(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class | Outstanding at October 16, 2019 | |
Common Stock, $0.01 par value per share |
Part I. | Financial Information: | |
Item 1. | Financial Statements: | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | Other Information: | |
Item 1A. | ||
Item 2. | ||
Item 6. | ||
Signatures |
(In thousands, except share data) | 2019 | 2018 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term investments | |||||||
Receivables, net | |||||||
Inventory | |||||||
Prepaid expenses and other | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Right-of-use assets | |||||||
Software development costs, net | |||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Long-term investments | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Current installments of long-term debt and capital lease obligations | |||||||
Deferred revenue | |||||||
Accrued payroll and tax withholdings | |||||||
Other current liabilities | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Deferred income taxes | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Shareholders' Equity: | |||||||
Common stock, $.01 par value, 500,000,000 shares authorized, 366,201,300 shares issued at September 28, 2019 and 362,212,843 shares issued at December 29, 2018 | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Treasury stock, 52,282,997 shares at September 28, 2019 and 37,905,013 shares at December 29, 2018 | ( | ) | ( | ) | |||
Accumulated other comprehensive loss, net | ( | ) | ( | ) | |||
Total shareholders' equity | |||||||
Total liabilities and shareholders' equity | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||
(In thousands, except per share data) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues | $ | $ | $ | $ | |||||||||||
Costs and expenses: | |||||||||||||||
Costs of revenue | |||||||||||||||
Sales and client service | |||||||||||||||
Software development (Includes amortization of $56,786 and $169,036 for the three and nine months ended September 28, 2019, respectively; and $53,429 and $155,571 for the three and nine months ended September 29, 2018, respectively) | |||||||||||||||
General and administrative | |||||||||||||||
Amortization of acquisition-related intangibles | |||||||||||||||
Total costs and expenses | |||||||||||||||
Operating earnings | |||||||||||||||
Other income, net | |||||||||||||||
Earnings before income taxes | |||||||||||||||
Income taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net earnings | $ | $ | $ | $ | |||||||||||
Basic earnings per share | $ | $ | $ | $ | |||||||||||
Diluted earnings per share | $ | $ | $ | $ | |||||||||||
Basic weighted average shares outstanding | |||||||||||||||
Diluted weighted average shares outstanding |
Three Months Ended | Nine Months Ended | ||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net earnings | $ | $ | $ | $ | |||||||||||
Foreign currency translation adjustment and other (net of taxes (benefit) of $(409) and $(413) for the three and nine months ended September 28, 2019; and $(13) and $572 for the three and nine months ended September 29, 2018, respectively) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Unrealized loss on cash flow hedge (net of tax benefit of $1,327 and $5,396 for the three and nine months ended September 28, 2019, respectively) | ( | ) | ( | ) | |||||||||||
Unrealized holding gain on available-for-sale investments (net of taxes of $5 and $286 for the three and nine months ended September 28, 2019; and $181 and $97 for the three and nine months ended September 29, 2018, respectively) | |||||||||||||||
Comprehensive income | $ | $ | $ | $ |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net earnings | $ | $ | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Share-based compensation expense | |||||||
Provision for deferred income taxes | |||||||
Investment gains | ( | ) | |||||
Changes in assets and liabilities: | |||||||
Receivables, net | ( | ) | |||||
Inventory | ( | ) | |||||
Prepaid expenses and other | ( | ) | |||||
Accounts payable | ( | ) | |||||
Accrued income taxes | ( | ) | ( | ) | |||
Deferred revenue | ( | ) | |||||
Other accrued liabilities | |||||||
Net cash provided by operating activities | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital purchases | ( | ) | ( | ) | |||
Capitalized software development costs | ( | ) | ( | ) | |||
Purchases of investments | ( | ) | ( | ) | |||
Sales and maturities of investments | |||||||
Purchase of other intangibles | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Long-term debt issuance | |||||||
Repayment of long-term debt | ( | ) | |||||
Proceeds from exercise of stock options | |||||||
Payments to taxing authorities in connection with shares directly withheld from associates | ( | ) | ( | ) | |||
Treasury stock purchases | ( | ) | ( | ) | |||
Dividends paid | ( | ) | |||||
Other | ( | ) | |||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | |||
Net increase in cash and cash equivalents | |||||||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss, Net | ||||||||||||||||||
(In thousands) | Shares | Amount | ||||||||||||||||||||
Balance at December 29, 2018 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at March 30, 2019 | ( | ) | ( | ) | ||||||||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | |||||||||||||||
Treasury stock purchases | — | — | — | — | ( | ) | — | |||||||||||||||
Cash dividends declared ($0.18 per share) | — | — | — | ( | ) | — | — | |||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at June 29, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | |||||||||||||||
Treasury stock purchases | — | — | — | — | ( | ) | — | |||||||||||||||
Cash dividends declared ($0.18 per share) | — | — | — | ( | ) | — | — | |||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at September 28, 2019 | ( | ) | ( | ) |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss, Net | ||||||||||||||||||
(In thousands) | Shares | Amount | ||||||||||||||||||||
Balance at December 30, 2017 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Cumulative effect of accounting change (ASU 2014-09) | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||
Treasury stock purchases | — | — | — | — | ( | ) | — | |||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at March 31, 2018 | ( | ) | ( | ) | ||||||||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | |||||||||||||||
Treasury stock purchases | — | — | — | — | ( | ) | — | |||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
Exercise of stock options and vests of restricted shares and share units | — | — | — | |||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | |||||||||||||||
Treasury stock purchases | — | — | — | — | ( | ) | — | |||||||||||||||
Net earnings | — | — | — | — | — | |||||||||||||||||
Balance at September 29, 2018 | $ | $ | $ | $ | ( | ) | $ | ( | ) |
Nine Months Ended | |||||||||
(In thousands) | 2019 | 2018 | |||||||
Cash paid during the period for: | |||||||||
Interest (including amounts capitalized of $12,575 and $9,318, respectively) | $ | $ | |||||||
Income taxes, net of refunds | ( | ) |
Three Months Ended | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(In thousands) | Domestic Segment | International Segment | Total | Domestic Segment | International Segment | Total | |||||||||||||
Licensed software | $ | $ | $ | $ | $ | $ | |||||||||||||
Technology resale | |||||||||||||||||||
Subscriptions | |||||||||||||||||||
Professional services | |||||||||||||||||||
Managed services | |||||||||||||||||||
Support and maintenance | |||||||||||||||||||
Reimbursed travel | |||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ | $ |
Nine Months Ended | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(In thousands) | Domestic Segment | International Segment | Total | Domestic Segment | International Segment | Total | |||||||||||||
Licensed software | $ | $ | $ | $ | $ | $ | |||||||||||||
Technology resale | |||||||||||||||||||
Subscriptions | |||||||||||||||||||
Professional services | |||||||||||||||||||
Managed services | |||||||||||||||||||
Support and maintenance | |||||||||||||||||||
Reimbursed travel | |||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ | $ |
Three Months Ended | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(In thousands) | Domestic Segment | International Segment | Total | Domestic Segment | International Segment | Total | |||||||||||||
Revenue recognized over time | $ | $ | $ | $ | $ | $ | |||||||||||||
Revenue recognized at a point in time | |||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ | $ |
Nine Months Ended | |||||||||||||||||||
2019 | 2018 | ||||||||||||||||||
(In thousands) | Domestic Segment | International Segment | Total | Domestic Segment | International Segment | Total | |||||||||||||
Revenue recognized over time | $ | $ | $ | $ | $ | $ | |||||||||||||
Revenue recognized at a point in time | |||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ | $ |
