding recently issued accounting pronouncements.

Critical Accounting Policies

We believe that there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving our judgments and estimates. These significant accounting policies relate to revenue recognition, software development, potential impairments of goodwill, and income taxes. These accounting policies and our procedures related to these accounting policies are described in detail below and under specific areas within this MD&A. In addition, Note (1) to the consolidated financial statements expands upon discussion of our accounting policies.

We recognize revenue within our multiple element arrangements, including software and software-related services, using the residual method. Key factors in our revenue recognition model are our assessments that ~~installation~~implementation services are not essential to the functionality of our software, ~~whereas implementation services are not,~~we can establish vendor specific objective evidence (VSOE) of fair value for any undelivered elements, and the length of time it takes for us to achieve the delivery and ~~installation~~implementation milestones for our licensed software. If our business model were to change such that implementation services are deemed to be essential to the functionality of our software, the period of time over which our licensed software revenue would be recognized would lengthen.

We also recognize revenue for certain projects in which services are deemed essential to the functionality of the software using the percentage of completion method. Our revenue recognition is dependent upon our ability to reliably estimate the direct labor hours to complete a project which generally can span several years. We utilize our historical project experience and detailed planning process as a basis for our future estimates to complete current projects. Significant delays in completion of the projects, unforeseen cost increases or penalties could result in significant reductions to revenue and margins on these contracts. The actual project results can be significantly different from the estimated results. When adjustments are identified

near or at the end of a project, the full impact of the change in estimate is recognized in that period. This can result in a material impact on our results for a single reporting period.

Software Development Costs

Costs incurred internally in creating computer software solutions and enhancements to those solutions are expensed until completion of a detailed program design, which is when we determine that technological feasibility has been established. Thereafter, all software development costs are capitalized until such time as the software solutions and enhancements are available for general release, and the capitalized costs subsequently are reported at the lower of amortized cost or net realizable value.

Net realizable value is computed as the estimated gross future revenues from each software solution less the amount of estimated future costs of completing and disposing of that product. Because the development of projected net future revenues related to our software solutions used in our net realizable value computation is based on estimates, a significant reduction in our future revenues could impact the recovery of our capitalized software development costs. If we missed our estimates of net future revenues by 10%, the amount of our capitalized software development costs would not be impaired.

Capitalized costs are amortized based on current and expected net future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the software solution. We are amortizing capitalized costs over five years. The five-year period over which capitalized software development costs are amortized is an estimate based upon our forecast of a reasonable useful life for the capitalized costs. Historically, use of our software programs by our clients has exceeded five years and is capable of being used a decade or more.

We expect that major software information systems companies, large information technology consulting service providers and systems integrators and others specializing in the health care industry may offer competitive products or services. The pace of change in the HCIT market is rapid and there are frequent new product introductions, product enhancements and evolving industry standards and requirements. As a result, the capitalized software solutions may become less valuable or obsolete and could be subject to impairment.

Goodwill is not amortized but is evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an annual impairment assessment. We assess goodwill for impairment in the second quarter of each fiscal year and evaluate impairment indicators at each quarter end. We assessed our goodwill for impairment inas of the second quarters of ~~2014~~2016 and ~~2013~~2015 and concluded that goodwill was not impaired. The assessments consisted of a qualitative analysis in accordance with ~~new guidance effective in 2012.~~Accounting Standards Update 2011-08, Testing for Goodwill Impairment. A key consideration in conducting those analyses was the significant growth in both the revenues and operating earnings of our reporting units since our last quantitative assessment. Our last quantitative assessment was performed in 2011, in which the fair values of each of our reporting units exceeded their carrying amounts by a significant margin. We used a discounted cash flow analysis utilizing Level 3 inputs, to determine the fair value of the reporting units in 2011. Goodwill amounted to ~~$320.5~~$844 million and ~~$307.4~~$799 million at the end of ~~2014~~2016 and ~~2013~~2015, respectively. If future anticipated cash flows from our reporting units that recognized goodwill do not materialize as expected, our goodwill could be impaired, which could result in significant charges to earnings.

We make a number of assumptions and estimates in determining the appropriate amount of expense to record for income taxes. These assumptions and estimates consider the taxing jurisdictions in which we operate as well as current tax regulations. Accruals are established for estimates of tax effects for certain transactions, business structures and future projected profitability of our businesses based on our interpretation of existing facts and circumstances. If these assumptions and estimates were to change as a result of new evidence or changes in circumstances, the change in estimate could result in a material adjustment to the consolidated financial statements.

We have discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosure contained herein.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We ~~use~~are exposed to interest rate risk, primarily changes in LIBOR, related to our Series 2015-C Notes issued in January 2015. As of December 31, 2016, the interest rate for the current interest period on our Series 2015-C Notes was 1.90%, based on the three-month floating LIBOR rate. Based on our balance of $75 million of Series 2015-C Notes as of December 31, 2016, an increase in interest rates of 1.0% would cause a ~~foreign-currency denominated debt instrument~~corresponding increase in our annual interest expense of less than $1 million.

We have global operations, and as a result, we are exposed to ~~reduce our~~market risk related to foreign currency exchange rate fluctuations. Foreign currency fluctuations through December 31, 2016 have not had a material impact on our financial position or operating results. We currently do not use currency hedging instruments, though we actively monitor our exposure to foreign currency fluctuations and may use hedging transactions in the ~~U.K. As of the end of 2014, we designated all~~future if management deems it appropriate. We believe most of our ~~Great Britain Pound (GBP) denominated long-term debt (9.3 million GBP)~~global operations are naturally hedged for foreign currency risk as ~~a net investment hedge~~our foreign subsidiaries invoice their clients and satisfy their obligations primarily in their local currencies. There can be no guarantee that the impact of ~~our U.K. operations. Because the borrowing is denominated in pounds, we are exposed to movements~~foreign currency fluctuations in the ~~foreign currency exchange rate between the U.S. dollar (USD) and the GPB. We estimate that~~future will not have a hypothetical 10% adverse change in the foreign currency exchange rate between the USD and GBP would have impacted the unrealized loss, net of related income tax effects, of the net investment hedge recognized in other comprehensive income in 2014 by approximately $0.9 million, as compared to $1.9 million in 2013. The 2014 model assumes an exchange rate of 1.533 at January 3, 2015 and a tax rate of 38.8%. The hypothetical decrease in other comprehensive income in 2014 from 2013 is a result of a lower amount of GBP denominated debt outstanding. Actual results may differ. Please refer to Notes (9) and (10) to the Consolidated Financial Statements for a more detailed discussion of the foreign-currency denominated debt instrument.material impact on our financial position or operating results.

Item 8. Financial Statements and Supplementary Data

The Financial Statements and Notes required by this Item are submitted as a separate part of this report. See Note ~~(20)~~(19) to the Consolidated Financial Statements for supplementary financial information.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report (the Evaluation Date). They have concluded that, as of the Evaluation Date and based on the evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rule 13a-15 or 15d-15, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis. The CEO and CFO have concluded that the Company’s disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the SEC. They have also concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure.

~~There were no changes in the Company’s internal controls~~Management's Report on Internal Control over ~~financial reporting during the three months ended~~ ~~January 3, 2015, that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.~~

in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Management’s Report on Internal Control over Financial Reporting~~

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of ~~January 3, 2015~~.December 31, 2016. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its Internal Control-Integrated Framework ~~(1992)~~(2013). The Company’s management has concluded that, as of ~~January 3, 2015~~,December 31, 2016, the Company’s internal control over financial reporting is effective based on these criteria. The Company’s independent registered public accounting firm that audited the consolidated financial statements included in this annual report has issued an audit report on the effectiveness of the Company’s internal control over financial reporting, which is included herein under “Report of Independent Registered Public Accounting Firm”.

On February 2, 2015, we acquired Siemens Health Services, as further described in Note (2) of the notes to consolidated financial statements. During 2016, we continued to integrate policies, processes, people, technology and operations for our combined operations. Except for any changes in internal controls related to the integration of the Siemens Health Services business into Cerner, there were no other changes in the Company’s internal controls over financial reporting during the year ended December 31, 2016, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

The Company’s management, including its CEO and CFO, have concluded that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at that reasonable assurance level. However, the Company’s management can provide no assurance that our disclosure controls and procedures or our internal control over financial reporting can prevent all errors and all fraud under all circumstances. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 9B. Other Information

~~Table of Contents~~

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information ~~required by this Item 10 regarding our Directors and any nominees to become Directors will be set forth~~ under ~~the caption~~ “Information Concerning ~~Directors” in our Proxy Statement in connection with the~~ ~~2015~~ ~~Annual Shareholders’ Meeting scheduled to be held~~ ~~May 22, 2015~~ (the Proxy Statement), and is incorporated in this Item 10 by reference. The information required by this Item 10 regarding family relationships between any Director, Executive Officer or other person nominated to become a Director or Executive Officer will be set forth under the captionDirectors,” “Certain Transactions” in our Proxy Statement and is incorporated in this Item 10 by reference. The information required by this Item 10 concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 will be set forth under the captionTransactions,” “Section 16(a) Beneficial Ownership Reporting ~~Compliance” in our Proxy Statement and is incorporated in this Item 10 by reference.~~

~~The information required by this Item 10 concerning our Code of Business Conduct and Ethics will be set forth under the caption~~Compliance,” “Corporate Governance: Code of Business Conduct and Ethics” ~~in our Proxy Statement~~ and ~~is incorporated in this Item 10 by reference. The information required by this Item 10 concerning our Audit Committee and our Audit Committee financial expert will be set forth under the caption~~ “Committees of the Board: Audit Committee” set forth in ~~our Proxy Statement and~~the Company's definitive proxy statement related to its 2017 annual meeting of stockholders (the "Proxy Statement"), which will be filed with the SEC not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A, is incorporated ~~in this Item 10~~herein by reference.

There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since our last disclosure ~~thereof.~~ thereof in our 2016 proxy statement.

The information required by this Item 10 regarding our Executive Officers is set forth under the caption “Executive Officers of the Registrant” in Part I above.

Item 11. Executive Compensation

The information ~~required by this Item 11 concerning our executive compensation will be set forth~~ under “Committees of the ~~caption “Compensation~~Board: Compensation Committee,” "Director Compensation," "2016 Director Compensation Table," "Compensation Committee Report," "Compensation Discussion and ~~Analysis”~~Analysis," "Summary Compensation Table," "2016 Grants of Plan-Based Awards," "Outstanding Equity Awards at 2016 Fiscal Year-End," "2016 Option Exercises and Stock Vested," "Employment Agreements & Potential Payments Under Termination or Change in ~~our Proxy Statement~~Control" and is incorporated in this Item 11 by reference. The information required by this Item 11 concerning Director compensation will be set forth under the caption "Director Compensation" in our Proxy Statement and is incorporated in this Item 11 by reference. The information required by this Item 11 concerning Compensation Committee interlocks and insider participation will be set forth under the caption “Compensation"Compensation Committee Interlocks and Insider ~~Participation”~~Participation" set forth in ~~our~~the Proxy Statement, ~~and~~which will be filed with the SEC not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A, is incorporated in this Item 11 by reference. The information required by this Item 11 concerning Compensation Committee report will be set forth under the caption “Compensation Committee Report” in our Proxy Statement and is incorporated in this Item 11herein by reference.

~~Table of Contents~~

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement and is incorporated in this Item 12 by reference.

The following table provides information about our common stock that may be issued under our equity compensation plans as of ~~January 3, 2015~~December 31, 2016:


(In thousands, except per share data)	Securities to be issued upon exercise of outstanding options and rights ⁽¹⁾	Weighted average exercise price per share ⁽²⁾		Securities available for future issuance⁽³⁾	Securities to be issued upon exercise of outstanding options and rights ⁽¹⁾	Weighted average exercise price per share ⁽²⁾		Securities available for future issuance⁽³⁾
Plan category						Weighted average exercise price per share ⁽²⁾		Securities available for future issuance⁽³⁾
		Weighted average exercise price per share ⁽²⁾		Securities available for future issuance⁽³⁾
Equity compensation plans approved by security holders ⁽⁴⁾	25,135	$	27.00	8,080	23,955	$	40.33	17,448
Equity compensation plans not approved by security holders	—	—		—	—	—		—

Total	25,135			8,080	23,955			17,448

^{(1) Includes grants of stock options, time-based and performance-based restricted stock.}

^{(2) Includes weighted-average exercise price of outstanding stock options only.}

^{(3) Excludes securities to be issued upon exercise of outstanding options and rights.}

^{(4) Includes the Stock Option Plan D, Stock Option Plan E, 2001 Long-Term Incentive Plan F, 2004 Long-Term Incentive Plan G and 2011 Omnibus Equity Incentive Plan. All new grants are made under the 2011 Omnibus Equity Incentive Plan, as the previous plans are no longer active.}

~~All other~~The information ~~required by this Item is incorporated by reference from~~under “Security Ownership of Certain Beneficial Owners and Management” set forth in the Proxy Statement, ~~under~~which will be filed with the ~~section entitled~~ “~~Principal Security Ownership and Certain Beneficial Owners.~~”SEC not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A, is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information ~~required by this Item 13 concerning our transactions with related parties will be set forth~~ under ~~the caption~~ “Certain Transactions” ~~in our Proxy Statement~~ and ~~is incorporated in this Item 13 by reference. The information required by this Item 13 concerning director independence will be set forth under the caption “Meetings~~"Meetings of the Board and ~~Committees”~~Committees" set forth in ~~our~~the Proxy Statement, ~~and~~which will be filed with the SEC not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A, is incorporated ~~in this Item 13~~herein by reference.

Item 14. Principal Accountant Fees and Services

The information ~~required by this Item 14 will be set forth~~ under ~~the caption~~ “Relationship with Independent Registered Public Accounting Firm” set forth in ~~our~~the Proxy Statement, ~~and~~which will be filed with the SEC not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A, is incorporated ~~in this Item 14~~herein by reference.

~~Table of Contents~~

PART IV

Item 15. Exhibits and Financial Statement Schedules


a)	Financial Statements and Exhibits


(1)	Consolidated Financial Statements:

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets - As of ~~January 3, 2015~~December 31, 2016 and ~~December 28, 2013~~January 2, 2016

Consolidated Statements of Operations -Years Ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015

Consolidated Statements of Comprehensive Income - Years Ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015

Consolidated Statements of Cash Flows - Years Ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015

Consolidated Statements of Changes in Shareholders' Equity - Years Ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015

Notes to Consolidated Financial Statements


(2)	~~The following financial statement schedule and Report of Independent Registered Public Accounting Firm of the Registrant for the three-year period ended~~ ~~January 3, 2015~~ ~~are included herein:~~

~~Schedule II—Valuation and Qualifying Accounts, Report of Independent Registered Public Accounting Firm~~

~~All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.~~


~~(3)~~	See the Index to Exhibits immediately following the signature page of this Annual Report on Form 10-K.

