CERNER CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | 43-1196944 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
2800 Rockcreek Parkway North Kansas City, MO | 64117 | |
(Address of principal executive offices) | (Zip Code) |
Class | Outstanding at April 20, 2017 | |
Common Stock, $0.01 par value per share | 330,429,274 shares |
Part I. | Financial Information: | |
Item 1. | Financial Statements: | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | Other Information: | |
Item 2. | ||
Item 6. | ||
Signatures |
(In thousands, except share data) | 2017 | 2016 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 378,452 | $ | 170,861 | |||
Short-term investments | 153,458 | 185,588 | |||||
Receivables, net | 986,354 | 944,943 | |||||
Inventory | 19,013 | 14,740 | |||||
Prepaid expenses and other | 288,833 | 303,229 | |||||
Total current assets | 1,826,110 | 1,619,361 | |||||
Property and equipment, net | 1,569,023 | 1,552,524 | |||||
Software development costs, net | 751,705 | 719,209 | |||||
Goodwill | 845,842 | 844,200 | |||||
Intangible assets, net | 542,715 | 566,047 | |||||
Long-term investments | 77,206 | 109,374 | |||||
Other assets | 190,607 | 219,248 | |||||
Total assets | $ | 5,803,208 | $ | 5,629,963 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 207,001 | $ | 238,134 | |||
Current installments of long-term debt and capital lease obligations | 17,398 | 26,197 | |||||
Deferred revenue | 338,074 | 311,839 | |||||
Accrued payroll and tax withholdings | 208,467 | 211,554 | |||||
Other accrued expenses | 62,599 | 57,677 | |||||
Total current liabilities | 833,539 | 845,401 | |||||
Long-term debt and capital lease obligations | 532,747 | 537,552 | |||||
Deferred income taxes and other liabilities | 311,540 | 306,263 | |||||
Deferred revenue | 12,506 | 12,800 | |||||
Total liabilities | 1,690,332 | 1,702,016 | |||||
Shareholders’ Equity: | |||||||
Common stock, $.01 par value, 500,000,000 shares authorized, 354,442,293 shares issued at April 1, 2017 and 353,731,237 shares issued at December 31, 2016 | 3,545 | 3,537 | |||||
Additional paid-in capital | 1,254,544 | 1,230,913 | |||||
Retained earnings | 4,245,101 | 4,094,327 | |||||
Treasury stock, 24,089,737 shares at April 1, 2017 and December 31, 2016 | (1,290,665 | ) | (1,290,665 | ) | |||
Accumulated other comprehensive loss, net | (99,649 | ) | (110,165 | ) | |||
Total shareholders’ equity | 4,112,876 | 3,927,947 | |||||
Total liabilities and shareholders’ equity | $ | 5,803,208 | $ | 5,629,963 |
Three Months Ended | |||||||
(In thousands, except per share data) | 2017 | 2016 | |||||
Revenues: | |||||||
System sales | $ | 319,856 | $ | 279,354 | |||
Support, maintenance and services | 918,238 | 839,638 | |||||
Reimbursed travel | 22,392 | 19,143 | |||||
Total revenues | 1,260,486 | 1,138,135 | |||||
Costs and expenses: | |||||||
Cost of system sales | 100,409 | 89,225 | |||||
Cost of support, maintenance and services | 76,192 | 67,225 | |||||
Cost of reimbursed travel | 22,392 | 19,143 | |||||
Sales and client service | 560,200 | 501,827 | |||||
Software development (Includes amortization of $40,561 and $32,614, respectively) | 145,901 | 133,532 | |||||
General and administrative | 88,392 | 90,134 | |||||
Amortization of acquisition-related intangibles | 22,874 | 21,601 | |||||
Total costs and expenses | 1,016,360 | 922,687 | |||||
Operating earnings | 244,126 | 215,448 | |||||
Other income (expense), net | (1,116 | ) | 1,681 | ||||
Earnings before income taxes | 243,010 | 217,129 | |||||
Income taxes | (69,797 | ) | (66,769 | ) | |||
Net earnings | $ | 173,213 | $ | 150,360 | |||
Basic earnings per share | $ | 0.52 | $ | 0.44 | |||
Diluted earnings per share | $ | 0.52 | $ | 0.43 | |||
Basic weighted average shares outstanding | 329,973 | 339,518 | |||||
Diluted weighted average shares outstanding | 336,190 | 345,900 |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Net earnings | $ | 173,213 | $ | 150,360 | |||
Foreign currency translation adjustment and other (net of taxes of $187 and $2,122, respectively) | 10,405 | 8,290 | |||||
Unrealized holding gain on available-for-sale investments (net of taxes of $68 and $233, respectively) | 111 | 380 | |||||
Comprehensive income | $ | 183,729 | $ | 159,030 |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net earnings | $ | 173,213 | $ | 150,360 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 134,833 | 119,126 | |||||
Share-based compensation expense | 17,500 | 17,811 | |||||
Provision for deferred income taxes | 11,214 | 7,978 | |||||
Changes in assets and liabilities (net of businesses acquired): | |||||||
Receivables, net | (34,236 | ) | 101,787 | ||||
Inventory | (4,266 | ) | (8,452 | ) | |||
Prepaid expenses and other | 27,270 | (4,751 | ) | ||||
Accounts payable | (21,908 | ) | (23,060 | ) | |||
Accrued income taxes | 768 | 11,201 | |||||
Deferred revenue | 24,269 | (32,309 | ) | ||||
Other accrued liabilities | (25,072 | ) | (3,486 | ) | |||
Net cash provided by operating activities | 303,585 | 336,205 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital purchases | (88,065 | ) | (99,351 | ) | |||
Capitalized software development costs | (71,092 | ) | (75,340 | ) | |||
Purchases of investments | (53,340 | ) | (157,744 | ) | |||
Sales and maturities of investments | 115,030 | 32,473 | |||||
Purchase of other intangibles | (6,385 | ) | (3,592 | ) | |||
Net cash used in investing activities | (103,852 | ) | (303,554 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from exercises of stock options | 10,683 | 10,421 | |||||
Payments to taxing authorities in connection with shares directly withheld from associates | (5,314 | ) | (419 | ) | |||
Treasury stock purchases | — | (150,056 | ) | ||||