(In thousands) | September 28, 2019 | December 29, 2018 | |||||
Client receivables | $ | $ | |||||
Less: Allowance for doubtful accounts | |||||||
Client receivables, net of allowance | |||||||
Current portion of lease receivables (under ASC Topic 840) | — | ||||||
Total receivables, net | $ | $ |
(In thousands) | Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | $ | — | $ | — | $ | ||||||||||
Time deposits | — | — | ||||||||||||||
Commercial paper | — | — | ||||||||||||||
Total cash equivalents | — | — | ||||||||||||||
Short-term investments: | ||||||||||||||||
Time deposits | — | — | ||||||||||||||
Commercial paper | ( | ) | ||||||||||||||
Government and corporate bonds | ( | ) | ||||||||||||||
Total short-term investments | ( | ) | ||||||||||||||
Long-term investments: | ||||||||||||||||
Government and corporate bonds | ( | ) | ||||||||||||||
Total available-for-sale investments | $ | $ | $ | ( | ) | $ |
(In thousands) | Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | $ | — | $ | — | $ | ||||||||||
Time deposits | — | — | ||||||||||||||
Commercial Paper | — | — | ||||||||||||||
Total cash equivalents | — | — | ||||||||||||||
Short-term investments: | ||||||||||||||||
Time deposits | — | — | ||||||||||||||
Commercial paper | — | ( | ) | |||||||||||||
Government and corporate bonds | ( | ) | ||||||||||||||
Total short-term investments | ( | ) | ||||||||||||||
Long-term investments: | ||||||||||||||||
Government and corporate bonds | — | ( | ) | |||||||||||||
Total available-for-sale investments | $ | $ | $ | ( | ) | $ |
(In thousands) | September 28, 2019 | December 29, 2018 | |||||
Credit agreement loans | $ | $ | |||||
Senior notes | |||||||
Capital lease obligations (under ASC Topic 840) | |||||||
Other | |||||||
Debt and capital lease obligations | |||||||
Less: debt issuance costs | ( | ) | ( | ) | |||
Debt and capital lease obligations, net | |||||||
Less: current portion | ( | ) | |||||
Long-term debt | $ | $ |
• | Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
• | Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
• | Level 3 – Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
(In thousands) | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Description | Balance Sheet Classification | Level 1 | Level 2 | Level 3 | ||||||||||
Money market funds | Cash equivalents | $ | $ | — | $ | — | ||||||||
Time deposits | Cash equivalents | — | — | |||||||||||
Commercial paper | Cash equivalents | — | — | |||||||||||
Time deposits | Short-term investments | — | — | |||||||||||
Commercial paper | Short-term investments | — | — | |||||||||||
Government and corporate bonds | Short-term investments | — | — | |||||||||||
Government and corporate bonds | Long-term investments | — | — |
(In thousands) | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Description | Balance Sheet Classification | Level 1 | Level 2 | Level 3 | ||||||||||
Money market funds | Cash equivalents | $ | $ | — | $ | — | ||||||||
Time deposits | Cash equivalents | — | — | |||||||||||
Commercial Paper | Cash equivalents | — | — | |||||||||||
Time deposits | Short-term investments | — | — | |||||||||||
Commercial paper | Short-term investments | — | — | |||||||||||
Government and corporate bonds | Short-term investments | — | — | |||||||||||
Government and corporate bonds | Long-term investments | — | — |
(In thousands) | Increase / (Decrease) | ||||
Right-of-use asset | $ | ||||
Prepaid expenses and other | |||||
Other current liabilities | |||||
Other liabilities |
(In thousands) | ||||||
Description | Balance Sheet Classification | September 28, 2019 | ||||
Right-of-use asset | Right-of-use assets | $ | ||||
Lease liability - current | Other current liabilities | |||||
Lease liability - non-current | Other liabilities |
(In thousands) | Operating Lease Obligations | ||||
Remainder of 2019 | $ | ||||
2020 | |||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 and thereafter | |||||
Aggregate future payments | |||||
Impact of discounting | ( | ) | |||
Aggregate lease liability at September 28, 2019 | $ |
(In thousands) | Operating Lease Obligations | ||||
2019 | $ | ||||
2020 | |||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 and thereafter | |||||
$ |
Three Months Ended | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
Earnings | Shares | Per-Share | Earnings | Shares | Per-Share | ||||||||||||||||
(In thousands, except per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||
Basic earnings per share: | |||||||||||||||||||||
Income available to common shareholders | $ | $ | $ | $ | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options and non-vested shares | — | — | |||||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
Income available to common shareholders including assumed conversions | $ | $ | $ | $ |
Nine Months Ended | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
Earnings | Shares | Per-Share | Earnings | Shares | Per-Share | ||||||||||||||||
(In thousands, except per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||
Basic earnings per share: | |||||||||||||||||||||
Income available to common shareholders | $ | $ | $ | $ | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options and non-vested shares | — | — | |||||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
Income available to common shareholders including assumed conversions | $ | $ | $ | $ |
(In thousands, except per share and term data) | Number of Shares | Weighted- Average Exercise Price (Per Share) | Aggregate Intrinsic Value | Weighted-Average Remaining Contractual Term (Yrs) | ||||||||
Outstanding at beginning of year | $ | |||||||||||
Granted | ||||||||||||
Exercised | ( | ) | ||||||||||
Forfeited and expired | ( | ) | ||||||||||
Outstanding as of September 28, 2019 | $ | |||||||||||
Exercisable as of September 28, 2019 | $ | $ |
Expected volatility (%) | % | |||
Expected dividend rate (%) | % | |||
Expected term (yrs) | ||||
Risk-free rate (%) | % | |||
Fair value per option | $ |
(In thousands, except per share data) | Number of Shares | Weighted-Average Grant Date Fair Value Per Share | ||||
Outstanding at beginning of year | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Forfeited | ( | ) | ||||
Outstanding as of September 28, 2019 | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Stock option and non-vested share and share unit compensation expense | $ | $ | $ | $ | |||||||||||
Associate stock purchase plan expense | |||||||||||||||
Amounts capitalized in software development costs, net of amortization | ( | ) | |||||||||||||
Amounts charged against earnings, before income tax benefit | $ | $ | $ | $ | |||||||||||
Amount of related income tax benefit recognized in earnings | $ | $ | $ | $ |
Foreign currency translation adjustment and other | Unrealized loss on cash flow hedge | Unrealized holding gain (loss) on available-for-sale investments | Total | ||||||||||||
(In thousands) | |||||||||||||||
Balance at December 29, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive income (loss) before reclassifications | |||||||||||||||
Amounts reclassified from AOCI | |||||||||||||||
Balance at March 30, 2019 | ( | ) | ( | ) | |||||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | |||||||||
Amounts reclassified from AOCI | ( | ) | ( | ) | |||||||||||
Balance at June 29, 2019 | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | |||||||||
Amounts reclassified from AOCI | ( | ) | |||||||||||||
Balance at September 28, 2019 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) |
Foreign currency translation adjustment and other | Unrealized loss on cash flow hedge | Unrealized holding gain (loss) on available-for-sale investments | Total | ||||||||||||
(In thousands) | |||||||||||||||
Balance at December 30, 2017 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive income (loss) before reclassifications | ( | ) | |||||||||||||
Amounts reclassified from AOCI | |||||||||||||||
Balance at March 31, 2018 | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Amounts reclassified from AOCI | |||||||||||||||
Balance at June 30, 2018 | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Amounts reclassified from AOCI | |||||||||||||||
Balance at September 29, 2018 | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
(In thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||||
AOCI Component | Location | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Unrealized loss on cash flow hedge | Other income, net | $ | ( | ) | $ | $ | $ | |||||||||||
Income taxes | ( | ) | ||||||||||||||||
Net of tax | ( | ) | ||||||||||||||||
Unrealized holding gain (loss) on available-for-sale investments | Other income, net | ( | ) | |||||||||||||||
Income taxes | ( | ) | ( | ) | ||||||||||||||
Net of tax | ( | ) | ||||||||||||||||
Total amount reclassified, net of tax | $ | ( | ) | $ | $ | $ | ( | ) |