Item 16. Form 10-K Summary.

None.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




	CERNER CORPORATION

Date: February ~~11, 2015~~10, 2017	By:	/s/ Neal L. Patterson
		Neal L. Patterson
		Chairman of the Board and
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:



Signature and Title		Date

/s/ Neal L. Patterson		February ~~11, 2015~~10, 2017
Neal L. Patterson, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

/s/ Clifford W. Illig		February ~~11, 2015~~10, 2017
Clifford W. Illig, Vice Chairman and Director

/s/ Marc G. Naughton		February ~~11, 2015~~10, 2017
Marc G. Naughton, Executive Vice President and Chief Financial Officer (Principal Financial Officer)

/s/ Michael R. Battaglioli		February ~~11, 2015~~10, 2017
Michael R. Battaglioli, Vice President and Chief Accounting Officer (Principal Accounting Officer)

/s/ Gerald E. Bisbee, Jr.		February ~~11, 2015~~10, 2017
Gerald E. Bisbee, Jr., Ph.D., Director

/s/ Denis A. Cortese, M.D.		February ~~11, 2015~~10, 2017
Denis A. Cortese, M.D., Director

/s/ John C. Danforth		February ~~11, 2015~~10, 2017
John C. Danforth, Director

/s/ Mitchell E. Daniels		February ~~11, 2015~~10, 2017
Mitchell E. Daniels, Director

/s/ Linda M. Dillman		February ~~11, 2015~~10, 2017
Linda M. Dillman, Director

/s/ William B. Neaves		February ~~11, 2015~~10, 2017
William B. Neaves, Ph.D., Director

/s/ William D. Zollars		February ~~11, 2015~~10, 2017
William D. Zollars, Director

~~Table of Contents~~

INDEX TO EXHIBITS

~~Incorporated by Reference~~

~~Exhibit Number~~

~~Exhibit Description~~

~~Form~~

~~Exhibit(s)~~

~~Filing Date~~

~~SEC File No./Film No.~~

~~Filed Herewith~~

~~3(a)~~

~~Third Restated Certificate of Incorporation dated September 12, 2013~~

~~3(b)~~

~~Amended & Restated Bylaws as of September 16, 2008 (as amended March 31, 2010, March 9, 2011 and December 23, 2013)~~

~~8-K~~

~~3.2~~

~~12/23/2013~~

~~4(a)~~

~~Specimen stock certificate~~

~~10-K~~

~~4(a)~~

~~2/28/2007~~

~~000-15386/07658265~~

10.1*

~~2006 Form of Indemnification Agreement for use between the Registrant and its Directors~~

~~10-K~~

~~10(a)~~

~~2/28/2007~~

~~000-15386/07658265~~

10.2*

~~2010 Form of Indemnification Agreement for use between the Registrant and its Directors and Section 16 Officers~~

~~8-K~~

~~99.1~~

~~6/3/2010~~

~~000-15386/10875957~~

10.3*

~~Amended & Restated Executive Employment Agreement of Neal L. Patterson dated January 1, 2008~~

~~10-K~~

~~10(c)~~

~~2/27/2008~~

~~000-15386/08646565~~

10.4*

~~Amended Stock Option Plan D of Registrant dated December 8, 2000~~

~~10-K~~

~~10(f)~~

~~3/30/2001~~

~~000-15386/1586224~~

10.5*

~~Amended Stock Option Plan E of Registrant dated December 8, 2000~~

~~10-K~~

~~10(g)~~

~~3/30/2001~~

~~000-15386/1586224~~

10.6*

~~Cerner Corporation 2001 Long-Term Incentive Plan F~~

~~DEF 14A~~

~~Annex I~~

~~4/16/2001~~

~~000-15386/1603080~~

10.7*

~~Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Agreement~~

~~10-K~~

~~10(v)~~

~~3/17/2005~~

~~000-15386/05688830~~

10.8*

~~Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Grant Certificate~~

~~10-Q~~

~~10(a)~~

~~11/10/2005~~

~~000-15386/051193974~~

10.9*

~~Cerner Corporation 2001 Long-Term Incentive Plan F Director Restricted Stock Agreement~~

~~10-K~~

~~10(x)~~

~~3/17/2005~~

~~000-15386/05688830~~

10.10*

~~Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Director Agreement~~

~~10-K~~

~~10(w)~~

~~3/17/2005~~

~~000-15386/05688830~~

10.11*

~~Cerner Corporation 2001 Long-Term Incentive Plan F Performance-Based Restricted Stock Agreement for Section 16 Officers~~

~~8-K~~

~~99.1~~

~~6/4/2010~~

~~000-15386/10879084~~

10.12*

~~Cerner Corporation 2004 Long-Term Incentive Plan G (as amended on December 3, 2007)~~

~~10-K~~

~~10(g)~~

~~2/27/2008~~

~~000-15386/08646565~~

10.13*

~~Cerner Corporation 2004 Long-Term Incentive Plan G Nonqualified Stock Option Grant Certificate~~

~~10-K~~

~~10(q)~~

~~2/27/2008~~

~~000-15386/08646565~~

10.14*

~~Cerner Corporation 2011 Omnibus Equity Incentive Plan~~

~~S-8~~

~~4.5~~

~~5/27/2011~~

10.15*

~~Cerner Corporation 2011 Omnibus Equity Incentive Plan - Director Restricted Stock Agreement~~



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit(s)	Filing Date SEC File No./Film No.	Filed Herewith

3.1	Third Restated Certificate of Incorporation of Cerner Corporation	10-K	3(a)	2/11/2015

3.2	Amended & Restated Bylaws as of February 25, 2016	8-K	3.2	2/29/2016

4	Specimen stock certificate	10-K	4(a)	2/28/2007 000-15386/07658265

10.1*	2006 Form of Indemnification Agreement for use between the Registrant and its Directors	10-K	10(a)	2/28/2007 000-15386/07658265

10.2*	2010 Form of Indemnification Agreement for use between the Registrant and its Directors and Section 16 Officers	8-K	99.1	6/3/2010 000-15386/10875957

10.3*	Amended & Restated Executive Employment Agreement of Neal L. Patterson dated January 1, 2008	10-K	10(c)	2/27/2008 000-15386/08646565

10.4*	Amended Stock Option Plan D of Registrant dated December 8, 2000	10-K	10(f)	3/30/2001 000-15386/1586224

10.5*	Amended Stock Option Plan E of Registrant dated December 8, 2000	10-K	10(g)	3/30/2001 000-15386/1586224

10.6*	Cerner Corporation 2001 Long-Term Incentive Plan F	DEF 14A	Annex I	4/16/2001 000-15386/1603080

10.7*	Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Agreement	10-K	10(v)	3/17/2005 000-15386/05688830

10.8*	Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Grant Certificate	10-Q	10(a)	11/10/2005 000-15386/051193974

10.9*	Cerner Corporation 2001 Long-Term Incentive Plan F Director Restricted Stock Agreement	10-K	10(x)	3/17/2005 000-15386/05688830

10.10*	Cerner Corporation 2001 Long-Term Incentive Plan F Nonqualified Stock Option Director Agreement	10-K	10(w)	3/17/2005 000-15386/05688830

10.11*	Cerner Corporation 2001 Long-Term Incentive Plan F Performance-Based Restricted Stock Agreement for Section 16 Officers	8-K	99.1	6/4/2010 000-15386/10879084

10.12*	Cerner Corporation 2004 Long-Term Incentive Plan G (as amended on December 3, 2007)	10-K	10(g)	2/27/2008 000-15386/08646565

10.13*	Cerner Corporation 2004 Long-Term Incentive Plan G Nonqualified Stock Option Grant Certificate	10-K	10(q)	2/27/2008 000-15386/08646565

10.14*	Cerner Corporation 2011 Omnibus Equity Incentive Plan (As Amended and Restated May 22, 2015)	8-K	10.2	5/27/2015

10.15*	Cerner Corporation 2011 Omnibus Equity Incentive Plan - Director Restricted Stock Agreement	10-Q	10.1	7/27/2012

10.16*	Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement	10-K	10(u)	2/8/2013

10.17*	Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement	10-Q	10.3	5/6/2016

~~10-Q~~

~~10.1~~

~~7/27/2012~~

10.16*

~~Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based Restricted Stock Agreement~~

~~10-K~~

~~10(u)~~

~~2/8/2013~~

10.17*

~~Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-Qualified Stock Option Grant Certificate~~

~~10-K~~

~~10(v)~~

~~2/8/2013~~

~~Table of Contents~~

10.18*

Cerner Corporation 2001 Associate Stock Purchase Plan as Amended and Restated March 1, 2010 and May 27, 2011

S-8

4.6

5/27/2011

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based Restricted Stock Agreement

10-Q

10.4

5/6/2016

10.19*

Cerner Corporation Performance-Based Compensation Plan (as Amended and Restated March 5, 2014)

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Director Restricted Stock Agreement

10-Q

10.2

5/6/2016

10.20*

Form of 2014 Executive Performance Agreement

10-Q

10.1

4/25/2014

Cerner Corporation 2011 Omnibus Equity Incentive Plan-Non-Qualified Stock Option Grant Certificate

10-K

10(v)

2/8/2013

10.21*

Cerner Corporation Executive Deferred Compensation Plan as Amended & Restated dated January 1, 2008

10-K

10(k)

2/27/2008

000-15386/08646565

Cerner Corporation 2011 Omnibus Equity Incentive Plan - Non-Qualified Stock Option Grant Certificate

10-Q

10.2

8/3/2016

10.22*

Cerner Corporation 2005 Enhanced Severance Pay Plan as Amended & Restated (for I.R.C. § 409A) Effective December 31, 2012

10-K

10(l)

2/8/2013

Cerner Corporation 2001 Associate Stock Purchase Plan as Amended and Restated March 1, 2010 and May 27, 2011

S-8

4.6

5/27/2011

333-174568/11877216

10.23*

Cerner Corporation 2005 Enhanced Severance Pay Plan as Amended & Restated (for I.R.C. § 409A) Effective January 4, 2015

Cerner Corporation Performance-Based Compensation Plan (as Amended and Restated May 27, 2016)

8-K/A

10.1

6/1/2016

10.24*

Exhibit A Severance Matrix, effective April 1, 2011 to the Cerner Corporation 2005 Enhanced Severance Pay Plan as Amended & Restated dated August 15, 2010

10-Q

10(a)

4/29/2011

Form of 2016 Executive Performance Agreement- Covered Executives pursuant to the Cerner Corporation Performance-Based Compensation Plan

10-Q

10.1

5/6/2016

10.25

Second Amended and Restated Aircraft Time Sharing Agreement between Cerner Corporation and Neal L. Patterson dated July 24, 2013

10-Q

10.1

7/26/2013

10.25*

Cerner Corporation Executive Deferred Compensation Plan as Amended & Restated dated January 1, 2008

10-K

10(k)

2/27/2008

000-15386/08646565

10.26

Interparty Agreement, dated January 19, 2010, among Kansas Unified Development, LLC, OnGoal, LLC and Cerner Corporation

8-K

99.1

1/22/2010

000-153866/10543089

10.26*

Cerner Corporation 2005 Enhanced Severance Pay Plan as Amended & Restated Effective January 4, 2015

10-K

10.3

2/11/2015

10.27

Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated July 30, 2013

8-K

10.1

8/1/2013

10.27*

Exhibit A to the Enhanced Severance Pay Plan - Severance Matrix Effective August 25, 2016

10-Q

10.1

11/2/2016

10.28

First Amendment to Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated December 23, 2013

10.28*

Second Amended and Restated Aircraft Time Sharing Agreement between Cerner Corporation and Neal L. Patterson dated July 24, 2013

10-Q

10.1

7/26/2013

10.29

Second Amendment to Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated October 16, 2014

10.29*

Amendment No. 1 to Second Amended and Restated Aircraft Time Sharing Agreement between Cerner Corporation and Neal Patterson dated October 28, 2015

10-K

10.25

2/17/2016

10.30

Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated August 5, 2014

10-Q

2.1

10/24/2014

Interparty Agreement, dated January 19, 2010, among Kansas Unified Development, LLC, OnGoal, LLC and Cerner Corporation

8-K

99.1

1/22/2010

000-153866/10543089

10.31

Amendment Agreement to the Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated February 2, 2015

8-K

10.1

2/2/2015

Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated July 30, 2013

8-K

10.1

8/1/2013

10.32

Note Purchase Agreement, dated November 1, 2005, among Cerner Corporation, as issuer, and AIG Annuity Insurance Company, American General Life Insurance Company and Principal Life Insurance Company, as purchasers

8-K

99.1

11/7/2005

000-15386/051183275

First Amendment to Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated December 23, 2013

10-K

10.28

2/11/2015

10.33

Master Note Purchase Agreement between Cerner Corporation and the Purchasers listed in Schedule A thereto dated December 4, 2014

8-K

10.1

12/5/2014

Second Amendment to Real Estate Purchase Agreement between Cerner Property Development, Inc. and Trails Property II, Inc. dated October 16, 2014

10-K

10.29

2/11/2015

��

10.34

Amended and Restated Credit Agreement, dated February 10, 2012, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A., Commerce Bank, N.A., UMB Bank, N.A. and RBS Citizens, N.A.

