Share-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation and Equity

Share-Based Compensation and Equity

Stock Option and Equity Plans

At the end of 2020, we had four 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 three plans from which no new grants are permitted, but some awards remain outstanding (Plans 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 2020, 18.0 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 2020 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
	2020		2019		2018
Expected volatility (%)	24.5	%	25.0	%	27.0	%
Expected dividend rate (%)	1	%	1	%	—
Expected term (yrs)	6		7		7
Risk-free rate (%)	1.1	%	2.4	%	2.8	%

Stock option activity for 2020 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	15,416	$	56.36
Granted	3	72.36
Exercised	(4,931)	51.49
Forfeited and expired	(284)	60.98
Outstanding at end of year	10,204	58.59		$	202,938	5.56
Exercisable at end of year	6,437	$	57.23	$	136,811	4.72

	For the Years Ended
(In thousands, except for grant date fair values)	2020		2019		2018
Weighted-average grant date fair values	$	16.64	$	17.51	$	20.13
Total intrinsic value of options exercised	$	115,607	$	155,202	$	74,530
Cash received from exercise of stock options	253,605		258,036		91,349
Tax benefit realized upon exercise of stock options	27,103		36,629		17,233

At the end of 2020, there was $49 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 1.93 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, if a member of the Board of Directors, 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 2020 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	2,634	$	65.30
Granted	2,620	70.12
Vested	(990)	66.29
Forfeited	(133)	67.63
Outstanding at end of year	4,131	$	68.05

	For the Years Ended
(In thousands, except for grant date fair values)	2020		2019		2018
Weighted average grant date fair values for shares granted during the year	$	70.12	$	66.49	$	59.34
Total fair value of shares vested during the year	$	70,355	$	30,558	$	26,264

At the end of 2020, there was $193 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 1.79 years.

Associate Stock Purchase Plan

We maintain an associate stock purchase plan ("ASPP"), which qualifies under Section 423 of the Internal Revenue Code. Generally, the ASPP provides our U.S. based associates the opportunity to purchase shares of our common stock at a 15% discount. Purchases of shares are made on the open market and subsequently reissued to participants of the ASPP. The difference between the open market purchase price and the cost to the participants 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)	2020		2019		2018
Stock option and non-vested share and share unit compensation expense	$	153,449	$	103,641	$	95,423
Associate stock purchase plan expense	5,478		6,053		6,082
Amounts capitalized in software development costs, net of amortization	(4,867)		(410)		914
Amounts charged against earnings, before income tax benefit	$	154,060	$	109,284	$	102,419
Amount of related income tax benefit recognized in earnings	$	30,775	$	20,967	$	21,371

Preferred Stock

At the end of 2020 and 2019, 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 2020, 2019, and 2018, we repurchased 10.6 million, 18.8 million, and 11.2 million shares for total consideration of $757 million, $1.30 billion, and $644 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 31, 2020, $927 million remains available for repurchase under the program.

Dividends

Cash dividend activity in 2020 and 2019 was as follows:

Date Declared	Date of Record	Payment Date	Amount per Share
May 29, 2019	June 18, 2019	July 26, 2019	$0.18
September 10, 2019	September 25, 2019	October 9, 2019	$0.18
December 12, 2019	December 27, 2019	January 9, 2020	$0.18
March 19, 2020	April 3, 2020	April 17, 2020	$0.18
May 21, 2020	June 5, 2020	July 17, 2020	$0.18
September 10, 2020	September 25, 2020	October 13, 2020	$0.18
December 10, 2020	December 28, 2020	January 12, 2021	$0.22

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 31, 2020 and December 28, 2019, our consolidated balance sheets included liabilities for dividends payable of $69 million and $56 million, respectively, which are 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 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)
Other comprehensive income (loss) before reclassifications	12,897		(23,687)		194		(10,596)
Amounts reclassified from AOCI	—		8,477		(25)		8,452
Balance at December 31, 2020	$	(93,450)	$	(27,788)	$	434	$	(120,804)

The effects on net earnings of amounts reclassified from AOCI were as follows:

(In thousands)		Years Ended
AOCI Component	Location	2020		2019		2018
Unrealized loss on cash flow hedge	Other income, net	$	(10,622)	$	(624)	$	—
	Income taxes	2,145		124		—
	Net of tax	(8,477)		(500)		—
Unrealized holding gain (loss) on available-for-sale investments	Other income, net	31		29		(4)
	Income taxes	(6)		(6)		1
	Net of tax	25		23		(3)
Total amount reclassified, net of tax		$	(8,452)	$	(477)	$	(3)