(In thousands) | Domestic | International | Other | Total | |||||||||||
Three Months Ended 2019 | |||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||
Costs of revenue | — | ||||||||||||||
Operating expenses | |||||||||||||||
Total costs and expenses | |||||||||||||||
Operating earnings (loss) | $ | $ | $ | ( | ) | $ |
(In thousands) | Domestic | International | Other | Total | |||||||||||
Three Months Ended 2018 | |||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||
Costs of revenue | — | ||||||||||||||
Operating expenses | |||||||||||||||
Total costs and expenses | |||||||||||||||
Operating earnings (loss) | $ | $ | $ | ( | ) | $ |
(In thousands) | Domestic | International | Other | Total | |||||||||||
Nine Months Ended 2019 | |||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||
Costs of revenue | — | ||||||||||||||
Operating expenses | |||||||||||||||
Total costs and expenses | |||||||||||||||
Operating earnings (loss) | $ | $ | $ | ( | ) | $ |
(In thousands) | Domestic | International | Other | Total | |||||||||||
Nine Months Ended 2018 | |||||||||||||||
Revenues | $ | $ | $ | $ | |||||||||||
Costs of revenue | — | ||||||||||||||
Operating expenses | |||||||||||||||
Total costs and expenses | |||||||||||||||
Operating earnings (loss) | $ | $ | $ | ( | ) | $ |
(In thousands) | 2019 | % of Revenue | 2018 | % of Revenue | % Change | |||||||||||
Revenues | $ | 1,429,428 | 100 | % | $ | 1,340,073 | 100 | % | 7 | % | ||||||
Costs of revenue | 271,778 | 19 | % | 230,332 | 17 | % | 18 | % | ||||||||
Margin | 1,157,650 | 81 | % | 1,109,741 | 83 | % | 4 | % | ||||||||
Operating expenses | ||||||||||||||||
Sales and client service | 707,743 | 50 | % | 605,946 | 45 | % | 17 | % | ||||||||
Software development | 187,526 | 13 | % | 172,297 | 13 | % | 9 | % | ||||||||
General and administrative | 152,321 | 11 | % | 102,789 | 8 | % | 48 | % | ||||||||
Amortization of acquisition-related intangibles | 21,283 | 1 | % | 21,553 | 2 | % | (1 | )% | ||||||||
Total operating expenses | 1,068,873 | 75 | % | 902,585 | 67 | % | 18 | % | ||||||||
Total costs and expenses | 1,340,651 | 94 | % | 1,132,917 | 85 | % | 18 | % | ||||||||
Operating earnings | 88,777 | 6 | % | 207,156 | 15 | % | (57 | )% | ||||||||
Other income, net | 13,535 | 6,943 | ||||||||||||||
Income taxes | (20,377 | ) | (44,718 | ) | ||||||||||||
Net earnings | $ | 81,935 | $ | 169,381 | (52 | )% |
• | Sales and client service expenses as a percent of revenues were 50% in the third quarter of 2019, compared to 45% in the same period of 2018. These expenses increased 17% to $708 million in the third quarter of 2019, from $606 million in the same period of 2018. Sales and client service expenses include salaries and benefits of sales, marketing, support, and services personnel, depreciation and other expenses associated with our managed services business, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The increase in sales and client service expenses was primarily driven by a $15 million increase in personnel expenses, inclusive of higher associate benefits costs; and a $60 million charge recognized in the third quarter of 2019 in connection with the termination of certain client contracts prior to the end of their stated terms. We expect the termination of such client contracts to reduce future revenues by approximately $170 million on an annualized basis. We do not expect a significant impact to future operating earnings, as the terminated contacts related to lower margin business. |
• | Software development expenses as a percent of revenues were 13% in the third quarter of both 2019 and 2018. Expenditures for software development include ongoing development and enhancement of the Cerner Millennium® and HealtheIntent platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle and population health solutions. A summary of our total software development expense in the third quarters of 2019 and 2018 is as follows: |
Three Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Software development costs | $ | 197,122 | $ | 185,039 | |||
Capitalized software costs | (65,684 | ) | (65,682 | ) | |||
Capitalized costs related to share-based payments | (698 | ) | (489 | ) | |||
Amortization of capitalized software costs | 56,786 | 53,429 | |||||
Total software development expense | $ | 187,526 | $ | 172,297 |
• | General and administrative expenses as a percent of revenues were 11% in the third quarter of 2019, compared to 8% in the same period of 2018. These expenses increased 48% to $152 million in the third quarter of 2019, from $103 million in the same period in 2018. General and administrative expenses include salaries and benefits for corporate, financial and administrative staffs, utilities, communications expenses, professional fees, depreciation and amortization, transaction gains or losses on foreign currency, expense for share-based payments, certain organizational restructuring and other expense. The increase in general and administrative expenses is primarily driven by expenses incurred in the third quarter of 2019 in connection with our operational improvement initiatives discussed above; inclusive of $32 million of charges associated with employee separation benefits, as further discussed in Note (1) of the notes to condensed consolidated financial statements. We expect to incur additional expenses in connection with these efforts in future periods, which may be material. |
• | Amortization of acquisition-related intangibles as a percent of revenues was 1% in the third quarter of 2019, compared to 2% in the same period of 2018. These expenses remained relatively flat at $21 million in the third quarter of 2019, and $22 million in the same period of 2018. Amortization of acquisition-related intangibles includes the amortization of customer relationships, acquired technology, trade names, and non-compete agreements recorded in connection with our business acquisitions. |
• | Other income, net was $14 million in the third quarter of 2019, compared to $7 million in the same period of 2018. The third quarter of 2019 includes a $9 million unrealized gain recognized on one of our equity investments. |
• | Our effective tax rate was 19.9% for the third quarter of 2019, compared to 20.9% in the same period of 2018. The decrease in the effective tax rate in the third quarter of 2019 is primarily due to a reduction in unfavorable permanent book versus tax differences in 2019. Refer to Note (8) of the notes to condensed consolidated financial statements for further discussion regarding our effective tax rate. |
(In thousands) | 2019 | % of Revenue | 2018 | % of Revenue | % Change | ||||||||
Domestic Segment | |||||||||||||
Revenues | $ | 1,265,263 | 100% | $ | 1,188,154 | 100% | 6% | ||||||
Costs of revenue | 246,634 | 19% | 202,980 | 17% | 22% | ||||||||
Operating expenses | 639,590 | 51% | 532,958 | 45% | 20% | ||||||||
Total costs and expenses | 886,224 | 70% | 735,938 | 62% | 20% | ||||||||
Domestic operating earnings | 379,039 | 30% | 452,216 | 38% | (16)% | ||||||||
International Segment | |||||||||||||
Revenues | 164,165 | 100% | 151,919 | 100% | 8% | ||||||||
Costs of revenue | 25,144 | 15% | 27,352 | 18% | (8)% | ||||||||
Operating expenses | 68,153 | 42% | 67,220 | 44% | 1% | ||||||||
Total costs and expenses | 93,297 | 57% | 94,572 | 62% | (1)% | ||||||||
International operating earnings | 70,868 | 43% | 57,347 | 38% | 24% | ||||||||
Other, net | (361,130 | ) | (302,407 | ) | 19% | ||||||||
Consolidated operating earnings | $ | 88,777 | $ | 207,156 | (57)% |
• | Revenues increased 6% to $1.27 billion in the third quarter of 2019, from $1.19 billion in the same period of 2018. This increase was primarily driven by a $46 million increase in professional services revenue due to growth in implementation activity. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models. |
• | Costs of revenue as a percent of revenues were 19% in the third quarter of 2019, compared to 17% in the same period of 2018. The higher costs of revenue as a percent of revenues was primarily driven by higher third-party costs associated with professional services revenue. |
• | Operating expenses as a percent of revenues were 51% in the third quarter of 2019, compared to 45% in the same period of 2018. The higher operating expenses as a percent of revenues was primarily driven by the $60 million charge in connection with client contract terminations discussed above. |
• | Revenues increased 8% to $164 million in the third quarter of 2019, from $152 million in the same period of 2018. This increase was primarily driven by growth in managed services revenue. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models. |
• | Costs of revenue as a percent of revenues were 15% in the third quarter of 2019, compared to 18% in the same period of 2018. The lower costs of revenue as a percent of revenues was primarily driven by a lower mix of technology resale revenue, which carries a higher cost of revenue. |