8-K

99.1

2/13/2012

000-15386/12599122

Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated August 5, 2014

10-Q

2.1

10/24/2014

10.35

Amendment Agreement to the Master Sale and Purchase Agreement between Siemens AG and Cerner Corporation dated February 2, 2015

8-K

10.1

2/2/2015

10.36

Master Note Purchase Agreement between Cerner Corporation and the Purchasers listed in Schedule A thereto dated December 4, 2014

8-K

10.1

12/5/2014

~~Table of Contents~~



~~10.35~~	First Amendment to Amended and Restated Credit Agreement, dated December 28, 2012, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A., Commerce Bank, N.A., UMB Bank, N.A. and RBS Citizens, N.A.	~~10-K~~	~~4(c)~~	~~2/8/2013~~

~~10.36~~	Second Amendment to Amended and Restated Credit Agreement, dated January 15, 2015, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A., Commerce Bank, N.A., UMB Bank, N.A. and RBS Citizens, N.A.				X

21	~~Subsidiaries of Registrant~~				X

23	~~Consent of Independent Registered Public Accounting Firm~~				X

~~31.1~~	~~Certification of Neal L. Patterson pursuant to Section 302 of Sarbanes-Oxley Act of 2002~~				X

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

~~32.1~~	~~Certification of Neal L. Patterson pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002~~				X

~~32.2~~	~~Certification of Marc G. Naughton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002~~				X

~~101.INS~~	~~XBRL Instance Document~~				X

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~				X

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~				X

~~101.LAB~~	~~XBRL Taxonomy Extension Labels Linkbase Document~~				X

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~				X

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~				X



10.37	Third Amended and Restated Credit Agreement, dated October 30, 2015, among Cerner Corporation and U.S. Bank National Association, Bank of America, N.A. and Commerce Bank, N.A.	8-K	10.1	11/3/2015
21	Subsidiaries of Registrant				X

23	Consent of Independent Registered Public Accounting Firm				X

31.1	Certification of Neal L. Patterson pursuant to Section 302 of Sarbanes-Oxley Act of 2002				X

31.2	Certification of Marc G. Naughton pursuant to Section 302 of Sarbanes-Oxley Act of 2002				X

32.1	Certification of Neal L. Patterson pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002				X

32.2	Certification of Marc G. Naughton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002				X

101.INS	XBRL Instance Document				X

101.SCH	XBRL Taxonomy Extension Schema Document				X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				X

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document				X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				X

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				X

* Indicates a management contract or compensatory plan or arrangement required to be identified by Part IV, Item 15(a)(3).

~~Table~~PLEASE NOTE: Pursuant to the rules and regulations of ~~Contents~~the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this annual report on Form 10-K. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Company or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Cerner Corporation:

We have audited Cerner Corporation and subsidiaries’ internal control over financial reporting as of ~~January 3, 2015,~~December 31, 2016, based on criteria established in Internal Control - Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Cerner Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Cerner Corporation and subsidiaries’ internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Cerner Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of ~~January 3, 2015,~~December 31, 2016, based on criteria established in Internal Control - Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Cerner Corporation and subsidiaries as of December 31, 2016 and January ~~3, 2015 and December 28, 2013,~~2, 2016, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in shareholders’ equity for each of the years in the three-year period ended ~~January 3, 2015,~~December 31, 2016, and our report dated February ~~11, 2015~~10, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/KPMG LLP

Kansas City, Missouri

February ~~11, 2015~~10, 2017

~~Table of Contents~~

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Cerner Corporation:

We have audited the accompanying consolidated balance sheets of Cerner Corporation and subsidiaries as of December 31, 2016 and January ~~3, 2015 and December 28, 2013,~~2, 2016, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in shareholders’ equity for each of the years in the three-year period ended ~~January 3, 2015.~~December 31, 2016. These consolidated financial statements are the responsibility of ~~the Company’s~~Cerner Corporation and subsidiaries' management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cerner Corporation and subsidiaries as of December 31, 2016 and January ~~3, 2015 and December 28, 2013,~~2, 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended ~~January 3, 2015,~~December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Cerner Corporation and subsidiaries’ internal control over financial reporting as of ~~January 3, 2015,~~December 31, 2016, based on criteria established in Internal Control - Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February ~~11, 2015~~10, 2017 expressed an unqualified opinion on the effectiveness of Cerner Corporation and subsidiaries’ internal control over financial reporting.

/s/KPMG LLP

Kansas City, Missouri

February ~~11, 2015~~10, 2017

~~Table of Contents~~

CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of ~~January 3, 2015~~December 31, 2016 and ~~December 28, 2013~~January 2, 2016


(In thousands, except share data)	2014			2013			2016			2015

Assets
Current assets:
Cash and cash equivalents	$	635,203		$	202,377		$	170,861		$	402,122
Short-term investments	785,663			677,004			185,588			111,059
Receivables, net	672,778			582,926			944,943			1,034,084
Inventory	23,789			32,299			14,740			15,788
Prepaid expenses and other	209,278			175,488			303,229			264,780
Deferred income taxes, net	22,075			91,614
Total current assets	2,348,786			1,761,708			1,619,361			1,827,833

Property and equipment, net	924,260			792,781			1,552,524			1,309,214
Software development costs, net	420,199			347,077			719,209			562,559
Goodwill	320,538			307,422			844,200			799,182
Intangible assets, net	126,636			144,132			566,047			688,058
Long-term investments	231,147			554,873			109,374			173,073
Other assets	158,999			190,371			219,248			202,065

Total assets	$	4,530,565		$	4,098,364		$	5,629,963		$	5,561,984

Liabilities and Shareholders’ Equity

Current liabilities:
Accounts payable	$	160,285		$	145,019		$	238,134		$	215,510
Current installments of long-term debt and capital lease obligations	67,460			54,107			26,197			41,797
Deferred revenue	209,655			209,746			311,839			278,443
Accrued payroll and tax withholdings	140,230			147,986			211,554			184,225
Other accrued expenses	56,685			83,574			57,677			57,891
Total current liabilities	634,315			640,432			845,401			777,866

Long-term debt and capital lease obligations	62,868			111,717			537,552			563,353
Deferred income taxes and other liabilities	256,601			170,392			306,263			324,516
Deferred revenue	10,813			8,159			12,800			25,865
Total liabilities	964,597			930,700			1,702,016			1,691,600

Shareholders’ Equity:
Common stock, $.01 par value, 500,000,000 shares authorized, 346,985,811 shares issued at January 3, 2015 and 344,338,030 shares issued at December 28, 2013	3,470			3,443
Common stock, $.01 par value, 500,000,000 shares authorized, 353,731,237 shares issued at December 31, 2016 and 350,323,367 shares issued at January 2, 2016							3,537			3,503
Additional paid-in capital	933,446			812,853			1,230,913			1,075,782
Retained earnings	2,918,481			2,393,048			4,094,327			3,457,843
Treasury stock, 4,652,515 shares at January 3, 2015 and 570,616 shares at December 28, 2013	(245,333		)	(28,251		)
Treasury stock, 24,089,737 shares at December 31, 2016 and 10,364,691 shares at January 2, 2016							(1,290,665		)	(590,390		)
Accumulated other comprehensive loss, net	(44,096		)	(13,429		)	(110,165		)	(76,354		)
Total shareholders’ equity	3,565,968			3,167,664			3,927,947			3,870,384

Total liabilities and shareholders’ equity	$	4,530,565		$	4,098,364		$	5,629,963		$	5,561,984

See notes to consolidated financial statements.

~~Table of Contents~~

CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015


	For the Years Ended									For the Years Ended
(In thousands, except per share data)	2014			2013			2012			2016			2015			2014

Revenues:
System sales	$	945,858		$	847,809		$	902,799		$	1,265,962		$	1,281,890		$	945,858
Support, maintenance and services	2,366,959			1,992,830			1,707,329			3,441,966			3,070,575			2,366,959
Reimbursed travel	89,886			70,109			55,308			88,545			72,802			89,886

Total revenues	3,402,703			2,910,748			2,665,436			4,796,473			4,425,267			3,402,703
Costs and expenses:
Cost of system sales	314,089			302,374			427,456			412,066			430,335			314,089
Cost of support, maintenance and services	200,402			142,239			125,433			278,505			247,644			200,402
Cost of reimbursed travel	89,886			70,109			55,308			88,545			72,802			89,886
Sales and client service	1,395,568			1,173,051			1,020,640			2,071,926			1,838,600			1,395,568
Software development (Includes amortization of $103,447, $94,688 and $81,731, respectively)	392,805			338,786			301,370
Software development (Includes amortization of $140,232, $119,195 and $103,447, respectively)										551,418			539,799			392,805
General and administrative	246,869			308,177			163,567			392,454			423,424			233,393
Amortization of acquisition-related intangibles										90,546			91,527			13,476

Total costs and expenses	2,639,619			2,334,736			2,093,774			3,885,460			3,644,131			2,639,619

Operating earnings	763,084			576,012			571,662			911,013			781,136			763,084

Other income, net	11,090			12,042			16,046			7,421			244			11,090

Earnings before income taxes	774,174			588,054			587,708			918,434			781,380			774,174
Income taxes	(248,741		)	(189,700		)	(190,476		)	(281,950		)	(242,018		)	(248,741		)

Net earnings	$	525,433		$	398,354		$	397,232		$	636,484		$	539,362		$	525,433

Basic earnings per share	$	1.54		$	1.16		$	1.16		$	1.88		$	1.57		$	1.54
Diluted earnings per share	$	1.50		$	1.13		$	1.13		$	1.85		$	1.54		$	1.50
Basic weighted average shares outstanding	342,150			343,636			341,861			337,740			343,178			342,150
Diluted weighted average shares outstanding	350,386			352,281			351,394			343,653			350,908			350,386

See notes to consolidated financial statements.

~~Table of Contents~~

CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015


	For the Years Ended								For the Years Ended
(In thousands)	2014			2013			2012		2016			2015			2014

Net earnings	$	525,433		$	398,354		$	397,232	$	636,484		$	539,362		$	525,433
Foreign currency translation adjustment and other (net of tax benefits of $1,111, $3,604 and $1,396, respectively)	(30,145		)	(8,185		)	6,511
Change in net unrealized holding gain (loss) on available-for-sale investments (net of taxes (benefits) of $(331), $10 and $125, respectively)	(522		)	11			201
Foreign currency translation adjustment and other (net of taxes (benefit) of $2,092, $(3,201) and $(1,111), respectively)									(33,871		)	(32,171		)	(30,145		)
Change in net unrealized holding gain (loss) on available-for-sale investments (net of taxes (benefits) of $37, $(46) and $(331), respectively)									60			(87		)	(522		)

Comprehensive income	$	494,766		$	390,180		$	403,944	$	602,673		$	507,104		$	494,766

See notes to consolidated financial statements.

~~Table of Contents~~

CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015


	For the Years Ended									For the Years Ended
(In thousands)	2014			2013			2012			2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	525,433		$	398,354		$	397,232		$	636,484		$	539,362		$	525,433
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	302,353			263,538			222,580			504,236			452,225			302,353
Share-based compensation expense	59,292			46,295			36,113			74,536			70,121			59,292
Provision for deferred income taxes	106,905			(22,647		)	8,342			(11,517		)	65,245			106,905
Changes in assets and liabilities (net of businesses acquired):
Receivables, net	(74,786		)	(9,599		)	(83,705		)	78,258			(160,124		)	(74,786		)
Inventory	8,117			(8,111		)	(279		)	(666		)	12,951			8,117
Prepaid expenses and other	(14,625		)	(36,038		)	(2,224		)	(66,658		)	(55,363		)	(14,625		)
Accounts payable	2,974			4,130			35,265			(13,197		)	7			2,974
Accrued income taxes	(21,764		)	14,694			(22,784		)	12,170			(690		)	(21,764		)
Deferred revenue	4,346			18,053			33,277			1,555			9,450			4,346
Other accrued liabilities	(51,218		)	27,196			84,497			(59,589		)	14,342			(51,218		)

Net cash provided by operating activities	847,027			695,865			708,314			1,155,612			947,526			847,027

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital purchases	(276,584		)	(352,877		)	(183,429		)	(459,427		)	(362,132		)	(276,584		)
Capitalized software development costs	(177,800		)	(174,649		)	(100,189		)	(293,696		)	(264,656		)	(177,800		)
Purchases of investments	(1,214,036		)	(1,106,819		)	(1,286,997		)	(482,078		)	(487,981		)	(1,214,036		)
Sales and maturities of investments	1,404,846			1,070,598			932,394			463,899			1,208,387			1,404,846
Purchase of other intangibles	(13,517		)	(56,805		)	(22,870		)	(18,472		)	(21,432		)	(13,517		)
Acquisition of businesses, net of cash acquired	(7,476		)	(67,877		)	(40,540		)
Acquisition of businesses										—			(1,478,129		)	(7,476		)

Net cash used in investing activities	(284,567		)	(688,429		)	(701,631		)	(789,774		)	(1,405,943		)	(284,567		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt issuance										—			500,000			—
Repayment of long-term debt and capital lease obligations	(14,930		)	(24,700		)	(17,083		)	—			(14,325		)	(14,930		)
Proceeds from excess tax benefits from share-based compensation	39,532			39,927			48,370			51,903			55,959			39,532
Proceeds from exercise of options	31,879			31,403			38,147			63,794			51,475			31,879
Treasury stock purchases	(217,082		)	(170,042		)	—			(700,275		)	(345,057		)	(217,082		)
Contingent consideration payments for acquisition of businesses	(10,617		)	(800		)	(3,400		)	(2,074		)	(11,012		)	(10,617		)
Cash grants	48,000			—			—			—			—			48,000
Other	2,894			4,823			—			—			(791		)	2,894

Net cash provided by (used in) financing activities	(120,324		)	(119,389		)	66,034			(586,652		)	236,249			(120,324		)

Effect of exchange rate changes on cash and cash equivalents	(9,310		)	(2,790		)	1,257			(10,447		)	(10,913		)	(9,310		)

Net increase (decrease) in cash and cash equivalents	432,826			(114,743		)	73,974			(231,261		)	(233,081		)	432,826
Cash and cash equivalents at beginning of period	202,377			317,120			243,146			402,122			635,203			202,377

Cash and cash equivalents at end of period	$	635,203		$	202,377		$	317,120		$	170,861		$	402,122		$	635,203

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	5,682		$	6,973		$	6,448
Income taxes, net of refunds	144,323			175,377			158,871
Summary of acquisition transactions:
Fair value of net tangible assets (liabilities) acquired (assumed)	$	(1,509	)	$	2,550		$	(6,375	)
Fair value of tangible assets acquired										$	(10,200	)	$	532,625		$	184
Fair value of intangible assets acquired	3,800			25,489			18,559			(25,000		)	637,980			3,800
Fair value of goodwill	16,785			59,570			35,281			46,940			485,387			16,785
Less: Fair value of liabilities assumed										(11,740		)	(176,863		)	(1,693		)
Less: Fair value of contingent liability payable	(11,600		)	(18,982		)	(1,916		)	—			(1,000		)	(11,600		)
Cash paid for acquisitions	7,476			68,627			45,549
Cash acquired	—			(750		)	(5,009		)

Net cash used	$	7,476		$	67,877		$	40,540		$	—		$	1,478,129		$	7,476

See notes to consolidated financial statements.

