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Share-Based Compensation
 12 Months Ended
Dec. 28, 2019
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation and Equity Share-Based Compensation and Equity
Stock Option and Equity Plans

As of the end of 2019, we had five fixed stock option and equity plans in effect for associates and directors. This includes one plan from which we could issue grants, the Cerner Corporation 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"); and four plans from which no new grants are permitted, but some awards remain outstanding (Plans D, E, F, and G).

Awards under the Omnibus Plan may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, performance grants and bonus shares. At the end of 2019, 24.4 million shares remain available for awards. Stock options granted under the Omnibus Plan are exercisable at a price not less than fair market value on the date of grant. Stock options under the Omnibus Plan typically vest over a period of 4 or 5 years and are exercisable for periods of up to 10 years.

Stock Options

The fair market value of each stock option award granted in 2019 is estimated on the date of grant using the Black-Scholes-Merton ("BSM") pricing model. The pricing model requires the use of the following estimates and assumptions:

•
Expected volatilities under the BSM model are based on an equal weighting of implied volatilities from traded options on our common shares and historical volatility.
•
The expected term of stock options granted is the period of time for which an option is expected to be outstanding beginning on the grant date. Our calculation of expected term takes into account the contractual term of the option, as well as the effects of employees' historical exercise patterns; groups of associates (executives and non-executives) that have similar historical behavior are considered separately for valuation purposes.
•
The risk-free rate is based on the zero-coupon U.S. Treasury bond with a term consistent with the expected term of the awards.







The weighted-average assumptions used to estimate the fair market value of stock options were as follows:
 
 
For the Years Ended
 
 
2019
 
2018
 
2017
 
 
 
 
 
 
 
Expected volatility (%)
 
25.0
%
 
27.0
%
 
26.7
%
Expected dividend rate (%)
 
1
%
 
—

 
—

Expected term (yrs)
 
7

 
7

 
7

Risk-free rate (%)
 
2.4
%
 
2.8
%
 
2.1
%


Stock option activity for 2019 was as follows:
(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
21,792

 
$
52.31

 
 
 
 
Granted
1,108

 
65.62

 
 
 
 
Exercised
(6,221
)
 
42.89

 
 
 
 
Forfeited and expired
(1,263
)
 
60.86

 
 
 
 
Outstanding at end of year
15,416

 
56.36

 
$
260,809

 
6.06
 
 
 
 
 
 
 
 
Exercisable at end of year
7,939

 
$
52.16

 
$
167,710

 
4.47


 
For the Years Ended
(In thousands, except for grant date fair values)
2019
 
2018
 
2017
 
 
 
 
 
 
Weighted-average grant date fair values
$
17.51

 
$
20.13

 
$
20.50

 
 
 
 
 
 
Total intrinsic value of options exercised
$
155,202

 
$
74,530

 
$
252,277

 
 
 
 
 
 
Cash received from exercise of stock options
258,036

 
91,349

 
76,705

 
 
 
 
 
 
Tax benefit realized upon exercise of stock options
36,629

 
17,233

 
85,657


As of the end of 2019, there was $98 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 2.67 years.

Non-vested Shares and Share Units

Non-vested shares and share units are valued at fair market value on the date of grant and will vest provided the recipient has continuously served on the Board of Directors through such vesting date or, in the case of an associate, provided that service and/or performance measures are attained. The expense associated with these grants is recognized over the period from the date of grant to the vesting date.












Non-vested share and share unit activity for 2019 was as follows:
(In thousands, except per share data)
Number of Shares
 
Weighted-Average
Grant Date Fair Value Per Share
 
 
 
 
Outstanding at beginning of year
882

 
$
62.82

Granted
2,349

 
66.49

Vested
(448
)
 
67.00

Forfeited
(149
)
 
64.31

 
 
 
 
Outstanding at end of year
2,634

 
$
65.30


 
For the Years Ended
(In thousands, except for grant date fair values)
2019
 
2018
 
2017
 
 
 
 
 
 
Weighted average grant date fair values for shares granted during the year
$
66.49

 
$
59.34

 
$
66.97

 
 
 
 
 
 
Total fair value of shares vested during the year
$
30,558

 
$
26,264

 
$
11,050


As of the end of 2019, there was $128 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 2.11 years.