• | Operating expenses remained relatively flat at $68 million in the third quarter of 2019, and $67 million in the same period of 2018. |
(In thousands) | 2019 | % of Revenue | 2018 | % of Revenue | % Change | |||||||||||
Revenues | $ | 4,250,366 | 100 | % | $ | 4,000,661 | 100 | % | 6 | % | ||||||
Costs of revenue | 793,655 | 19 | % | 700,393 | 18 | % | 13 | % | ||||||||
Margin | 3,456,711 | 81 | % | 3,300,268 | 82 | % | 5 | % | ||||||||
Operating expenses | ||||||||||||||||
Sales and client service | 2,026,825 | 48 | % | 1,830,999 | 46 | % | 11 | % | ||||||||
Software development | 548,934 | 13 | % | 502,192 | 13 | % | 9 | % | ||||||||
General and administrative | 398,305 | 9 | % | 290,547 | 7 | % | 37 | % | ||||||||
Amortization of acquisition-related intangibles | 64,809 | 2 | % | 65,872 | 2 | % | (2 | )% | ||||||||
Total operating expenses | 3,038,873 | 71 | % | 2,689,610 | 67 | % | 13 | % | ||||||||
Total costs and expenses | 3,832,528 | 90 | % | 3,390,003 | 85 | % | 13 | % | ||||||||
Operating earnings | 417,838 | 10 | % | 610,658 | 15 | % | (32 | )% | ||||||||
Other income, net | 44,973 | 18,404 | ||||||||||||||
Income taxes | (87,688 | ) | (130,323 | ) | ||||||||||||
Net earnings | $ | 375,123 | $ | 498,739 | (25 | )% |
• | Sales and client service expenses as a percent of revenues were 48% in the first nine months of 2019, compared to 46% in the same period of 2018. These expenses increased 11% to $2.03 billion in the first nine months of 2019, from $1.83 billion in the same period of 2018. The increase in sales and client service expenses was primarily driven by a $64 million increase in personnel expenses, inclusive of hiring of personnel to support growth in professional services revenue; a $21 million increase in bad debt expense related to client receivables; a $60 million charge recognized in the first nine months of 2019 in connection with the termination of certain client contracts prior to the end of their stated terms; and a $20 million charge in connection with a client dispute recognized in the first nine months of 2019. Refer to Note (11) of the notes to condensed consolidated financial statements for further information regarding such client dispute. |
• | Software development expenses as a percent of revenues were 13% in the first nine months of both 2019 and 2018. Expenditures for software development include ongoing development and enhancement of the Cerner Millennium® and HealtheIntent platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle and population health solutions. A summary of our total software development expense in the first nine months of 2019 and 2018 is as follows: |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Software development costs | $ | 591,182 | $ | 555,743 | |||
Capitalized software costs | (209,458 | ) | (207,539 | ) | |||
Capitalized costs related to share-based payments | (1,826 | ) | (1,583 | ) | |||
Amortization of capitalized software costs | 169,036 | 155,571 | |||||
Total software development expense | $ | 548,934 | $ | 502,192 |
• | General and administrative expenses as a percent of revenues were 9% in the first nine months 2019, compared to 7% in the same period of 2018. These expenses increased 37% to $398 million in the first nine months of 2019, from $291 million in the same period of 2018. The increase in general and administrative expenses is primarily driven by expenses incurred in the first nine months of 2019 in connection with our operational improvement initiatives discussed above; inclusive of $73 million of charges associated with employee separation benefits, as further discussed in Note (1) of the notes to condensed consolidated financial statements. We expect to incur additional expenses in connection with these efforts in future periods, which may be material. |
• | Amortization of acquisition-related intangibles as a percent of revenues was 2% in the first nine months of both 2019 and 2018. These expenses remained relatively flat at $65 million in the first nine months of 2019, and $66 million in the same period of 2018. |
• | Other income, net was $45 million in the first nine months of 2019, compared to $18 million in the same period of 2018. The first nine months of 2019 includes a $16 million gain recognized on the disposition of one of our equity investments and a $9 million unrealized gain recognized on another one of our equity investments. |
• | Our effective tax rate was 18.9% for the first nine months of 2019, compared to 20.7% in the same period of 2018. The decrease in the effective tax rate in the first nine months of 2019 is primarily due to increased excess tax benefits recognized as a component of income tax expense due to elevated stock option exercise activity. Refer to Note (8) of the notes to condensed consolidated financial statements for further discussion regarding our effective tax rate. |
(In thousands) | 2019 | % of Revenue | 2018 | % of Revenue | % Change | ||||||||
Domestic Segment | |||||||||||||
Revenues | $ | 3,762,205 | 100% | $ | 3,525,314 | 100% | 7% | ||||||
Costs of revenue | 719,119 | 19% | 617,839 | 18% | 16% | ||||||||
Operating expenses | 1,817,244 | 48% | 1,604,297 | 46% | 13% | ||||||||
Total costs and expenses | 2,536,363 | 67% | 2,222,136 | 63% | 14% | ||||||||
Domestic operating earnings | 1,225,842 | 33% | 1,303,178 | 37% | (6)% | ||||||||
International Segment | |||||||||||||
Revenues | 488,161 | 100% | 475,347 | 100% | 3% | ||||||||
Costs of revenue | 74,536 | 15% | 82,554 | 17% | (10)% | ||||||||
Operating expenses | 209,580 | 43% | 209,771 | 44% | —% | ||||||||
Total costs and expenses | 284,116 | 58% | 292,325 | 61% | (3)% | ||||||||
International operating earnings | 204,045 | 42% | 183,022 | 39% | 11% | ||||||||
Other, net | (1,012,049 | ) | (875,542 | ) | 16% | ||||||||
Consolidated operating earnings | $ | 417,838 | $ | 610,658 | (32)% |
• | Revenues increased 7% to $3.76 billion in the first nine months of 2019, from $3.53 billion in the same period of 2018. This increase was primarily driven by a $146 million increase in professional services revenue due to growth in implementation activity, and growth in licensed software revenue of $48 million as a result of continued demand for our solutions. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models. |
• | Costs of revenue as a percent of revenues were 19% in the first nine months of 2019, compared to 18% in the same period of 2018. The higher costs of revenue as a percent of revenues was primarily driven by higher third-party costs associated with professional services revenue. |
• | Operating expenses as a percent of revenues were 48% in the first nine months of 2019, compared to 46% in the same period of 2018. The higher operating expenses as a percent of revenues was primarily driven by the $60 million charge in connection with client contract terminations and the $20 million charge in connection with a client dispute, both recognized in the first nine months of 2019 and discussed above. |
• | Revenues increased 3% to $488 million in the first nine months of 2019, from $475 million in the same period of 2018. This increase was primarily driven by growth in managed services revenue. Refer to Note (2) of the notes to condensed consolidated financial statements for further information regarding revenues disaggregated by our business models. |
• | Costs of revenue as a percent of revenues were 15% in the first nine months of 2019, compared to 17% in the same period of 2018. The lower costs of revenue as a percent of revenues was primarily driven by a lower mix of technology resale revenue, which carries a higher cost of revenue. |
• | Operating expenses were flat at $210 million in the first nine months of both 2019 and 2018. |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Cash flows from operating activities | $ | 875,524 | $ | 1,047,120 | |||
Cash flows from investing activities | (436,387 | ) | (562,094 | ) | |||
Cash flows from financing activities | (312,805 | ) | (345,704 | ) | |||
Effect of exchange rate changes on cash | (4,028 | ) | (11,631 | ) | |||
Total change in cash and cash equivalents | 122,304 | 127,691 | |||||
Cash and cash equivalents at beginning of period | 374,126 | 370,923 | |||||
Cash and cash equivalents at end of period | $ | 496,430 | $ | 498,614 | |||
Free cash flow (non-GAAP) | $ | 275,652 | $ | 532,047 |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Cash collections from clients | $ | 4,233,269 | $ | 3,992,200 | |||
Cash paid to employees and suppliers and other | (3,271,818 | ) | (2,976,974 | ) | |||
Cash paid for interest | (20,756 | ) | (15,568 | ) | |||
Cash paid for taxes, net of refunds | (65,171 | ) | 47,462 | ||||
Total cash from operations | $ | 875,524 | $ | 1,047,120 |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Capital purchases | $ | (388,588 | ) | $ | (305,951 | ) | |