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CERNER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the years ended ~~January 3, 2015~~December 31, 2016, ~~December 28, 2013~~January 2, 2016 and ~~December 29, 2012~~January 3, 2015


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


Balance at December 31, 2011	339,132		$	3,392		$	721,794		$	1,597,462		$	—		$	(11,967	)	$	120

Exercise of stock options (including net-settled option exercises)	5,047		50			32,536			—			—			—			—

Employee share-based compensation expense	—		—			36,113			—			—			—			—

Employee share-based compensation net excess tax benefit	—		—			50,326			—			—			—			—

Other comprehensive income (loss)	—		—			—			—			—			6,712			—

Dissolution of underlying entity	—		—			—			—			—			—			(120		)

Net earnings	—		—			—			397,232			—			—			—

Balance at December 29, 2012	344,179		3,442			840,769			1,994,694			—			(5,255		)	—

Exercise of stock options (including net-settled option exercises)	3,204		32			27,056			—			—			—			—

Employee share-based compensation expense	—		—			46,295			—			—			—			—

Employee share-based compensation net excess tax benefit	—		—			40,493			—			—			—			—

Other comprehensive income (loss)	—		—			—			—			—			(8,174		)	—

Treasury stock purchases	—		—			—			—			(170,042		)	—			—

Distribution of treasury stock in stock split	(3,045	)	(31		)	(141,760		)	—			141,791			—			—

Net earnings	—		—			—			398,354			—			—			—

Balance at December 28, 2013	344,338		3,443			812,853			2,393,048			(28,251		)	(13,429		)	—			344,338	$	3,443	$	812,853	$	2,393,048	$	(28,251	)	$	(13,429	)

Exercise of stock options (including net-settled option exercises)	2,648		27			21,613			—			—			—			—			2,648	27		21,613		—		—			—

Employee share-based compensation expense	—		—			59,292			—			—			—			—			—	—		59,292		—		—			—

Employee share-based compensation net excess tax benefit	—		—			39,688			—		��	—			—			—			—	—		39,688		—		—			—

Other comprehensive income (loss)	—		—			—			—			—			(30,667		)				—	—		—		—		—			(30,667		)

Treasury stock purchases	—		—			—			—			(217,082		)	—			—			—	—		—		—		(217,082		)	—

Net earnings	—		—			—			525,433			—			—			—			—	—		—		525,433		—			—

Balance at January 3, 2015	346,986		$	3,470		$	933,446		$	2,918,481		$	(245,333	)	$	(44,096	)	$	—		346,986	3,470		933,446		2,918,481		(245,333		)	(44,096		)

Exercise of stock options (including net-settled option exercises)																					3,337	33		15,647		—		—			—

Employee share-based compensation expense																					—	—		70,121		—		—			—

Employee share-based compensation net excess tax benefit																					—	—		56,568		—		—			—

Other comprehensive income (loss)																					—	—		—		—		—			(32,258		)

Treasury stock purchases																					—	—		—		—		(345,057		)	—

Net earnings																					—	—		—		539,362		—			—

Balance at January 2, 2016																					350,323	3,503		1,075,782		3,457,843		(590,390		)	(76,354		)

Exercise of stock options (including net-settled option exercises)																					3,408	34		27,747		—		—			—

Employee share-based compensation expense																					—	—		74,536		—		—			—

Employee share-based compensation net excess tax benefit																					—	—		52,848		—		—			—

Other comprehensive income (loss)																					—	—		—		—		—			(33,811		)

Treasury stock purchases																					—	—		—		—		(700,275		)	—

Net earnings																					—	—		—		636,484		—			—

Balance at December 31, 2016																					353,731	$	3,537	$	1,230,913	$	4,094,327	$	(1,290,665	)	$	(110,165	)

See notes to consolidated financial statements.

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CERNER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation, Nature of Operations and Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include all the accounts of Cerner Corporation ~~(Cerner,~~("Cerner," the ~~Company, we, us~~"Company," "we," "us" or ~~our)~~"our") and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

The consolidated financial statements were prepared using accounting principles generally accepted in the United ~~States.~~States of America ("GAAP"). These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Our fiscal year ends on the Saturday closest to December 31. Fiscal years 2016 and 2015 each consisted of 52 weeks and ended on December 31, 2016 and January 2, 2016, respectively. Fiscal year 2014 consisted of 53 weeks and ended on January 3, ~~2015, and fiscal years~~ ~~2013~~ ~~and~~ ~~2012~~ ~~consisted of 52 weeks each and ended on~~ ~~December 28, 2013~~ ~~and~~ ~~December 29, 2012, respectively.~~2015. All references to years in these notes to consolidated financial statements represent fiscal years unless otherwise noted.

Nature of Operations

We design, develop, market, install, host and support health care information technology, health care devices, hardware and content solutions for health care organizations and consumers. We also provide a wide range of value-added services, including implementation and training, remote hosting, operational management services, revenue cycle services, support and maintenance, health care data analysis, clinical process optimization, transaction processing, employer health centers, employee wellness programs and third party administrator services for employer-based health plans.

Factors Impacting Comparability of Financial Statements

Siemens Health Services

On February 2, 2015, we acquired Siemens Health Services, as further described in Note (2). The addition of the Siemens Health Services business impacts the comparability of our consolidated financial statements as of and for the year ended January 2, 2016, in relation to the comparative periods presented herein.

52/53 Week Periods

Our 2014 fiscal year included 53 weeks, as discussed above. This additional week impacts the comparability of our consolidated financial statements as of and for the year ended January 3, 2015, in relation to the comparative periods presented herein.

Voluntary Separation Plans

In the first quarter of 2015, the Company adopted a voluntary separation plan ("2015 VSP") for eligible associates. Generally, the 2015 VSP was available to U.S. associates who met a minimum level of combined age and tenure, excluding, among others, our executive officers. Associates who elected to participate in the 2015 VSP received financial benefits commensurate with their tenure and position, along with vacation payout and medical benefits. The irrevocable acceptance period for most associates electing to participate in the 2015 VSP ended in May 2015. During 2015, we recorded pre-tax charges for the 2015 VSP of $46 million, which are included in general and administrative expense in our consolidated statements of operations. At the end of 2015, this program was complete.

In the fourth quarter of 2016, the Company adopted a new voluntary separation plan ("2016 VSP") for eligible associates. This 2016 VSP was available to U.S. associates who met a minimum level of combined age and tenure. Associates who elected to participate in the 2016 VSP received financial benefits commensurate with their tenure and position, along with vacation payout and medical benefits. The irrevocable acceptance period for associates electing to participate in the 2016 VSP ended in December 2016. During 2016, we recorded pre-tax charges for the 2016 VSP of $36 million, which are included

in general and administrative expense in our consolidated statements of operations. At the end of 2016, this program was complete.

Supplemental Disclosures of Cash Flow Information



	For the Years Ended
(In thousands)	2016		2015		2014
Cash paid during the year for:
Interest (including amounts capitalized of $14,852, $7,106, and $1,583, respectively)	$	18,484	$	13,164	$	5,682
Income taxes, net of refunds	254,539		118,409		144,323

Summary of Significant Accounting Policies

(a) Revenue Recognition - We recognize software related revenue in accordance with the provisions of ~~Accounting Standards Codification (ASC)~~ASC 985-605, Software – Revenue Recognition and non-software related revenue in accordance with ASC 605, Revenue Recognition. In general, revenue is recognized when all of the following criteria have been met:

Persuasive evidence of an arrangement exists;

Delivery has occurred or services have been rendered;

Our fee is fixed or determinable; and

Collection of the revenue is reasonably assured.

The following are our major components of revenue:

System sales – includes the licensing of computer software, software as a service, deployment period upgrades, installation, content subscriptions, transaction processing and the sale of computer hardware and sublicensed software;

Support, maintenance and service – includes software support and hardware maintenance, remote hosting and managed services, training, consulting and implementation services; and

Reimbursed travel – includes reimbursable out-of-pocket expenses (primarily travel) incurred in connection with our client service activities.

We provide for several models of procurement of our information systems and related services. The predominant model involves multiple deliverables and includes a perpetual software license agreement, project-related ~~installation services,~~ implementation and consulting services, software support and either hosting services or computer hardware and sublicensed software, which requires that we allocate revenue to each of these elements.

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Allocation of Revenue to Multiple Element Arrangements

For multiple element arrangements that contain software and non-software elements, we allocate revenue to software and software-related elements as a group and any non-software element separately. After the arrangement consideration has been allocated to the non-software elements, revenue is recognized when the basic revenue recognition criteria are met for each element. For the group of software and software-related elements, revenue is recognized under the guidance applicable to software transactions.

Since we do not have vendor specific objective evidence (VSOE) of fair value on software licenses within our multiple element arrangements, we recognize revenue on our software and software-related elements using the residual method. Under the residual method, license revenue is recognized in a multiple-element arrangement when vendor-specific objective evidence of fair value exists for all of the undelivered elements in the arrangement, when software is delivered, installed and all other conditions to revenue recognition are met. We allocate revenue to each undelivered element in a multiple-element arrangement based on the element’s respective fair value, with the fair value determined by the price charged when that element is sold separately. Specifically, we determine the fair value of the software support, hardware maintenance, sublicensed software support, remote hosting, subscriptions and software as a service portions of the arrangement based on the substantive renewal price for these services charged to clients; professional services (including training and consulting) portion of the arrangement, ~~other than installation services,~~ based on hourly rates which we charge for these services when sold apart from a software license; and sublicensed software based on its price when sold separately from the software. The residual amount of the fee

after allocating revenue to the fair value of the undelivered elements is attributed to the licenses for software ~~solutions, including project-related installation services.~~solutions. If evidence of the fair value cannot be established for the undelivered elements of a license agreement using VSOE, the entire amount of revenue under the arrangement is deferred until these elements have been delivered or VSOE of fair value can be established.

We also enter into arrangements that include multiple non-software deliverables. For each element in a multiple element arrangement that does not contain software-related elements to be accounted for as a separate unit of accounting, the following must be met: the delivered products or services have value to the client on a stand-alone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. We allocate the arrangement consideration to each element based on the selling price hierarchy of VSOE of fair value, if it exists, or third-party evidence (TPE) of selling price. If neither VSOE nor TPE are available, we use estimated selling price. After the arrangement consideration has been allocated to the elements, we account for each respective element in the arrangement as described below.

For certain arrangements, revenue for software, implementation services and, in certain cases, support services for which VSOE of fair value cannot be established are accounted for as a single unit of accounting. If VSOE of fair value cannot be established for both the implementation services and the support services, the entire arrangement fee is recognized ratably over the period during which the implementation services are expected to be performed or the support period, whichever is longer, beginning with delivery of the software, provided that all other revenue recognition criteria are met. The revenue recognized from single units of accounting are typically allocated and classified as system sales and support, maintenance and services. If available, the VSOE of fair value of the services provides the basis for support, maintenance and services allocation, and the remaining residual consideration provides the basis for system sales revenue allocations. In cases where VSOE cannot be established, revenue is classified based on contract value. In instances where VSOE for undelivered elements is established subsequent to the ~~nature~~outset of ~~related costs incurred.~~an arrangement, a cumulative adjustment to revenue is recognized in the period VSOE for the undelivered elements is established.

Revenue Recognition Policies for Each Element

We provide project-related installation services when licensing our software solutions, which include project-scoping services, conducting pre-installation audits and creating initial environments. We have deemed installation services to be essential to the functionality of the software and, therefore, recognize the software license over the software installation period using the percentage-of-completion method. We measure the percentage-of-completion based on output measures that reflect direct labor hours incurred, beginning at software delivery and culminating at completion of installation. Installation generally occurs in the same period the contracts are executed but in the past has been extended over a longer period of time depending on client specific factors.

We provide implementation and consulting services. These services vary depending on the scope and complexity of the engagement. Examples of such services may include database consulting, system configuration, project management, testing assistance, network consulting, post conversion review and application management services. Except for limited arrangements where our software requires significant modifications or customization, implementation and consulting services generally are not deemed to be essential to the functionality of the software and, thus, do not impact the timing of the software license recognition. However, if software license fees are tied to implementation milestones, then the portion of the software license fee tied to implementation milestones is deferred until the related milestone is accomplished and related fees become

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due and payable and non-forfeitable. Implementation fees, for which VSOE of fair value can be determined, are recognized over the service period, which may extend from nine months to several years for multi-phased projects.

Remote hosting and managed services are marketed under long-term arrangements generally over periods of five to 10 years. These services are typically provided to clients that have acquired a perpetual license for licensed software and have contracted with us to host the software in our data center. Under these arrangements, the client generally has the contractual right to take possession of the licensed software at any time during the hosting period without significant penalty and it is feasible for the client to either run the software on its own equipment or contract with another party unrelated to us to host the software. Additionally, these services are not deemed to be essential to the functionality of the licensed software or other elements of the ~~arrangement and as~~arrangement. As such, in situations for which we have VSOE of fair value for the undelivered items, we allocate athe residual portion of the ~~services~~arrangement fee to the software and recognize it once the client has the ability to take possession of the software. The remaining ~~services fee~~fees in these arrangements, as well as the ~~services fee~~fees for arrangements where the client does not have the contractual right or the ability to take possession of the software at any time isor for situations in which VSOE of fair value does not exist for undelivered elements, are generally recognized ratably over the hosting service period.

We also offer our solutions on a software as a service model, providing time-based licenses for our software solutions available within an environment that we manage from our data centers. The data centers provide system and administrative support as well as processing services. Revenue on these services is combined and recognized on a monthly basis over the term of the contract. We capitalize related pre-contract direct set-up costs consisting of third party costs and direct software installation and implementation costs associated with the initial set up of a software as a service client. These costs are amortized over the term of the arrangement.

Software support fees are marketed under annual and multi-year arrangements and are recognized as revenue ratably over the contractual support term. Hardware and sublicensed software maintenance revenues are recognized ratably over the contractual maintenance term.

Subscription and content fees are generally marketed under annual and multi-year agreements and are recognized ratably over the contractual terms.

Hardware and sublicensed software sales are generally recognized when title and risk of loss have transferred to the client.

The sale of equipment under sales-type leases is recorded as system sales revenue at the inception of the lease. Sales-type leases also produce financing income, which is included in system sales revenue and is recognized at consistent rates of return over the lease term.

Where we have contractually agreed to develop new or customized software code for a client, we utilize percentage-of-completion accounting, labor-hours method.

Revenue generally is recognized net of any taxes collected from clients and subsequently remitted to governmental authorities.

Payment Arrangements

Our payment arrangements with clients typically include an initial payment due upon contract signing and date-based licensed software payment terms and payments based upon delivery for services, hardware and sublicensed software. Revenue recognition on support payments received in advance of the services being performed are deferred and classified as either current or long term deferred revenue depending on whether the revenue will be earned within one year.