Associate Stock Purchase Plan

We established an Associate Stock Purchase Plan ("ASPP") in 2001, which qualifies under Section 423 of the Internal Revenue Code. Each individual employed by us and associates of our U.S. based subsidiaries, except as provided below, are eligible to participate in the ASPP ("Participants"). The following individuals are excluded from participation: (a) persons who, as of the beginning of a purchase period under the Plan, have been continuously employed by us or our domestic subsidiaries for less than two weeks; (b) persons who, as of the beginning of a purchase period, own directly or indirectly, or hold options or rights to acquire under any agreement or Company plan, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of Company common stock; and, (c) persons who are customarily employed by us for less than 20 hours per week or for less than five months in any calendar year. Participants may elect to make contributions from 1% to 20% of compensation to the ASPP, subject to annual limitations determined by the Internal Revenue Service. Participants may purchase Company common stock at a 15% discount on the last business day of the option period. The purchase of Company common stock is made through the ASPP on the open market and subsequently reissued to Participants. The difference between the open market purchase and the Participant's purchase price is recognized as compensation expense, as such difference is paid by Cerner, in cash.

Share-Based Compensation Cost

Our stock option and non-vested share and share unit awards qualify for equity classification. The costs of our ASPP, along with participant contributions, are recorded as a liability until open market purchases are completed. The amounts recognized in the consolidated statements of operations with respect to stock options, non-vested shares and share units and ASPP are as follows:
 
For the Years Ended
(In thousands)
2019
 
2018
 
2017
 
 
 
 
 
 
Stock option and non-vested share and share unit compensation expense
$
103,641

 
$
95,423

 
$
83,019

Associate stock purchase plan expense
6,053

 
6,082

 
6,277

Amounts capitalized in software development costs, net of amortization
(410
)
 
914

 
(327
)
 
 
 
 
 
 
Amounts charged against earnings, before income tax benefit
$
109,284

 
$
102,419

 
$
88,969

 
 
 
 
 
 
Amount of related income tax benefit recognized in earnings
$
20,967

 
$
21,371

 
$
25,265

 
Preferred Stock

As of the end of 2019 and 2018, we had 1.0 million shares of authorized but unissued preferred stock, $0.01 par value.

Treasury Stock
Under our current share repurchase program, which was initially approved by our Board of Directors in May 2017 and most recently amended in December 2019, the Company is authorized to repurchase up to $3.70 billion of shares of our common stock, 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 2019, 2018, and 2017, we repurchased 18.8 million, 11.2 million, and 2.7 million shares for total consideration of $1.30 billion, $644 million, and $173 million, respectively, 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 December 28, 2019, $1.68 billion remains available for repurchase under the program.

Dividends

On December 12, 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 January 9, 2020 to shareholders of record as of December 27, 2019. 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 shares 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. At December 28, 2019, our consolidated balance sheet included a liability for dividends payable of $56 million, which is included in other current liabilities.

Accumulated Other Comprehensive Loss, Net (AOCI)

The components of AOCI, net of tax, were as follows:
 
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 31, 2016
$
(109,827
)
 
$
—

 
$
(338
)
 
$
(110,165
)
Other comprehensive income (loss) before reclassifications
37,463

 
—

 
(672
)
 
36,791

Amounts reclassified from AOCI
—

 
—

 
(8
)
 
(8
)
 
 
 
 
 
 
 
 
Balance at December 30, 2017
(72,364
)
 
—

 
(1,018
)
 
(73,382
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications
(30,575
)
 
—

 
402

 
(30,173
)
Amounts reclassified from AOCI
—

 
—

 
3

 
3

 
 
 
 
 
 
 
 
Balance at December 29, 2018
(102,939
)
 
—

 
(613
)
 
(103,552
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications
(3,408
)
 
(13,078
)
 
901

 
(15,585
)
Amounts reclassified from AOCI
—

 
500

 
(23
)
 
477

 
 
 
 
 
 
 
 
Balance at December 28, 2019
$
(106,347
)
 
$
(12,578
)
 
$
265

 
$
(118,660
)







The effects on net earnings of amounts reclassified from AOCI were as follows:
(In thousands)
 
 
 
Years Ended
AOCI Component
 
Location
 
2019
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Unrealized loss on cash flow hedge
 
Other income, net
 
$
(624
)
 
$
—

 
$
—

 
 
Income taxes
 
124

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
Net of tax
 
(500
)
 
—

 
—

 
 
 
 
 
 
 
 
 
Unrealized holding gain (loss) on available-for-sale investments

 
Other income, net
 
29

 
(4
)
 
12

 
 
Income taxes
 
(6
)
 
1

 
(4
)
 
 
 
 
 
 
 
 
 
 
 
Net of tax
 
23

 
(3
)
 
8

 
 
 
 
 
 
 
 
 
Total amount reclassified, net of tax
 
 
 
$
(477
)
 
$
(3
)
 
$
8