Capitalized software development costs | (211,284 | ) | (209,122 | ) | |||
Sales and maturities of investments, net of purchases | 189,279 | (22,717 | ) | ||||
Purchases of other intangibles | (25,794 | ) | (24,304 | ) | |||
Total cash flows from investing activities | $ | (436,387 | ) | $ | (562,094 | ) |
Nine Months Ended | |||||||
(In thousands) | 2019 | 2018 | |||||
Long-term debt issuance | $ | 600,000 | $ | — | |||
Repayment of long-term debt | — | (75,000 | ) | ||||
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates) | 173,480 | 72,252 | |||||
Treasury stock purchases | (1,020,542 | ) | (345,210 | ) | |||
Dividends paid | (57,293 | ) | — | ||||
Other | (8,450 | ) | 2,254 | ||||
Total cash flows from financing activities | $ | (312,805 | ) | $ | (345,704 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Cash flows from operating activities (GAAP) | $ | 351,448 | $ | 338,454 | $ | 875,524 | $ | 1,047,120 | |||||||
Capital purchases | (110,714 | ) | (116,957 | ) | (388,588 | ) | (305,951 | ) | |||||||
Capitalized software development costs | (66,382 | ) | (66,171 | ) | (211,284 | ) | (209,122 | ) | |||||||
Free cash flow (non-GAAP) | $ | 174,352 | $ | 155,326 | $ | 275,652 | $ | 532,047 |
a) | Evaluation of Disclosure Controls and Procedures. |
b) | Changes in Internal Control over Financial Reporting. |
c) | Limitations on Controls. |
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 | ||||||||||||||
June 30, 2019 - July 27, 2019 | — | $ | — | — | $ | 883,346,876 | ||||||||
July 28, 2019 - August 24,2019 | 4,762,581 | 70.86 | 4,762,581 | 545,886,829 | ||||||||||
August 25, 2019 - September 28, 2019 | 911,061 | 68.52 | 911,061 | 483,460,421 | ||||||||||
Total | 5,673,642 | $ | 70.48 | 5,673,642 |
(a) | As announced on May 21, 2018, our Board of Directors approved an amendment to our repurchase program that allowed for the Company to repurchase up to an aggregate of $1.0 billion of shares of our common stock, excluding transaction costs. As announced on April 9, 2019, our Board of Directors approved a further amendment to this share repurchase program, authorizing the Company to repurchase up to an additional $1.2 billion of shares of our common stock, for an aggregate of $2.2 billion, excluding transaction costs. The repurchases are to be effectuated in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers. No time limit was set for the completion of the program. During the nine months ended September 28, 2019, we repurchased 14.4 million shares for total consideration of $1.0 billion under the program pursuant to Rule 10b5-1 plans. As of September 28, 2019, $483 million remains available for repurchase under the amended program. Refer to Note (10) of the notes to condensed consolidated financial statements for further information regarding our share repurchase program. |
(a) | Exhibits | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101. |
CERNER CORPORATION | |||
Registrant | |||
Date: October 25, 2019 | By: | /s/ Marc G. Naughton | |
Marc G. Naughton | |||
Executive Vice President and Chief | |||
Financial Officer (duly authorized | |||
officer and principal financial officer) |
Date: October 25, 2019 | /s/ Brent Shafer | |||||||
Brent Shafer | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: October 25, 2019 | /s/ Marc G. Naughton | |||||||
Marc G. Naughton | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Brent Shafer |
Brent Shafer, Chairman of the Board |
and Chief Executive Officer |
(Principal Executive Officer) |
Date: October 25, 2019 |
1. | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Marc G. Naughton |
Marc G. Naughton, Executive Vice President |
and Chief Financial Officer |
(Principal Financial Officer) |
Date: October 25, 2019 |
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Operating Information | The following table presents a summary of our operating segments and other expense for the three and nine months ended September 28, 2019 and September 29, 2018:
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Revenue from Contracts with Customers Performance Obligation (Details) $ in Millions |
9 Months Ended |
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Sep. 28, 2019
USD ($)
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Revenue Recognition [Line Items] | |
Revenue, Remaining Performance Obligation, Amount | $ 13,310 |
Contract with Customer, Liability, Revenue Recognized | $ 342 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Explanation | we expect to recognize 31% of the revenue over the next 12 months and the remainder thereafter |
Leases (Notes) |
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Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Leases [Text Block] | Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces a new accounting model that requires most leases to be reported on the balance sheet. It also establishes disclosure requirements, which are more extensive than those required under prior U.S. GAAP. The standard requires use of the modified retrospective (cumulative effect) transition approach and was effective for the Company in the first quarter of 2019. We selected the effective date of ASU 2016-02 as the date of initial application on transition, as permitted by ASU 2016-02, as amended ("Topic 842"). Under this transition method, the cumulative effect from prior periods upon applying the new guidance to arrangements containing leases was recognized in our condensed consolidated balance sheets as of December 30, 2018. We did not recast comparative periods. A summary of such cumulative effect adjustment is as follows:
Arrangements Containing Leases The cumulative effect adjustment above, is primarily comprised of arrangements where we are the lessee under operating leases for real estate (office, data center, and warehouse space) and certain dedicated fiber optic lines within our infrastructure. The duration of these agreements ranges from several months to in excess of 20 years. Generally, variable lease payments under these operating lease agreements relate to amounts based on changes to an index or rate (i.e. percentage change in the consumer price index). We do not have any arrangements where we are the lessee, classified as finance leases in our condensed consolidated financial statements. In addition to the items described above, we also procure hotel stays and rental cars related to associate business travel, and the use of certain equipment for trade shows, client presentations, conferences, and internal meetings. We have made the policy election to classify such arrangements as short-term leases, as defined in Topic 842. As such, we have not recognized lease liabilities and right-of-use assets for such arrangements in our condensed consolidated financial statements. The duration of these arrangements is less than one month. Therefore, we do not disclose any short-term lease expense, as permitted by Topic 842. Expense for such items is recognized on a straight-line basis over the term of such arrangements. Arrangements in which we are the lessor are not significant to our condensed consolidated financial statements. Amounts Included in the Condensed Consolidated Financial Statements The following table presents a summary of lease liability and right-of-use asset amounts included in our condensed consolidated balance sheets as of September 28, 2019, under operating lease arrangements where we are the lessee:
Lease liabilities recorded upon the commencement of operating leases during the nine months ended September 28, 2019 were $23 million. For the three and nine months ended September 28, 2019, operating lease cost was $9 million and $28 million, respectively. Variable lease cost was less than $1 million for both the three and nine months ended September 28, 2019. Maturity Analysis Aggregate future payments under operating lease arrangements where we are the lessee (by fiscal year) are as follows:
At September 28, 2019, the weighted-average remaining lease term and weighted-average discount rate for our operating lease arrangements where we are the lessee were 7.05 years and 3.7%, respectively. Prior Periods Prior to the adoption of Topic 842, we accounted for arrangements where we were the lessee under operating leases in accordance with ASC Topic 840, Leases. Rent expense for office and warehouse space for our regional and global offices for the three and nine months ended September 29, 2018 was $8 million and $25 million, respectively. Aggregate minimum future payments under these non-cancelable operating leases as of December 29, 2018, were as follows:
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Receivables |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | Receivables A summary of net receivables is as follows:
During the first nine months of 2019 and 2018, we received total client cash collections of $4.23 billion and $3.99 billion, respectively.