We have periodically provided long-term financing options to creditworthy clients through third party financing institutions and have directly provided extended payment terms to clients from contract date. These extended payment term arrangements typically provide for ~~date based~~date-based payments over periods ranging from 12 months up to seven years. As a significant portion of the fee is due beyond one year, we have analyzed our history with these types of arrangements and have concluded that we have a standard business practice of using extended payment term arrangements and a long history of successfully collecting under the original payment terms for arrangements with similar clients, product offerings, and economics without granting concessions. Accordingly, in these situations, we consider the fee to be fixed and determinable in these extended payment term arrangements and, thus, the timing of revenue is not impacted by the existence of extended payments.

Some of these payment streams have been assigned on a non-recourse basis to third party financing institutions. We account for the assignment of these receivables as sales of financial assets. Provided all revenue recognition criteria have been met,

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we recognize revenue for these arrangements under our normal revenue recognition criteria, and if appropriate, net of any payment discounts from financing transactions.

(b) Cash Equivalents - Cash equivalents consist of short-term marketable securities with original maturities less than 90 days.

(c) Investments – Our short-term investments are primarily invested in time deposits, commercial paper, government and corporate bonds, with maturities of less than one year. Our long-term investments are primarily invested in government and corporate bonds with maturities of less than two years. All of our investments, other than a small portion accounted for under the cost and equity methods, are classified as available-for-sale.

Available-for-sale securities are recorded at fair value with the unrealized gains and losses reflected in accumulated other comprehensive ~~income~~loss until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis.

We regularly review investment securities for impairment based on both quantitative and qualitative criteria that include the extent to which cost exceeds fair value, the duration of any market decline, and the financial health of and specific prospects for the issuer. Unrealized losses that are other than temporary are recognized in earnings.

Premiums are amortized and discounts are accreted over the life of the security as adjustments to interest income for our investments. Interest income is recognized when earned.

Refer to Note (3) and Note (4) for further description of these assets and their fair value.

(d) Concentrations - The majority of our cash and cash equivalents are held at three major financial institutions. The majority of our cash equivalents consist of money market ~~funds and commercial paper.~~funds. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand.

As of the end of ~~2014~~2016, we had a significant concentration of receivables owed to us by Fujitsu Services Limited, which are currently in dispute. Refer to Note (5) for additional information.

(e) Inventory - Inventory consists primarily of computer hardware and sublicensed software, held for resale. Inventory is recorded at the lower of cost (first-in, first-out) or ~~market.~~net realizable value.

(f) Property and Equipment - We account for property and equipment in accordance with ASC 360, Property, Plant, and Equipment. Property, equipment and leasehold improvements are stated at cost. Depreciation of property and equipment is computed using the straight-line method over periods of one to 50 years. Amortization of leasehold improvements is computed using a straight-line method over the shorter of the lease terms or the useful lives, which range from periods of one to 15 years.

(g) Software Development Costs - Software development costs are accounted for in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed. Software development costs incurred internally in creating computer software products are expensed until technological feasibility has been established upon completion of a detailed program design. Thereafter, all software development costs incurred through the software’s general release date are capitalized and subsequently reported at the lower of amortized cost or net realizable value. Capitalized costs are amortized based on current and expected future revenue for each software solution with minimum annual amortization equal to the straight-line amortization over the estimated economic life of the solution. We amortize capitalized software development costs over five years.

(h) Goodwill - We account for goodwill under the provisions of ASC 350, Intangibles – Goodwill and Other. Goodwill is not amortized but is evaluated for impairment annually or whenever there is an impairment indicator. All goodwill is assigned to a reporting unit, where it is subject to an annual impairment assessment. Based on these evaluations, there was no impairment of goodwill in ~~2014~~2016, ~~2013~~2015 or ~~2012~~2014. Refer to Note (7) for more information on goodwill and other intangible assets.

(i)~~Derivative Instruments and Hedging Activities~~ Intangible Assets - We account for ~~our hedging activities~~intangible assets in accordance with ASC ~~815,~~350, ~~Derivatives~~Intangibles – Goodwill and ~~Hedging~~Other. ~~Historically, our use~~Amortization of ~~hedging instruments has primarily been~~finite-lived intangible assets is computed using the straight-line method over periods of three to hedge foreign currency denominated assets and liabilities. We record all hedging instruments on our consolidated balance sheets at fair value. For hedging instruments that are designated and qualify as a net investment hedge, the effective portion of the gain or loss on30 years.

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the hedging instrument is reported in the foreign currency translation component of other comprehensive income (loss). Any ineffective portion of the gain or loss on the hedging instrument is recorded in the results of operations immediately. Refer to Note (10) for more information on our hedging activities.

(j) Income Taxes - Income taxes are accounted for in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Refer to Note ~~(13)~~(12) for additional information regarding income taxes.

(k) Earnings per Common Share - Basic earnings per share (EPS) excludes dilution and is computed, in accordance with ASC 260, Earnings Per Share, by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. Refer to Note ~~(14)~~(13) for additional details of our earnings per share computations.

(l) Accounting for Share-based Payments - We recognize all share-based payments to associates, directors and consultants, including grants of stock options, restricted stock and performance shares, in the financial statements as compensation cost based on their fair value on the date of grant, in accordance with ASC 718, Compensation-Stock Compensation. This compensation cost is recognized over the vesting period on a straight-line basis for the fair value of awards that actually vest. Refer to Note ~~(15)~~(14) for a detailed discussion of share-based payments.

(m) Voluntary Separation Benefits - We account for voluntary separation benefits in accordance with the provisions of ASC Topic 712, Compensation-Nonretirement Postemployment Benefits. Voluntary separation benefits are recorded to expense when the associates irrevocably accept the offer and the amount of the termination liability is reasonably estimable.

(n) Foreign Currency - In accordance with ASC 830, Foreign Currency Matters, assets and liabilities of non-U.S. subsidiaries whose functional currency is the local currency are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates during the year. The net exchange differences resulting from these translations are reported in accumulated other comprehensive ~~income.~~loss. Gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations.

~~(n)~~(o) Collaborative Arrangements - In accordance with ASC 808, Collaborative Arrangements, third party costs incurred and revenues generated by arrangements involving joint operating activities of two or more parties that are each actively involved and exposed to risks and rewards of the activities are classified in the consolidated statements of operations on a gross basis only if we are determined to be the principal participant in the arrangement. Otherwise, third party revenues and costs generated by collaborative arrangements are presented on a net basis. Payments between participants are recorded and classified based on the nature of the payments.

~~(o)~~(p) Recently Issued Accounting Pronouncements

Revenue Recognition. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No.~~ 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. ~~GAAP when it becomes effective. This~~GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under existing U.S. GAAP.

The FASB has issued the following amendments to ASU 2014-09 from August 2015 through December 2016:

ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date

ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenue Gross versus Net)

ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

Such amendments provide supplemental and clarifying guidance, as well as amend the effective date of the new standard.

ASU 2014-09, as amended, is effective for the Company in the first quarter of ~~2017,~~2018, with no early adoption ~~permitted.~~permitted in the first quarter of 2017. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method.

In 2015, we formed a cross-functional implementation team and began our analysis of this new guidance. Such analysis includes assessment of the impact of the new guidance on our consolidated financial statements and related disclosures, as well as related impacts on processes, accounting systems, and internal controls. Based on our analysis to-date, we have reached the following tentative conclusions regarding this new guidance and how we expect it to impact our consolidated financial statements and related disclosures:

We expect to adopt this new guidance effective with our first quarter of 2018; we will not early adopt.

We expect to use the cumulative effect transition method. Such method provides that the cumulative effect from prior periods upon applying the new guidance is recognized in our consolidated balance sheets as of the date of adoption, including an adjustment to retained earnings. Prior periods will not be retrospectively adjusted.

We believe substantially all of our revenue falls within the scope of ASU 2014-09, as amended; substantially all of our revenue is contractual.

As discussed above, generally, our subscription and content fees revenue is recognized ratably over the respective contract terms (“over time”). Upon adoption of the new guidance, we expect to recognize a license component of certain subscription and content fees revenue upon delivery to the customer (“point in time”) and a non-license

component (i.e. support) of such revenues over the respective contract terms (“over time”). At the date of adoption of this ~~time~~new guidance, we expect to record a cumulative adjustment to our consolidated balance sheet, including an adjustment to retained earnings, to adjust for the impact of certain prior period subscription and content fees revenue, as calculated under the new guidance.

We have determined the only significant incremental costs incurred to obtain contracts with customers within the scope of ASU 2014-09, as amended, are sales commissions paid to associates. Under current U.S. GAAP we recognize sales commissions as earned, and record such amounts as a component of total costs and expenses in our consolidated statements of operations. We recognized sales commission expense of $44 million, $45 million and $35 million in 2016, 2015, and 2014, respectively. Under the new guidance, we expect to record sales commissions as an asset, and amortize to expense over the related contract performance period. At the date of adoption of this new guidance, we expect to record an asset in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new guidance. Such amount will subsequently be amortized to expense over the remaining performance periods of the related contracts with remaining performance obligations.

Our analysis and evaluation of the new standard will continue through the effective date in the first quarter of 2018. A significant amount of work remains, due to the complexity of revenue recognition within our industry, the increased number of judgments and estimates required by this new guidance, and the volume of our contract portfolio which must be examined. We must quantify all impacts of this new guidance, including the topics discussed above, which may be material to our consolidated financial statements and related disclosures. We must also implement any necessary changes/modifications to processes, accounting systems, and internal controls.

Consolidation. In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which provides guidance when evaluating whether to consolidate certain legal entities. The updated guidance modifies evaluation criteria of limited partnerships and similar legal entities, eliminates the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships. ASU 2015-02 was effective for the Company in the first quarter of 2016. The adoption of ASU 2015-02 did not ~~selected~~have a ~~transition method.~~material impact on our consolidated financial statements and related disclosures.

Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company in the first quarter of 2018, with early adoption permitted. We are currently evaluating the effect that ASU ~~2014-09~~2016-01 will have on our consolidated financial statements and related ~~disclosures.~~disclosures, and we have not determined if we will early adopt.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces a new model that requires most leases to be reported on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard. The standard requires the use of the modified retrospective (cumulative effect) transition approach. ASU 2016-02 is effective for the Company in the first quarter of 2019, with early adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt.

Share-Based Compensation. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 changes several aspects of the accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification. ASU 2016-09 is effective for the Company in the first quarter of 2017. We expect this new guidance to have the following impact on our consolidated financial statements:

Under current GAAP, when associates exercise stock options, or upon the vesting of restricted stock awards, we recognize any related excess tax benefits or deficiencies (the difference between the deduction for tax purposes and the cumulative compensation cost recognized in the consolidated financial statements) in additional paid-in capital. We recognized excess tax benefits of $53 million, $57 million and $40 million in 2016, 2015, and 2014, respectively. Under the new guidance, all excess tax benefits and tax deficiencies are recognized as a component of income tax expense. They are not estimated when determining the annual estimated effective tax rate; instead, they are recorded as discrete items in the reporting period they occur. This provision of the new guidance may have a significant impact on our future income tax expense, including increased variability in our quarterly effective tax rates, which is dependent

on a number of factors, including the price of our common stock, grant activity under our stock and equity plans, and the timing of option exercises by our associates. This provision of the new guidance is required to be applied prospectively. Upon adoption, prior periods will not be retrospectively adjusted.

Under current GAAP, we utilize the treasury stock method for calculating diluted earnings per share. This method assumes that any excess tax benefits generated from the hypothetical exercise of dilutive options are used to repurchase outstanding shares. Assumed share repurchases for excess tax benefits included in our 2016, 2015 and 2014 calculations of diluted earnings per share were 2.0 million, 3.2 million and 3.9 million, respectively. Under the new guidance, excess tax benefits generated from the hypothetical exercise of dilutive options are excluded from the calculation of diluted earnings per share. Therefore, the denominator in our diluted earnings per share calculation will increase. We estimate that this provision of the new guidance will reduce our calculation of diluted earnings per share by approximately $0.01 to $0.02 for fiscal 2017. This provision of the new guidance is required to be applied prospectively. Upon adoption, prior periods will not be retrospectively adjusted.

We currently present excess tax benefits in our consolidated statements of cash flows as a cash inflow from financing activities. Under the new guidance, excess tax benefits are to be presented within operating activities. We expect to apply this provision of the new guidance retrospectively. Upon adoption, prior periods will be retrospectively adjusted.

We currently present cash payments to taxing authorities in connection with shares directly withheld from associates upon the exercise of stock options, or upon the vesting of restricted stock awards, to meet statutory tax withholding requirements (employee withholdings) as a cash outflow from operating activities. Such amounts were $38 million, $36 million and $11 million in 2016, 2015, and 2014, respectively. Under the new guidance, such payments are to be presented within financing activities. This provision of the new guidance is required to be applied retrospectively. Upon adoption, prior periods will be retrospectively adjusted.

Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables and evaluate our available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of 2020, with early adoption permitted in the first quarter of 2019. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt.

Cash Flow Presentation. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which includes clarifying guidance regarding the cash flow statement presentation of contingent consideration payments made after business combinations. ASU 2016-15 is effective for the Company in the first quarter of 2018, with early adoption permitted. The standard requires use of the retrospective transition method. The Company adopted the standard early, in the fourth quarter of 2016. The adoption of ASU 2016-15 did not have an impact on our consolidated financial statements.

Income Taxes. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which provides new guidance regarding when an entity should recognize the income tax consequences of certain intra-entity asset transfers. Current U.S. GAAP prohibits entities from recognizing the income tax consequences of intercompany asset transfers, including transfers of intellectual property. The seller defers any net tax effect, and the buyer is prohibited from recognizing a deferred tax asset on the difference between the newly created tax basis of the asset in its tax jurisdiction and its financial statement carrying amount as reported in the consolidated financial statements. ASU 2016-16 requires entities to recognize these tax consequences in the period in which the transfer takes place, with the exception of inventory transfers.

ASU 2016-16 is effective for the Company in the first quarter of 2018, with early adoption permitted in the first quarter of 2017. The standard requires the use of the modified retrospective (cumulative effect) transition approach. We expect to early adopt ASU 2016-16 in the first quarter of 2017. In connection with such adoption, we expect to record a cumulative effect adjustment reducing retained earnings by approximately $22 million. The cumulative effect adjustment includes recognition of the income tax consequences of intra-entity transfers of assets other than inventory that occurred prior to the adoption date. Prior periods will not be retrospectively adjusted.

Business Acquisitions. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance regarding the definition of a business, with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for the Company in the first quarter of 2018, with early adoption permitted, and prospective application required. The Company adopted the standard early, in the fourth quarter of 2016. The adoption of ASU 2017-01 did not have a material impact on our consolidated financial statements.

(2) Business Acquisitions

Siemens Health Services

On February 2, 2015, we acquired substantially all of the assets, and assumed certain liabilities of Siemens Health Services, the health information technology business unit of Siemens AG, ~~("Siemens"),~~ a stock corporation established under the laws of ~~Germany.~~Germany, and its affiliates. Siemens Health Services ~~offers~~offered a portfolio of enterprise-level clinical and financial health care information technology solutions, as well as departmental, connectivity, population health, and care coordination solutions globally. Solutions ~~are~~were offered on the Soarian, Invision, and i.s.h.med platforms, among others. Siemens Health Services also ~~offers~~offered a range of complementary ~~and support~~ services, including support, hosting, ~~and~~ managed services, implementation services, and strategic consulting.

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We believe the acquisition enhances our organic growth opportunities as it provides us a larger base into which we can sell our combined portfolio of solutions and services. The acquisition also augments our non-U.S. footprint and growth opportunities, increases our ability and scale for R&D investment, and ~~adds approximately 5,500 of~~added over 5,000 highly-skilled associates that ~~will~~ enhance our capabilities. These factors, combined with the synergies and economies of scale expected from combining the operations of Cerner and Siemens Health Services, are the basis for ~~acquisition.~~acquisition and comprise the resulting goodwill recorded.

Consideration for the acquisition was ~~$1.37~~$1.39 billion of cash, consisting of the $1.3 billion agreed upon purchase price plus working capital ~~adjustments. The purchase price is subject to~~and certain ~~post-closing~~other adjustments ~~for working capital and pension obligations, as specified in~~under the Master Sale and Purchase Agreement ("MSPA") dated August 5, 2014, as amended.

InWe incurred pre-tax costs of $22 million and $16 million in 2015 and 2014, ~~we incurred $15.8 million of pre-tax costs~~respectively, in connection with our acquisition of Siemens Health Services, which are included in general and administrative expense in our consolidated statements of operations.

~~Our~~The acquisition of Siemens Health Services ~~will be~~was treated as a purchase in accordance with ASC Topic 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of the assets acquired and liabilities ~~acquired~~assumed in the transaction. ~~Due to the timing of the acquisition subsequent to our 2014 fiscal year-end, certain disclosures, including the preliminary~~

The final allocation of purchase price is as follows:



(in thousands)	Allocation Amount			Estimated Weighted Average Useful Life
Receivables, net of allowances of $34,191	$	226,207
Other current assets	46,682
Property and equipment	158,324			20 years
Goodwill	532,327
Intangible assets:
Customer relationships	371,000			10 years
Existing technologies	201,990			5 years
Trade names	39,990			8 years
Total intangible assets	612,980
Other non-current assets	5,212
Accounts payable	(42,306		)
Deferred revenue (current)	(85,314		)
Other current liabilities	(12,853		)
Deferred revenue (non-current)	(48,130		)

Total purchase price	$	1,393,129

The intangible assets in the table above are being amortized on a straight-line basis over their estimated useful lives, with such amortization included in amortization of acquisition-related intangibles in our consolidated statements of operations.

The fair value measurements of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 inputs included, among others, discount rates that we estimated would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, client attrition rates, royalty rates, and market comparables.

Property and equipment was valued primarily using the sales comparison method, a form of the market approach, in which the value is derived by evaluating the market prices of assets with comparable features such as size, location, condition and age. Our analysis included multiple property categories, including land, buildings, and personal property and included assumptions for market prices of comparable assets, and physical and economic obsolescence, among others.

Customer relationship intangible assets were valued using the excess earnings method, a form of the income approach, in which the value is derived by estimation of the after-tax cash flows specifically attributable to the customer relationships. Our analysis consisted of two customer categories, order backlog and existing customer relationships and included assumptions for projections of revenues and expenses, contributory asset charges, discount rates, and a tax amortization benefit, among others.

Existing technology and trade name intangible assets were valued using the relief from royalty method, a form of the income approach, in which the value is derived by estimation of the after-tax royalty savings attributable to owning the assets. Assumptions in these analyses included projections of revenues, royalty rates representing costs avoided due to ownership of the assets, discount rates, and a tax amortization benefit.

Deferred revenue was valued using an income approach, in which the value was derived by estimation of the fulfillment cost, plus a normal profit margin (which excludes any selling margin), for performance obligations assumed in the acquisition. Assumptions included estimations of costs incurred to fulfill the obligations, profit margins a market participant would expect to receive, and a discount rate.

The goodwill of $532 million was allocated among our Domestic and Global operating segments, and is expected to be deductible for tax purposes. Refer to Note (7) for additional information on goodwill.

Our consolidated statements of operations include revenues of approximately $930 million attributable to the acquired business (now referred to as "Cerner Health Services") in 2015. Disclosure of the earnings contribution from the Cerner Health Services business in 2015 is not practicable, as we had already integrated operations in many areas.

The following table provides unaudited pro forma results of operations for the years ended January 2, 2016 and January 3, 2015, as if the acquisition had been completed on the first day of our 2014 fiscal year.



	For the Years Ended
(In thousands, except per share data)	2015		2014

Pro forma revenues	$	4,518,947	$	4,549,387
Pro forma net earnings	546,027		463,344
Pro forma diluted earnings per share	1.56		1.32

These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been ~~omitted from this Annual Report on Form 10-K because~~realized had we been a combined company during the ~~initial accounting~~periods presented, nor are they indicative of our consolidated results of operations in future periods. The pro forma results for the ~~business combination~~2015 year include pre-tax adjustments for amortization of intangible assets, fair value adjustments for deferred revenue, and the elimination of acquisition costs of $7 million, $6 million and $22 million, respectively. Pro forma results for the 2014 year include pre-tax adjustments for amortization of intangible assets, fair value adjustments for deferred revenue, and elimination of acquisition costs of $86 million, $52 million, and $16 million respectively.

Lee's Summit Tech Center

On December 17, 2015, we purchased real estate interests, in-place tenant leases, and certain other assets associated with the property commonly referred to as the Summit Technology Campus, located in Lee's Summit, Missouri. The acquired property (now referred to as the "Lee's Summit Tech Center") consists of a 550,000 square foot multi-tenant office building. We expect to utilize this space to support our data center and office space needs. Consideration for the Lee's Summit Tech Center is ~~incomplete as~~expected to total $86 million, consisting of $85 million of up-front cash plus contingent consideration not to exceed $1 million.

The acquisition of the ~~filing date. We will include necessary disclosures~~Lee's Summit Tech Center was treated as a purchase in accordance with ASC Topic 805, Business Combinations. The final allocation of purchase price resulted in the allocation of $86 million to property and equipment, net in our ~~Quarterly Report~~consolidated balance sheets. The in-place tenant leases had a de minimis impact on ~~Form 10-Q for our first fiscal quarter~~the allocation of ~~2015.~~

~~The operating results of Siemens Health Services will be combined with our operating results subsequent to~~purchase price. No goodwill resulted from the ~~purchase date of February 2, 2015.~~transaction.

InterMedHx

On April 1, 2014, we purchased 100% of the outstanding membership interests of InterMedHx, LLC (InterMedHx). InterMedHx iswas a provider of health technology solutions in the areas of preventive care, patient administration, and medication history. We believe the addition of InterMedHx solutions provides additional capabilities in the market.

Consideration for the acquisition of InterMedHx is expected to total $~~19.1~~19 million, consisting of up-front cash plus contingent consideration, which is payable at a percentage of the revenue contribution from InterMedHx solutions and services. We valued the contingent consideration at ~~$11.6~~$12 million based on projections of revenue over the assessment period. We paid $2 million in both 2016 and 2015 to satisfy a portion of this contingent consideration obligation.

The allocation of purchase price to the estimated fair value of the identified tangible and intangible assets acquired and liabilities assumed resulted in goodwill of $~~16.8~~17 million and $~~3.8~~4 million in intangible assets related to the value of existing technologies. The goodwill was allocated to our Domestic operating segment and is expected to be deductible for tax purposes. Identifiable intangible assets are being amortized over a period of five years.

~~The operating results of InterMedHx were combined with our operating results subsequent to the purchase date of~~ ~~April 1, 2014. Pro-forma results of operations have not been presented because the effect of this acquisition was not material to our results.~~

~~PureWellness~~

On ~~March 4, 2013~~, we purchased the net assets of Kaufman & Keen, LLC (doing business as PureWellness). PureWellness is a health and wellness company that develops solutions for the administration and management of wellness programs, and to enable plan member engagement strategies. Our acquisition of PureWellness will further expand what we believe to be a robust offering of solutions to manage and improve the health of populations.

~~Consideration for the acquisition of PureWellness is expected to total~~ ~~$69.2 million~~ consisting of up-front cash plus contingent consideration, which is payable if we achieve certain revenue milestones from PureWellness solutions and services during the period commencing on August 1, 2013 and ending April 30, 2015. We valued the contingent consideration at ~~$19.0 million~~ ~~based on a probability-weighted assessment of potential contingent consideration payment scenarios. During 2014, we paid $10.6 million to satisfy a portion of this contingent consideration obligation.~~

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~~was allocated to our Domestic operating segment and is expected to be deductible for tax purposes. Identifiable intangible assets are being amortized over a weighted-average period of~~ ~~seven~~ ~~years.~~

~~The operating results of PureWellness were combined with our operating results subsequent to the purchase date of~~ ~~March 4, 2013~~. Pro-forma results of operations, assuming this acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to our results.

~~Labotix~~

On ~~March 18, 2013, we purchased~~ ~~100%~~ of the outstanding stock of Labotix Corporation (together with its wholly owned subsidiary Labotix Automation, Inc., Labotix). Labotix is a developer of laboratory automation solutions for clinical laboratories. We believe the combination of Cerner Millennium, Cerner Copath, and Labotix will allow us to offer a comprehensive set of capabilities to support high volume laboratory testing.

Consideration for the acquisition of Labotix was $18.0 million, which was paid in cash. The allocation of purchase price to the estimated fair value of the identified tangible and intangible assets acquired and liabilities assumed resulted in goodwill of $11.7 million and ~~$5.2 million~~ in intangible assets related to the value of existing technologies. The goodwill was allocated to our Domestic operating segment and is not expected to be deductible for tax purposes. Identifiable intangible assets are being amortized over a period of ~~five~~ ~~years.~~

~~The operating results of Labotix were combined with our operating results subsequent to the purchase date of~~ ~~March 18, 2013. Pro-forma results of operations have not been presented because the effect of this acquisition was not material to our results.~~

~~Anasazi Software, Inc.~~

On ~~November 26, 2012, we completed the purchase of~~ ~~100%~~ of the outstanding stock of Anasazi Software, Inc. (Anasazi). Anasazi is a provider of behavioral health technology solutions. We believe the combination of Cerner Millennium, including in-patient behavioral health, and Anasazi's community behavioral health solutions create a more comprehensive offering in the market.

Consideration for the acquisition of Anasazi was $47.7 million consisting of up-front cash plus contingent consideration, which was payable upon the achievement of certain revenue milestones during 2013 from Anasazi solutions and services. During 2013, we paid $0.8 million to satisfy all contingent consideration obligations.

~~The allocation of the purchase price to the estimated fair value of the identified tangible and intangible assets acquired and liabilities assumed resulted in goodwill of~~ ~~$34.6 million~~ and $18.6 million in intangible assets, of which $12.8 million and $5.2 million was related to the value of established customer relationships and existing technologies, respectively. The goodwill was allocated to our Domestic operating segment and is not expected to be deductible for tax purposes. Identifiable intangible assets are being amortized over a weighted-average period of 12 ~~years.~~

~~The operating results of Anasazi were combined with our operating results subsequent to the purchase date of~~ ~~November 26, 2012~~.

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(3) Investments

Available-for-sale investments at the end of ~~2014~~2016 were as follows:


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

Cash equivalents:
Money market funds	$	189,137	$	—	$	—		$	189,137	$	23,110	$	—	$	—		$	23,110
Time deposits	9,989		—		—			9,989		11,477		—		—			11,477
Commercial Paper	115,638		—		—			115,638
Total cash equivalents	314,764		—		—			314,764		34,587		—		—			34,587

Short-term investments:
Time deposits	52,830		—		(1		)	52,829		40,639		—		—			40,639
Commercial paper	435,555		1		(12		)	435,544		22,325		—		(24		)	22,301
Government and corporate bonds	297,311		69		(90		)	297,290		122,729		3		(84		)	122,648
Total short-term investments	785,696		70		(103		)	785,663		185,693		3		(108		)	185,588

Long-term investments:
Government and corporate bonds	219,439		26		(500		)	218,965		95,806		—		(438		)	95,368

Total available-for-sale investments	$	1,319,899	$	96	$	(603	)	$	1,319,392	$	316,086	$	3	$	(546	)	$	315,543

Available-for-sale investments at the end of ~~2013~~2015 were as follows:


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

Cash equivalents:
Money market funds	$	57,254	$	—	$	—		$	57,254	$	126,752	$	—	$	—		$	126,752
Time deposits	7,771		—		—			7,771		5,677		—		—			5,677
Commercial Paper	3,000		—		—			3,000
Government and corporate bonds	410		—		—			410		73		—		—			73
Total cash equivalents	68,435		—		—			68,435		132,502		—		—			132,502

Short-term investments:
Time deposits	70,303		12		—			70,315		30,989		—		—			30,989
Commercial paper	33,750		1		(9		)	33,742		1,500		—		(2		)	1,498
Government and corporate bonds	572,670		356		(79		)	572,947		78,655		20		(103		)	78,572
Total short-term investments	676,723		369		(88		)	677,004		111,144		20		(105		)	111,059

Long-term investments:
Government and corporate bonds	542,644		346		(279		)	542,711		156,527		14		(569		)	155,972

Total available-for-sale investments	$	1,287,802	$	715	$	(367	)	$	1,288,150	$	400,173	$	34	$	(674	)	$	399,533

Investments reported under the cost method of accounting as of December 31, 2016 and January ~~3, 2015~~2, 2016 were $12 million and ~~December 28, 2013 were $8.7 millionand$7.2~~$16 million, respectively. Investments reported under the equity method of accounting as of December 31, 2016 and January ~~3, 2015 and December 28, 2013~~2, 2016 were ~~$3.5~~$2 million and ~~$5.0~~$1 million, respectively.

We sold available-for-sale investments for proceeds of ~~$697.9~~$245 million and ~~$125.3~~$293 million in ~~2014~~2016 and ~~2013~~,2015, respectively, resulting in insignificant ~~gains.~~losses in each period.