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Consolidated Statements Of Operations (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Income Statement [Abstract] | ||||
Software development, amortization | $ 56,786 | $ 53,429 | $ 169,036 | $ 155,571 |
Share-Based Compensation (Schedule Of Non-Vested Shares Activity) (Details) - Restricted Stock [Member] shares in Thousands |
9 Months Ended |
---|---|
Sep. 28, 2019
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding at beginning of year, number of shares | shares | 882 |
Outstanding at beginning of year, weighted-average grant date fair value | $ / shares | $ 62.82 |
Granted, number of shares | shares | 2,262 |
Granted, weighted-average grant date fair value | $ / shares | $ 66.47 |
Vested, number of shares | shares | (394) |
Vested, weighted-average grant date fair value | $ / shares | $ 67.01 |
Forfeited, number of shares | shares | (64) |
Forfeited, weighted-average grant date fair value | $ / shares | $ 63.01 |
Outstanding at end of year, number of shares | shares | 2,686 |
Outstanding at end of year, weighted-average grant date fair value | $ / shares | $ 65.27 |
Earnings Per Share (Reconciliation Of The Numerators And The Denominators Of The Basic And Diluted Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Earnings Per Share [Abstract] | ||||
Net Income (Loss) Available to Common Stockholders, Basic | $ 81,935 | $ 169,381 | $ 375,123 | $ 498,739 |
Net Income (Loss) Available to Common Stockholders, Diluted | $ 81,935 | $ 169,381 | $ 375,123 | $ 498,739 |
Basic weighted average shares outstanding | 315,876 | 329,342 | 320,282 | 330,789 |
Stock options and non-vested shares, incremental shares | 3,237 | 3,595 | 3,079 | 3,704 |
Diluted weighted average shares outstanding | 319,113 | 332,937 | 323,361 | 334,493 |
Basic earnings per share | $ 0.26 | $ 0.51 | $ 1.17 | $ 1.51 |
Diluted earnings per share | $ 0.26 | $ 0.51 | $ 1.16 | $ 1.49 |
Indebtedness Schedule of Indebtedness Outstanding (Details) - USD ($) $ in Thousands |
Sep. 28, 2019 |
Dec. 29, 2018 |
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Debt Instrument [Line Items] | ||
Long-term Debt | $ 1,039,162 | $ 444,076 |
Debt Issuance Costs, Noncurrent, Net | (595) | (360) |
Long-term Debt, Net of Debt Issuance Costs | 1,038,567 | 443,716 |
Current installments of long-term debt and capital lease obligations | 0 | (4,914) |
Long-term debt | 1,038,567 | 438,802 |
Line of Credit [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt | 600,000 | 0 |
Senior Notes [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt | 425,000 | 425,000 |
Capital Lease Obligations [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt | 0 | 4,914 |
Other [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt | $ 14,162 | $ 14,162 |
Leases Schedule of Aggregate Future Minimum Payments for Non-Cancelable Operating Leases (Details) $ in Thousands |
Sep. 28, 2019
USD ($)
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Operating Leases, Future Minimum Payments [Line Items] | |
Remainder of 2019 | $ 10,164 |
2020 | 32,170 |
2021 | 27,677 |
2022 | 22,185 |
2023 | 15,511 |
2024 and thereafter | 47,394 |
Aggregate future payments | 155,101 |
Impact of Discounting | (21,844) |
Operating Lease, Liability | $ 133,257 |
Income Taxes (Details) |
9 Months Ended | |
---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
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Income Tax Disclosure [Abstract] | ||
Effective tax rate | 18.90% | 20.70% |
Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | A summary of such cumulative effect adjustment is as follows:
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Lessee, Operating Lease, Amounts Included in Balance Sheet [Table Text Block] | The following table presents a summary of lease liability and right-of-use asset amounts included in our condensed consolidated balance sheets as of September 28, 2019, under operating lease arrangements where we are the lessee:
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Lessee, Operating Lease, Liability, Maturity [Table Text Block] | Aggregate future payments under operating lease arrangements where we are the lessee (by fiscal year) are as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | Aggregate minimum future payments under these non-cancelable operating leases as of December 29, 2018, were as follows:
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Receivables (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Receivables | A summary of net receivables is as follows:
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Contingencies |
9 Months Ended |
---|---|
Sep. 28, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies Disclosure | Contingencies We accrue estimates for resolution of any legal and other contingencies when losses are probable and reasonably estimable in accordance with ASC Topic 450, Contingencies. The terms of our agreements with our clients generally provide for limited indemnification of such clients against losses, expenses and liabilities arising from third party or other claims based on, among other things, alleged infringement by our solutions of an intellectual property right of third parties or damages caused by data privacy breaches or system interruptions. The terms of such indemnification often limit the scope of and remedies for such indemnification obligations and generally include, as applicable, a right to replace or modify an infringing solution. For several reasons, including the lack of a sufficient number of prior indemnification claims relating to IP infringement, data privacy breaches or system interruptions, the inherent uncertainty stemming from such claims, and the lack of a monetary liability limit for such claims under the terms of the corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions. In addition to commitments and obligations in the ordinary course of business, we are involved in various other legal proceedings and claims that arise in the ordinary course of business, including for example, employment and client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties. Many of these proceedings are at preliminary stages and many seek an indeterminate amount of damages. At this time, we do not believe the range of potential losses under such claims to be material to our condensed consolidated financial statements. During the three months ended June 29, 2019, we incurred a $20 million pre-tax charge in connection with a client dispute that arose during the same period. The client is continuing to assess the potential for additional damages and claims, and our evaluation of the dispute continues. We have not accrued a reserve for any additional damages or claims at this time because we cannot reasonably determine the probability of a loss and we cannot reasonably estimate the amount of loss, if any. While we can provide no assurances as to the ultimate outcome of this dispute, we believe the amount, if any, we will be required to pay to fully settle this dispute will not have a material adverse impact on our business, results of operations, cash flows or financial condition. No less than quarterly, we review the status of each significant matter underlying a legal proceeding or claim and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made. Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any one or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our business, results of operations, cash flows or financial condition.