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(4) Fair Value Measurements

We determine fair value measurements used in our consolidated financial statements based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3 – Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table details our financial assets measured and recorded at fair value on a recurring basis at the end of ~~2014~~2016:


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

Money market funds	Cash equivalents	$	189,137	$	—	$	—	Cash equivalents	$	23,110	$	—	$	—
Time deposits	Cash equivalents	—		9,989		—		Cash equivalents	—		11,477		—
Commercial paper	Cash equivalents	—		115,638		—
Time deposits	Short-term investments	—		52,829		—		Short-term investments	—		40,639		—
Commercial paper	Short-term investments	—		435,544		—		Short-term investments	—		22,301		—
Government and corporate bonds	Short-term investments	—		297,290		—		Short-term investments	—		122,648		—
Government and corporate bonds	Long-term investments	—		218,965		—		Long-term investments	—		95,368		—

The following table details our financial assets measured and recorded at fair value on a recurring basis at the end of ~~2013~~2015:


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

Money market funds	Cash equivalents	$	57,254	$	—	$	—	Cash equivalents	$	126,752	$	—	$	—
Time deposits	Cash equivalents	—		7,771		—		Cash equivalents	—		5,677		—
Commercial paper	Cash equivalents	—		3,000		—
Government and corporate bonds	Cash equivalents	—		410		—		Cash equivalents	—		73		—
Time deposits	Short-term investments	—		70,315		—		Short-term investments	—		30,989		—
Commercial paper	Short-term investments	—		33,742		—		Short-term investments	—		1,498		—
Government and corporate bonds	Short-term investments	—		572,947		—		Short-term investments	—		78,572		—
Government and corporate bonds	Long-term investments	—		542,711		—		Long-term investments	—		155,972		—

We estimate the fair value of our long-term, fixed rate debt using a Level 3 discounted cash flow analysis based on current borrowing rates for debt with similar maturities. We estimate the fair value of our long-term, variable rate debt using a Level 3 discounted cash flow analysis based on LIBOR rate forward curves. The fair value of our long-term debt, including current maturities, at the end of ~~2014~~2016 and ~~2013~~2015 was approximately ~~$14.9~~$515 million and ~~$32.6~~$505 million, respectively. The carrying amount of such ~~fixed-rate~~ debt at the end of ~~2014~~both 2016 and ~~2013~~2015 was ~~$14.2 million and~~ ~~$30.6 million, respectively.~~$500 million.

~~Table of Contents~~

(5) Receivables

Receivables consist of accounts receivable and the current portion of amounts due under sales-type leases. Accounts receivable primarily represent recorded revenues that have been billed. Billings and other consideration received on contracts in excess of related revenues recognized are recorded as deferred revenue. Substantially all receivables are derived from sales and related support and maintenance and professional services of our clinical, administrative and financial information systems and solutions to health care ~~providers located throughout the United States and in certain non-U.S. countries.~~providers.

We perform ongoing credit evaluations of our clients and generally do not require collateral from our clients. We provide an allowance for estimated uncollectible accounts based on specific identification, historical experience and our judgment. ~~Provisions for losses on uncollectible accounts for~~ ~~2014~~, ~~2013, and~~ ~~2012~~ ~~totaled $5.3 million,~~ ~~$7.0 million~~ ~~and~~ ~~$13.5 million, respectively.~~

A summary of net receivables is as follows:


(In thousands)	2014		2013		2016		2015

Gross accounts receivable	$	641,160	$	583,312	$	958,843	$	1,043,069
Less: Allowance for doubtful accounts	25,531		36,286		43,028		48,119

Accounts receivable, net of allowance	615,629		547,026		915,815		994,950

Current portion of lease receivables	57,149		35,900		29,128		39,134

Total receivables, net	$	672,778	$	582,926	$	944,943	$	1,034,084

A reconciliation of the beginning and ending amount of our allowance for doubtful accounts is as follows:



(in thousands)	2016			2015			2014

Allowance for doubtful accounts - beginning balance	$	48,119		$	25,531		$	36,286
Additions charged to costs and expenses	5,060			2,317			5,274
Additions through acquisitions	—			34,159			—
Deductions^(a)	(10,151		)	(13,888		)	(16,029		)

Allowance for doubtful accounts - ending balance	$	43,028		$	48,119		$	25,531

^(a)Deductions in 2014 include a $14 million reclassification to other non-current assets.

Lease receivables represent our net investment in sales-type leases resulting from the sale of certain health care devices to our clients. The components of our net investment in sales-type leases are as follows:


(In thousands)	2014		2013		2016		2015

Minimum lease payments receivable	$	125,906	$	146,566	$	59,171	$	101,968
Less: Unearned income	6,089		7,602		2,253		5,593

Total lease receivables	119,817		138,964		56,918		96,375

Less: Long-term receivables included in other assets	62,668		103,064		27,790		57,241

Current portion of lease receivables	$	57,149	$	35,900	$	29,128	$	39,134

Future minimum lease payments to be received under existing sales-type leases for the next five years are as follows:


(In thousands)

2015	$	60,198
2016	36,259
2017	20,293		$	30,180
2018	6,986		14,155
2019	2,170		10,343
2020			3,983
2021			510

During the second quarter of 2008, Fujitsu Services Limited’s (Fujitsu) contract as the prime contractor in the National Health Service (NHS) initiative to automate clinical processes and digitize medical records in the Southern region of England was terminated by the NHS. This had the effect of automatically terminating our subcontract for the project. We continue to be in dispute with Fujitsu regarding Fujitsu’s obligation to pay the amounts comprised of accounts receivable and contracts receivable related to that subcontract, and we are working with Fujitsu to resolve these issues based on processes provided for in the contract. Part of that process requires final resolution of disputes between Fujitsu and the NHS regarding the contract termination. As of ~~January 3, 2015~~December 31, 2016, it remains unlikely that our matter with Fujitsu will be resolved in the next 12 months. Therefore, these receivables have been classified as long-term and represent less than the majority of other long-term assets at the end of ~~2014~~2016 and ~~2013~~2015. While the ultimate collectability of the receivables pursuant to this process is

During ~~2014~~2016 and ~~2013,~~2015, we received total client cash collections of ~~$3.5~~$5.2 billion and ~~$3.1~~$4.4 billion, ~~respectively, of which $79.9 million and $60.8 million were received from third party arrangements with non-recourse payment assignments.~~respectively.

(6) Property and Equipment

A summary of property, equipment and leasehold improvements stated at cost, less accumulated depreciation and amortization, is as follows:

Depreciation and leasehold amortization expense for ~~2014~~2016, ~~2013~~2015 and ~~2012~~2014 was ~~$163.0~~$246 million, $~~135.7~~217 million and $~~120.1~~163 million, respectively.

(7) Goodwill and Other Intangible Assets

Estimated aggregate amortization expense for each of the next five years is as follows:

Note that the above estimate of future amortization expense does not include any impact of intangible assets that may be recorded in connection with our February 2, 2015 acquisition of Siemens Health Services, as further described in Note (2).

(8) Software Development

(9) Long-term Debt and Capital Lease Obligations

~~In November 2005, we completed a~~ ~~£65.0 million~~ ~~unsecured private placement of debt at~~ ~~5.54%~~ ~~pursuant to a Note Agreement. The Note Agreement is payable in~~ ~~seven~~ ~~equal annual installments, which commenced~~ ~~November 2009. The proceeds were used to repay the outstanding amount under our credit facility and for general corporate purposes.~~ The Note Agreement contains certain net worth and fixed charge coverage covenants and provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends. We were in compliance with all covenants at the end of 2014.Senior Notes

In January 2015, we issued ~~$500.0~~$500 million aggregate principal amount of unsecured Senior Notes ("Senior Notes"), pursuant to a Master Note Purchase Agreement dated December 4, 2014. The issuance consisted of ~~$225.0~~$225 million of 3.18% Series 2015-A Notes due February 15, 2022, ~~$200.0~~$200 million of 3.58% Series 2015-B Notes due February 14, 2025, and ~~$75.0~~$75 million in floating rate Series 2015-C Notes due February 15, 2022. Interest is payable semiannually on February 15th and August 15th in each year, commencing on August 15, 2015 for the Series 2015-A Notes and Series 2015-B Notes. The Series 2015-C Notes will accrue interest at a floating rate equal to the Adjusted LIBOR Rate (as defined in the Master Note Purchase Agreement), payable quarterly on February 15th, May 15th, August 15th and November 15th in each year, commencing on May 15, 2015. As of December 31, 2016, the interest rate for the current interest period was 1.90% based on the three-month floating LIBOR rate. The debt issuance costs in the table above relate to the issuance of these Senior Notes. The Master Note Purchase Agreement contains certain leverage and interest coverage ratio covenants and

Our capital lease obligations are primarily related to the procurement of hardware and health care devices, and generally have a term of five years.

~~Minimum annual payments under existing capital lease obligations and maturities of indebtedness outstanding at the end of~~ ~~2014~~ ~~are as follows:~~

~~We also maintain a~~ ~~$100.0 million~~ ~~multi-year~~Other indebtedness includes estimated amounts payable through September 2025, under an agreement entered into in September 2015.

In October 2015, we amended and restated our revolving credit ~~facility, which expires in~~ ~~February 2017~~.facility. The amended facility provides ana $100 million unsecured revolving line of credit for working capital purposes, ~~along with~~which includes a letter of credit ~~facility.~~ facility, expiring in October 2020. We have the ability to increase the maximum capacity to $200 million at any time during the facility’s term, subject to lender participation. Interest is payable at a rate based on prime, LIBOR, or the U.S. federal funds rate, plus a spread that varies depending on the leverage ratios ~~maintained~~. maintained. The agreement provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends and contains certain cash flow and liquidity covenants. As of the end of ~~2014, we were in compliance with all debt covenants.~~ ~~As of the end of~~ ~~2014~~,2016, we had no outstanding borrowings under this ~~agreement;~~facility; however, we had ~~$16.6~~$32 million of outstanding letters of credit, which reduced our available borrowing capacity to ~~$83.4~~$68 million.

~~(10) Hedging Activities~~

~~We designated~~Covenant Compliance

As of December 31, 2016, we were in compliance with all debt covenants.

Minimum annual payments under existing capital lease obligations and maturities of ~~our Great Britain Pound (GBP) denominated long-term debt~~indebtedness outstanding at the end of 2016 are as a net investment hedge of our U.K. operations. The objective of the hedge is to reduce our foreign currency exposure in our U.K. subsidiary investment. Changes in the exchange rate between the United States Dollar (USD) and GBP, related to the notional amount of the hedge, are recognized as a component of other comprehensive income (loss), to the extent the hedge is effective. The following tables represent the fair value of our net investment hedge included within the consolidated balance sheets and the related unrealized gain or loss, net of related income tax effects, on the net investment hedge recognized in comprehensive income:follows:

~~(11)~~(10) Contingencies

We accrue estimates for resolution of any legal and other contingencies when losses are probable and estimable, in accordance with ASC 450, Contingencies.

The terms of our software license agreements with our clients generally provide for a limited indemnification of such clients against losses, expenses and liabilities arising from third party claims based on alleged infringement by our solutions of an intellectual property right of such third party. The terms of such indemnification often limit the scope of and remedies for such indemnification obligations and generally include a right to replace or modify an infringing solution. To date, we have not had to reimburse any of our clients for any ~~losses~~judgments or settlements to third parties related to these indemnification provisions pertaining to ~~third party~~ intellectual property infringement claims. For several reasons, including the lack of a sufficient number of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under the terms of the corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

In addition to commitments and obligations in the ordinary course of business, we are subject to various legal proceedings and claims that arise in the ordinary course of business, including for example, employment and client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties. ~~Many~~In addition, we are a defendant in lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of ~~these~~various groups of current and former associates in the U.S alleging that we misclassified associates as exempt from overtime pay under the Fair Labor Standards Act and state wage and hour laws. These proceedings are at ~~preliminary~~various procedural stages and ~~many~~ seek ~~an indeterminate amount of damages.~~unspecified monetary damages, injunctive relief and attorneys’ fees. We do not believe any material losses under these claims to be probable or estimable at this time.

No less than quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made. Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any one or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our ~~financial position or~~business, results of ~~operations.~~operations, cash flows or financial condition.

RLIS, Inc., a non-practicing entity, filed a complaint in the Southern District of Texas against the Company alleging that certain of the Company’s electronic medical record solutions infringe two patents owned by the plaintiff. At trial, Plaintiff requested damages between $35.3 million and $38.2 million. Plaintiff also sought attorneys’ fees, costs, and an ongoing royalty. A jury trial was conducted from January 5, 2015, to January 16, 2015. The jury rendered a verdict that all remaining patent claims asserted against the Company were invalid and not infringed by the Company. The Company continues to dispute the Plaintiff’s claims and will vigorously defend itself if the Plaintiff appeals after a final judgment is entered. In the opinion of our management, if the Plaintiff were to appeal, there is a reasonable possibility that we could incur losses with respect to this matter but we are unable to estimate a range of any such possible losses at this time, and we do not believe a loss is probable. Our management will continue to evaluate the potential exposure related to this matter in future periods.

~~Settlement Charge~~

~~(12)~~(11) Other Income

A summary of other income is as follows:

~~Other income in 2012 includes a~~ ~~$4.5 million~~ ~~gain recognized on the disposition of one of our cost-method investments.~~

~~(13)~~(12) Income Taxes

~~Table of Contents~~

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to significant portions of deferred income taxes at the end of ~~2014~~2016 and ~~2013~~2015 relate to the following:


(In thousands)	2014			2013			2016			2015

Deferred tax assets:
Accrued expenses	$	25,398		$	22,948		$	25,454		$	27,555
Tax credits and separate return net operating losses	28,953			25,612			27,762			29,265
Share based compensation	58,271			44,856			81,133			69,555
Contract and service revenues and costs	—			65,407			59,217			—
Other	10,347			12,529			9,723			16,334
Gross deferred tax assets	122,969			171,352
Less: Valuation allowance	(776		)	(896		)
Total deferred tax assets	122,193			170,456			203,289			142,709

Deferred tax liabilities:
Software development costs	(163,938		)	(130,583		)	(275,888		)	(216,435		)
Depreciation and amortization	(129,684		)	(113,492		)	(133,424		)	(133,242		)
Prepaid expenses							(30,255		)	(25,655		)
Contract and service revenues and costs	(7,511		)	—			—			(10,684		)
Other	(3,625		)	(2,859		)	(3,050		)	(3,589		)
Total deferred tax liabilities	(304,758		)	(246,934		)	(442,617		)	(389,605		)

Net deferred tax liability	$	(182,565	)	$	(76,478	)	$	(239,328	)	$	(246,896	)

At the end of ~~2014,~~2016, we had net operating loss carry-forwards subject to Section 382 of the Internal Revenue Code for ~~Federal~~U.S. federal income tax purposes of ~~$5.5~~$4 million that are available to offset future ~~Federal~~U.S. federal taxable income, if any, through 2020. We had net operating loss carry-forwards from foreign jurisdictions of ~~$0.4~~$37 million that are available to offset future taxable income ~~if any, through 2024, $0.7 million that are available to offset future taxable income, if any, through 2033, and $46.8 million that are available to offset future taxable income, if any,~~ with no expiration. We had a deferred tax asset for state net operating loss carry-forwards of ~~$0.8~~$1 million which are available to offset future taxable income, if any, through 2034. In addition, we have a state income tax credit carry-forward of ~~$16.0~~$13 million available to offset income tax liabilities through ~~2030.~~

At the end of ~~2014,~~2016, we had not provided tax on the cumulative undistributed earnings of our foreign subsidiaries of approximately ~~$99~~$111 million, because it is our intention to reinvest these earnings indefinitely. If these earnings were distributed, we would be subject to U.S. federal and state income taxes and foreign withholding taxes, net of U.S. foreign tax credits which may be available. The calculation of this unrecognized deferred tax liability is complex and not practicable.

~~Table of Contents~~

The effective income tax rates for 2016, 2015, and 2014 ~~2013, and 2012~~ were ~~32%~~31%, ~~32%~~31%, and 32%, respectively. These effective rates differ from the ~~Federal~~U.S. federal statutory rate of 35% as follows:


	For the Years Ended									For the Years Ended
(In thousands)	2014			2013			2012			2016			2015			2014

Tax expense at statutory rates	$	270,961		$	205,819		$	205,698		$	321,452		$	273,483		$	270,961
State income tax, net of federal benefit	15,715			17,502			13,856			22,644			16,129			19,301
Tax credits	(20,986		)	(18,683		)	(1,510		)	(23,881		)	(20,681		)	(19,469		)
Unrecognized tax benefit (including interest)	5,538			(20		)	(12,832		)
Foreign rate differential										(16,468		)	(14,821		)	(13,057		)
Permanent differences	(12,253		)	(14,760		)	(19,900		)	(20,330		)	(14,314		)	(12,253		)
Other, net	(10,234		)	(158		)	5,164			(1,467		)	2,222			3,258

Total income tax expense	$	248,741		$	189,700		$	190,476		$	281,950		$	242,018		$	248,741

A reconciliation of the beginning and ending amount of unrecognized tax benefit is presented below:

If recognized, ~~$5.9~~$6 million of the unrecognized tax benefit will favorably impact our effective tax rate. We do not anticipate ~~that it is reasonably possible~~ that our unrecognized tax benefits will decrease ~~by up to $4 million~~significantly within the next twelve months due to the potential settlement of examinations and lapse of the statutes of limitations in various taxing jurisdictions. Our federal returns have been examined by the Internal Revenue Service through 2009. Ourmonths. During 2016, we filed amended federal returns for ~~2010~~2011, 2012 and 2013. Our 2011 through ~~2012~~2014 federal returns are currently under examination by the Internal Revenue Service. We have various state and foreign returns under examination.

The ~~2014 beginning and~~ ending amounts of accrued interest and penalties related to unrecognized tax benefits were ~~$0.2~~less than $1 million in 2016 and ~~$0.6~~$1 million ~~respectively.~~in 2015. We classify interest and penalties as income tax expense in our consolidated statement of operations. ~~No accrual for tax penalties was recorded at the end of the year.~~

The foreign portion of our earnings before income taxes was ~~$68.3~~$86 million, ~~$4.5~~$83 million, and ~~($15.4)~~$68 million in ~~2014, 2013,~~2016, 2015, and ~~2012~~2014 respectively, and the remaining portion was domestic.

(13) Earnings Per Share

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

Options to purchase ~~5.7~~9.4 million, ~~6.1~~2.9 million and ~~4.6~~5.7 million shares of common stock at per share prices ranging from $47.38 to $73.40, $50.04 to $73.40 and $44.05 to $66.10, ~~$36.92 to~~ ~~$56.39~~ ~~and~~ ~~$27.62~~ to ~~$42.98~~, were outstanding at the end of ~~2014~~, ~~2013~~2016, 2015 and ~~2012~~,2014, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

~~(15)~~(14) Share-Based Compensation and Equity

As of the end of ~~2014~~2016, we had five fixed stock option and equity plans in effect for associates and directors. This includes one plan from which we could issue grants, the Cerner Corporation 2011 Omnibus Equity Incentive Plan (the Omnibus Plan); and four plans from which no new grants are permitted, but some awards remain outstanding (Plans D, E, F, and G).

Awards under the Omnibus Plan may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, performance grants and bonus shares. At the end of ~~2014~~2016, ~~8.1~~17.4 million shares remain available for awards. Stock options granted under the Omnibus Plan are exercisable at a price not less than fair market value on the date of grant. Stock options under the Omnibus Plan typically vest over a period of five years and are exercisable for periods of up to 10 ~~years~~.years.

The fair market value of each stock option award granted in 2016 is estimated on the date of grant using ~~a lattice option-pricing~~the Black-Scholes-Merton (BSM) pricing model. The pricing model requires the use of the following estimates and assumptions:



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)



Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value per share		The NASDAQ Stock Market LLC (NASDAQ Global Select Market)



Class		Outstanding at February ~~6, 2015~~1, 2017
Common Stock, $0.01 par value per share		~~342,588,295~~329,719,501 shares


	For the Years Ended									For the Years Ended
(In thousands)	2014			2013			2012			2016			2015			2014

Cash collections from clients	$	3,480,591		$	3,050,633		$	2,714,315		$	5,184,252		$	4,419,650		$	3,480,591
Cash paid to employees and suppliers and other	(2,483,559		)	(2,172,418		)	(1,840,682		)	(3,755,617		)	(3,340,551		)	(2,483,559		)
Cash paid for interest	(5,682		)	(6,973		)	(6,448		)	(18,484		)	(13,164		)	(5,682		)
Cash paid for taxes, net of refund	(144,323		)	(175,377		)	(158,871		)
Cash paid for taxes, net of refunds										(254,539		)	(118,409		)	(144,323		)

Total cash from operations	$	847,027		$	695,865		$	708,314		$	1,155,612		$	947,526		$	847,027



Document		Parts into Which Incorporated
Portions of the registrant's Proxy Statement for the Annual Shareholders' Meeting to be held May ~~22, 2015~~24, 2017		Part III



Part I
Item 1.	Business	1
Item 1A.	Risk Factors	8	9
Item 1B.	Unresolved Staff Comments	18	21
Item 2.	Properties	18	22
Item 3.	Legal Proceedings	18	23
Item 4.	Mine Safety Disclosures	18	23

Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19	24
Item 6.	Selected Financial Data	20	25
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34	39
Item 8.	Financial Statements and Supplementary Data	34	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34	39
Item 9A.	Controls and Procedures	34	39
Item 9B.	Other Information	35	40

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	36	41
Item 11.	Executive Compensation	36	41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	37	42
Item 13.	Certain Relationships and Related Transactions, and Director Independence	37	42
Item 14.	Principal Accountant Fees and Services	37	42

Part IV
Item 15.	Exhibits and Financial Statement Schedules	38 43

Item 16.	Form 10-K Summary	43

Signatures		39	44



	2014						2013(a)

	High		Low		Last		High		Low		Last

First Quarter	$	63.07	$	51.65	$	56.15	$	47.37	$	38.76	$	47.37
Second Quarter	56.94		48.39		51.27		49.68		45.60		48.05
Third Quarter	60.07		50.30		58.66		52.61		46.06		52.61
Fourth Quarter	66.45		55.75		65.03		58.24		52.55		55.58



(In millions, except share data)	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	Total Number of Shares Purchased (a)	Average Price Paid per Share
September 28, 2014 - October 25, 2014	—	—		—	$	100.0
October 26, 2014 - November 22, 2014	658	$	63.34	—	100.0
November 23, 2014 - January 3, 2015	—	—		—	100.0
Total	658	$	63.34	—


(In thousands)	2014			% of Revenue	2013			% of Revenue	% Change	2016			% of Revenue	2015			% of Revenue	% Change

Domestic Segment
Revenues	$	3,021,790		100%	$	2,550,115		100%	18%	$	4,245,097		100%	$	3,904,454		100%	9%
Costs of revenue	542,210			18%	458,540			18%	18%	676,437			16%	651,826			17%	4%
Operating expenses	677,817			22%	600,341			24%	13%	1,774,146			42%	1,577,594			40%	12%
Total costs and expenses	1,220,027			40%	1,058,881			42%	15%	2,450,583			58%	2,229,420			57%	10%

Domestic operating earnings	1,801,763			60%	1,491,234			58%	21%	1,794,514			42%	1,675,034			43%	7%

Global Segment
Revenues	380,913			100%	360,633			100%	6%	551,376			100%	520,813			100%	6%
Costs of revenue	62,167			16%	56,182			16%	11%	102,679			19%	98,955			19%	4%
Operating expenses	131,096			34%	115,281			32%	14%	246,243			45%	233,047			45%	6%
Total costs and expenses	193,263			51%	171,463			48%	13%	348,922			63%	332,002			64%	5%

Global operating earnings	187,650			49%	189,170			52%	(1)%	202,454			37%	188,811			36%	7%

Other, net	(1,226,329		)		(1,104,392		)		11%	(1,085,955		)		(1,082,709		)		—%

Consolidated operating earnings	$	763,084			$	576,012			32%	$	911,013			$	781,136			17%


	Payments Due by Period														Payments Due by Period
(In thousands)	2015		2016		2017		2018		2019		2020 and thereafter		Total		2017		2018		2019		2020		2021		2022 and thereafter		Total

Balance sheet obligations^(a):
Long-term debt obligations ^(b)	$	14,233	$	—	$	—	$	—	$	—	$	—	$	14,233	$	—	$	2,500	$	—	$	1,100	$	1,700	$	508,621	$	513,921
Interest on long-term debt obligations	789		—		—		—		—		—		789		15,945		16,377		16,701		16,915		17,057		29,351		112,346
Capital lease obligations	53,227		34,510		19,522		6,721		2,115		—		116,095		26,197		11,719		8,718		3,380		430		—		50,444
Interest on capital lease obligations	2,741		1,458		530		156		22		—		4,907		1,229		690		292		55		6		—		2,272

Other obligations:
Operating lease obligations	23,525		21,693		21,467		19,294		14,984		39,607		140,570		30,089		26,898		22,041		16,085		11,147		8,722		114,982
Purchase obligations	42,300		23,481		6,762		4,345		4,001		8,000		88,889		83,002		41,887		19,205		7,677		3,711		26,890		182,372

Total	$	136,815	$	81,142	$	48,281	$	30,516	$	21,122	$	47,607	$	365,483	$	156,462	$	100,071	$	66,957	$	45,212	$	34,051	$	573,584	$	976,337


(In thousands)	Depreciable Lives (Yrs)			2014		2013		Depreciable Lives (Yrs)			2016		2015

Computer and communications equipment	1	—	5	$	1,137,497	$	963,301	1	—	5	$	1,363,799	$	1,261,338
Land, buildings and improvements	12	—	50	439,567		411,382		12	—	50	961,550		742,760
Leasehold improvements	1	—	15	187,351		160,030		1	—	15	226,471		201,155
Furniture and fixtures	5	—	12	96,244		72,601		5	—	12	102,151		102,681
Capital lease equipment	3	—	5	3,196		3,207		3	—	5	3,197		3,200
Other equipment	3	—	20	915		710		3	—	20	1,398		1,155

				1,864,770		1,611,231					2,658,566		2,312,289

Less accumulated depreciation and leasehold amortization				940,510		818,450					1,106,042		1,003,075

Total property and equipment, net				$	924,260	$	792,781				$	1,552,524	$	1,309,214


(In thousands)

2015	$	34,048
2016	29,359
2017	22,651		$	117,049
2018	8,494		102,727
2019	5,208		98,734
2020			55,990
2021			49,733



	Capital Lease Obligations
(In thousands)	Minimum Lease Payments		Less: Interest		Principal		Principal Amount of Indebtedness		Total

2015	$	55,968	$	2,741	$	53,227	$	14,233	$	67,460
2016	35,968		1,458		34,510		—		34,510
2017	20,052		530		19,522		—		19,522
2018	6,877		156		6,721		—		6,721
2019	2,137		22		2,115		—		2,115

Total	$	121,002	$	4,907	$	116,095	$	14,233	$	130,328



(In thousands)		2014
Derivatives Designated	Balance Sheet Classification	Fair Value		Net Unrealized Gain

Total net investment hedge	Short-term liabilities	$	14,233	$	929


(In thousands, except per share data)	Number of Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Yrs)	Number of Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term (Yrs)
Outstanding at beginning of year	24,407		$	22.24				24,267		$	34.46
Granted	3,271		52.19					4,133		55.14
Exercised	(2,719	)	12.70					(4,053	)	17.46
Forfeited and expired	(330	)	42.31					(746	)	55.71
Outstanding at end of year	24,629		27.00		$	936,584	6.00	23,601		40.33		$	280,586	6.00

Exercisable at end of year	14,387		$	14.39	$	728,611	4.50	12,662		$	26.19	$	275,484	4.14


	For the Years Ended						For the Years Ended
(In thousands, except for grant date fair values)	2014		2013		2012		2016		2015		2014

Weighted-average grant date fair values	$	22.59	$	19.57	$	18.52	$	18.31	$	21.51	$	22.59

Total intrinsic value of options exercised	$	124,828	$	118,051	$	152,117	$	177,375	$	196,127	$	124,828

Cash received from exercise of stock options	31,879		31,403		38,147		63,794		51,475		31,879

Tax benefit realized upon exercise of stock options	44,029		43,523		55,952		64,347		66,868		44,029


(In thousands, except per share data)	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value

Outstanding at beginning of year	552		$	38.54	557		$	59.42
Granted	167		55.27		58		57.22
Vested	(208	)	33.38		(216	)	53.74
Forfeited	(5	)	34.48		(45	)	70.37

Outstanding at end of year	506		$	46.21	354		$	61.12





(In thousands)	Balance at Beginning of Period		Additions Charged to Costs and Expenses	Additions Through Acquisitions	Deductions^(a)		Balance at End of Period
Description

2012

Allowance for Doubtful Accounts	$	24,270	13,483	8	(4,531	)	$	33,230

2013

Allowance for Doubtful Accounts	$	33,230	6,954	489	(4,387	)	$	36,286

2014

Allowance for Doubtful Accounts	$	36,286	5,274	—	(16,029	)	$	25,531

^(a) Deductions in 2014 include a $13.9 million reclassification to other non-current assets.