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Leases Schedule of Aggregate Future Minimum Payments for Non-Cancelable Operating Leases Topic 840 (Details) $ in Thousands |
Dec. 29, 2018
USD ($)
|
---|---|
Operating Leases, Future Minimum Payments under Topic 840 [Line Items] | |
2019 | $ 29,739 |
2020 | 27,669 |
2021 | 22,904 |
2022 | 17,240 |
2023 | 10,166 |
2024 and thereafter | 17,743 |
Operating Lease Liability | $ 125,461 |
Indebtedness (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 28, 2019 |
Dec. 29, 2018 |
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Debt Instrument [Line Items] | ||
Line of Credit Facility, Description | In May 2019, we entered into a First Amendment to our Third Amended and Restated Credit Agreement (as amended, the "Credit Agreement") with a syndicate of lenders. The Credit Agreement provides for an unsecured revolving credit facility expiring in May 2024, and includes: (a) a revolving credit loan facility of up to $700 million at any time outstanding, and (b) a letter of credit facility of up to $100 million at any time outstanding (which is a sub-facility of the $700 million revolving credit loan facility). The Credit Agreement also includes an accordion feature allowing an increase of the credit facility of up to an additional $300 million ($1 billion in the aggregate) at any time outstanding, subject to lender participation and the satisfaction of specified conditions. Borrowings outstanding under the Credit Agreement are due in May 2024, with prepayment permitted at any time. Proceeds may be used for working capital and general corporate purposes, including but not limited to certain business acquisitions and purchases under our share repurchase programs. The Credit Agreement provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends, and contains certain leverage and interest coverage covenants | |
Line of Credit Facility, Interest Rate Description | Generally, interest on revolving credit loans is payable at a variable rate based on LIBOR, prime, or the U.S. federal funds rate, plus a spread that varies depending on leverage ratios maintained. Unused commitment, letter of credit, and other fees are also payable under the Credit Agreement | |
Line of Credit Facility, Interest Rate at Period End | 2.84% | |
Long-term Debt | $ 1,039,162 | $ 444,076 |
Letters of Credit Outstanding, Amount | 30,000 | |
Line of Credit Facility, Remaining Borrowing Capacity | $ 70,000 | |
General Discussion of Derivative Instruments and Hedging Activities | We are exposed to market risk from fluctuations in the variable interest rates on outstanding indebtedness under our Credit Agreement. In order to manage this exposure, we have entered into an interest rate swap agreement, with an initial notional amount of $600 million, to hedge the variability of cash flows associated with such interest obligations through May 2024. The interest rate swap has an effective start date of May 13, 2019, and is designated as a cash flow hedge, which effectively fixes the interest rate on the hedged indebtedness under our Credit Agreement at 3.06% | |
Derivative, Fair Value, Net | $ 22,000 | |
Derivatives, Methods of Accounting, Hedging Derivatives [Policy Text Block] | Our interest rate swap agreement is accounted for in accordance with ASC Topic 815, Derivatives and Hedging. Such agreement is designated as a cash flow hedge and considered to be highly effective under hedge accounting principles. Therefore, the swap agreement is recognized in our condensed consolidated balance sheets as either an asset or liability, measured at fair value. Changes in the fair value of the swap agreement are initially recorded in accumulated other comprehensive loss, net and then subsequently recognized in our condensed consolidated statements of operations in the periods in which earnings are affected by the hedged item. All cash flows associated with the swap agreement are classified as operating activities in our condensed consolidated statements of cash flows |
Leases Cumulative Effect Transition (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 28, 2019 |
Dec. 30, 2018 |
Dec. 29, 2018 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Right-of-use assets | $ 121,746 | $ 0 | |
Prepaid expenses and other | 402,247 | 334,870 | |
Other current liabilities | 153,187 | 69,122 | |
Other liabilities | $ 132,289 | $ 42,376 | |
Accounting Standards Update 2016-02 [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
New Accounting Pronouncement or Change in Accounting Principle, Description | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces a new accounting model that requires most leases to be reported on the balance sheet. It also establishes disclosure requirements, which are more extensive than those required under prior U.S. GAAP. The standard requires use of the modified retrospective (cumulative effect) transition approach and was effective for the Company in the first quarter of 2019. We selected the effective date of ASU 2016-02 as the date of initial application on transition, as permitted by ASU 2016-02, as amended ("Topic 842"). Under this transition method, the cumulative effect from prior periods upon applying the new guidance to arrangements containing leases was recognized in our condensed consolidated balance sheets as of December 30, 2018. We did not recast comparative periods | ||
Right-of-use assets | $ 129,652 | ||
Prepaid expenses and other | 3,968 | ||
Other current liabilities | 22,767 | ||
Other liabilities | $ 110,853 |
Investments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of available-for-sale investments | Available-for-sale investments at September 28, 2019 were as follows:
Available-for-sale investments at December 29, 2018 were as follows:
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Segment Reporting |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have two operating segments, Domestic and International (formerly referred to as Global). Revenues are derived primarily from the sale of clinical, financial and administrative information solutions and services. The cost of revenues includes the cost of third-party consulting services, computer hardware, devices and sublicensed software purchased from manufacturers for delivery to clients. It also includes the cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers. Operating expenses incurred by the geographic business segments consist of sales and client service expenses including salaries of sales and client service personnel, expenses associated with our managed services business, marketing expenses, communications expenses and unreimbursed travel expenses. "Other" includes expenses that have not been allocated to the operating segments, such as software development, general and administrative expenses, certain organizational restructuring and other expense, share-based compensation expense, and certain amortization and depreciation. Performance of the segments is assessed at the operating earnings level by our chief operating decision maker, who is our Chief Executive Officer. Items such as interest, income taxes, capital expenditures and total assets are managed at the consolidated level and thus are not included in our operating segment disclosures. Accounting policies for each of the reportable segments are the same as those used on a consolidated basis. The following table presents a summary of our operating segments and other expense for the three and nine months ended September 28, 2019 and September 29, 2018:
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Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation Of The Numerators And The Denominators Of The Basic And Diluted Per Share | A reconciliation of the numerators and the denominators of the basic and diluted per share computations are as follows:
For the three months ended September 28, 2019 and September 29, 2018, options to purchase 7.7 million and 13.0 million shares of common stock at per share prices ranging from $54.87 to $75.83 and $50.04 to $73.40, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive.
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Investments (Narrative) (Details) - USD ($) $ in Millions |
9 Months Ended | ||
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Sep. 28, 2019 |
Sep. 29, 2018 |
Dec. 29, 2018 |
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Investments [Abstract] | |||
Proceeds from Sale of Available-for-sale Securities | $ 181 | $ 45 | |
Equity Securities without Readily Determinable Fair Value, Amount | $ 314 | $ 277 |
Share-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Stock Options Activity | Stock option activity for the nine months ended September 28, 2019 was as follows:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The weighted-average assumptions used to estimate the fair value, under the Black-Scholes-Merton pricing model, of stock options granted during the nine months ended September 28, 2019 were as follows:
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Schedule of Share-based Compensation, Restricted Stock Activity | Non-vested share and share unit activity for the nine months ended September 28, 2019 was as follows:
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Compensation Expense Recognized In The Condensed Consolidated Statements Of Operations | The following table presents total compensation expense recognized with respect to stock options, non-vested shares and share units, and our associate stock purchase plan:
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | The components of AOCI, net of tax, were as follows:
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Reclassification out of Accumulated Other Comprehensive Income [Table Text Block] | The effects on net earnings of amounts reclassified from AOCI were as follows:
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Consolidated Statements Of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Revenues: | ||||
Revenues | $ 1,429,428 | $ 1,340,073 | $ 4,250,366 | $ 4,000,661 |
Costs and expenses: | ||||
Cost of Revenue | 271,778 | 230,332 | 793,655 | 700,393 |
Sales and client service | 707,743 | 605,946 | 2,026,825 | 1,830,999 |
Software development (Includes amortization of $56,786 and $169,036 for the three and nine months ended September 28, 2019, respectively; and $53,429 and $155,571 for the three and nine months ended September 29, 2018, respectively) | 187,526 | 172,297 | 548,934 | 502,192 |
General and administrative | 152,321 | 102,789 | 398,305 | 290,547 |
Amortization of acquisition-related intangibles | 21,283 | 21,553 | 64,809 | 65,872 |
Total costs and expenses | 1,340,651 | 1,132,917 | 3,832,528 | 3,390,003 |
Operating earnings | 88,777 | 207,156 | 417,838 | 610,658 |
Other income, net | 13,535 | 6,943 | 44,973 | 18,404 |
Earnings before income taxes | 102,312 | 214,099 | 462,811 | 629,062 |
Income taxes | (20,377) | (44,718) | (87,688) | (130,323) |
Net earnings | $ 81,935 | $ 169,381 | $ 375,123 | $ 498,739 |
Basic earnings per share | $ 0.26 | $ 0.51 | $ 1.17 | $ 1.51 |
Diluted earnings per share | $ 0.26 | $ 0.51 | $ 1.16 | $ 1.49 |
Basic weighted average shares outstanding | 315,876 | 329,342 | 320,282 | 330,789 |
Diluted weighted average shares outstanding | 319,113 | 332,937 | 323,361 | 334,493 |
Income Taxes |
9 Months Ended |
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Sep. 28, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We determine the tax provision for interim periods using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our effective tax rate was 18.9% and 20.7% for the first nine months of 2019 and 2018, respectively. The decrease in the effective tax rate in the first nine months of 2019 is primarily due to increased excess tax benefits recognized as a component of income tax expense due to elevated stock option exercise activity.
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Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments Available-for-sale investments at September 28, 2019 were as follows:
Available-for-sale investments at December 29, 2018 were as follows:
We sold available-for-sale investments for proceeds of $181 million and $45 million during the nine months ended September 28, 2019 and September 29, 2018, respectively, resulting in insignificant gains/losses in each period. Other Investments At September 28, 2019 and December 29, 2018, we had equity investments that do not have readily determinable fair values of $314 million and $277 million, respectively, accounted for in accordance with Accounting Standards Codification ("ASC") Topic 321, Investments-Equity Securities. Such investments are included in long-term investments in our condensed consolidated balance sheets. We did not record any changes in the measurement of such investments for the nine months ended September 28, 2019 and September 29, 2018, respectively.
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Earnings Per Share (Narrative) (Details) - $ / shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from computation of earnings per share, amount | 7.7 | 13.0 | 10.1 | 12.7 |
Antidilutive securities excluded from computation of earnings per share, exercise price, lower range limit | $ 54.87 | $ 50.04 | $ 51.87 | $ 50.04 |
Antidilutive securities excluded from computation of earnings per share, exercise price, upper range limit | $ 75.83 | $ 73.40 | $ 75.83 | $ 73.40 |
Contingencies Contingencies (Details) $ in Millions |
3 Months Ended |
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Jun. 29, 2019
USD ($)
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Loss Contingency [Abstract] | |
Loss Contingency, Period of Occurrence | During the three months ended June 29, 2019 |
Loss Contingency, Loss in Period | $ 20 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions |
Sep. 28, 2019 |
Dec. 29, 2018 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Fair value of long-term debt, including current maturities | $ 1,070 | $ 431 |
Unsecured Long-term Debt, Noncurrent | $ 1,030 | $ 425 |
Leases (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Lessee Disclosure [Abstract] | ||||
Operating Lease, Weighted Average Remaining Lease Term | 7 years 18 days | 7 years 18 days | ||
Lessee, Operating Lease, Description | we are the lessee under operating leases for real estate (office, data center, and warehouse space) and certain dedicated fiber optic lines within our infrastructure | |||
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability | $ 23 | |||
Operating Lease, Cost | $ 9 | 28 | ||
Variable Lease, Cost | $ 1 | |||
Operating Lease, Weighted Average Discount Rate, Percent | 3.70% | 3.70% | ||
Operating Leases, Rent Expense | $ 8 | $ 25 | ||
Lessee, Operating Lease, Variable Lease Payment, Terms and Conditions | Generally, variable lease payments under these operating lease agreements relate to amounts based on changes to an index or rate (i.e. percentage change in the consumer price index) |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table details our financial assets measured and recorded at fair value on a recurring basis at September 28, 2019:
The following table details our financial assets measured and recorded at fair value on a recurring basis at December 29, 2018:
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Revenue from Contracts with Customers (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Table Text Block] | The following tables present revenues disaggregated by our business models:
The following tables present our revenues disaggregated by timing of revenue recognition:
|
Share-Based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Equity | Share-Based Compensation and Equity Stock Options Stock option activity for the nine months ended September 28, 2019 was as follows:
The weighted-average assumptions used to estimate the fair value, under the Black-Scholes-Merton pricing model, of stock options granted during the nine months ended September 28, 2019 were as follows:
As of September 28, 2019, there was $112 million of total unrecognized compensation cost related to stock options granted under all plans. That cost is expected to be recognized over a weighted-average period of 2.83 years. Non-vested Shares and Share Units Non-vested share and share unit activity for the nine months ended September 28, 2019 was as follows:
As of September 28, 2019, there was $144 million of total unrecognized compensation cost related to non-vested share and share unit awards granted under all plans. That cost is expected to be recognized over a weighted-average period of 2.30 years. Share-Based Compensation Cost The following table presents total compensation expense recognized with respect to stock options, non-vested shares and share units, and our associate stock purchase plan:
Treasury Stock In May 2018, our Board of Directors approved an amendment to our share repurchase program that allowed for the Company to repurchase up to an aggregate $1.0 billion of shares of our common stock, excluding transaction costs. In April 2019, our Board of Directors approved a further amendment to this share repurchase program. Under this new amendment, the Company is authorized to repurchase up to an additional $1.2 billion of shares of our common stock, for an aggregate of $2.2 billion, excluding transaction costs. The repurchases are to be effected in the open market, by block purchase, in privately negotiated transactions, or through other transactions managed by broker-dealers. No time limit was set for the completion of the program. During the nine months ended September 28, 2019, we repurchased 14.4 million shares for total consideration of $1.0 billion under the program. The shares were recorded as treasury stock and accounted for under the cost method. No repurchased shares have been retired. As of September 28, 2019, $483 million remains available for repurchase under the amended program. Dividends On September 10, 2019, our Board of Directors declared a cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on October 9, 2019 to shareholders of record as of September 25, 2019. On May 29, 2019, our Board of Directors declared a cash dividend of $0.18 per share on our issued and outstanding common stock, which was paid on July 26, 2019 to shareholders of record as of June 18, 2019. In connection with the declaration of such dividends, our non-vested share and share units are entitled to dividend equivalents, which will be payable to the holder subject to, and upon vesting of, the underlying awards. Our outstanding stock options are not entitled to dividend or dividend equivalents. Accumulated Other Comprehensive Loss, Net (AOCI) The components of AOCI, net of tax, were as follows:
The effects on net earnings of amounts reclassified from AOCI were as follows:
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Fair Value Measurements |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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:
The following table details our financial assets measured and recorded at fair value on a recurring basis at September 28, 2019:
The following table details our financial assets measured and recorded at fair value on a recurring basis at December 29, 2018:
Our interest rate swap agreement is measured and recorded at fair value on a recurring basis using a Level 2 valuation. The fair value of such agreement is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instrument is held, the derivative is classified as Level 2 in the hierarchy. We estimate the fair value of our long-term, fixed rate debt using a Level 3 discounted cash flow analysis based on current borrowing rates for debt with similar maturities. We estimate the fair value of our long-term, variable rate debt using a Level 3 discounted cash flow analysis based on LIBOR rate forward curves. The fair value of our long-term debt, including current maturities, at September 28, 2019 and December 29, 2018 was approximately $1.07 billion and $431 million, respectively. The carrying amount of such debt at September 28, 2019 and December 29, 2018 was $1.03 billion and $425 million, respectively.
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