Contingent consideration payments for acquisition of businesses | (1,000 | ) | — | ||||
Net cash provided by (used in) financing activities | 4,369 | (140,054 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 3,489 | 870 | |||||
Net increase (decrease) in cash and cash equivalents | 207,591 | (106,533 | ) | ||||
Cash and cash equivalents at beginning of period | 170,861 | 402,122 | |||||
Cash and cash equivalents at end of period | $ | 378,452 | $ | 295,589 | |||
Summary of acquisition transactions: | |||||||
Fair value of tangible assets acquired | $ | — | $ | (10,200 | ) | ||
Fair value of intangible assets acquired | — | (25,000 | ) | ||||
Fair value of goodwill | — | 46,940 | |||||
Less: Fair value of liabilities assumed | — | (11,740 | ) | ||||
Net cash used | $ | — | $ | — |
• | Prior to the adoption of ASU 2016-09, when associates exercised stock options, or upon the vesting of restricted stock awards, we recognized any related excess tax benefits or deficiencies (the difference between the deduction for tax purposes and the cumulative compensation cost recognized in the consolidated financial statements) in additional paid-in capital ("APIC"). We recognized net excess tax benefits of $9 million in APIC during the three months ended April 2, 2016. |
• | We utilize the treasury stock method for calculating diluted earnings per share. Prior to the adoption of ASU 2016-09, this method assumed that any net excess tax benefits generated from the hypothetical exercise of dilutive options were used to repurchase outstanding shares. Assumed share repurchases for net excess tax benefits included in our calculation of diluted earnings per share for the three months ended April 2, 2016 were 2.2 million shares. |
• | Prior to the adoption of ASU 2016-09, we presented net excess tax benefits in our condensed consolidated statements of cash flows as a cash inflow from financing activities. Under the new guidance, net excess tax benefits are presented within operating activities. We have elected to apply this provision of the new guidance retrospectively. Prior periods have been retrospectively adjusted. |
• | Prior to the adoption of ASU 2016-09, we presented cash payments to taxing authorities in connection with shares directly withheld from associates upon the exercise of stock options, or upon the vesting of restricted stock awards, to meet statutory tax withholding requirements (employee withholdings) as a cash outflow from operating activities. Under the new guidance, such payments are presented within financing activities. This provision of the new guidance was required to be applied retrospectively. Prior periods have been retrospectively adjusted. |
• | Under the new guidance, an entity is permitted to make an entity-wide accounting policy election (at adoption) either to estimate the number of forfeitures expected to occur or to account for forfeitures as a reduction to compensation cost when they occur. Upon adoption of ASU 2016-09, we did not change our policy of estimating participant forfeitures as a part of our calculations of share-based compensation cost. |
• | ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date |
• | ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenue Gross versus Net) |
• | ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing |
• | ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients |
• | ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers |
• | We expect to adopt this new guidance effective with our first quarter of 2018; we will not early adopt. |
• | We expect to use the cumulative effect transition method. Such method provides that the cumulative effect from prior periods upon applying the new guidance is recognized in our consolidated balance sheets as of the date of adoption, including an adjustment to retained earnings. Prior periods will not be retrospectively adjusted. |
• | We believe substantially all of our revenue falls within the scope of ASU 2014-09, as amended; substantially all of our revenue is contractual. |
• | Generally, our subscription and content fees revenue is recognized ratably over the respective contract terms ("over time"). Upon adoption of the new guidance, we expect to recognize a license component of certain subscription and content fees revenue upon delivery to the customer ("point in time") and a non-license component (i.e. support) of such revenues over the respective contract terms ("over time"). At the date of adoption of this new guidance, we expect to record a cumulative adjustment to our consolidated balance sheet, including an adjustment to retained earnings, to adjust for the impact of certain prior period subscription and content fees revenue, as calculated under the new guidance. |
• | We have determined the only significant incremental costs incurred to obtain contracts with customers within the scope of ASU 2014-09, as amended, are sales commissions paid to associates. Under current U.S. GAAP we recognize sales commissions as earned, and record such amounts as a component of total costs and expenses in our consolidated statements of operations. We recognized sales commission expense of $44 million, $45 million and $35 million in the 2016, 2015, and 2014 annual periods, respectively. Under the new guidance, we expect to record sales commissions as an asset, and amortize to expense over the related contract performance period. At the date of adoption of this new guidance, we expect to record an asset in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new guidance. Such amount will subsequently be amortized to expense over the remaining performance periods of the related contracts with remaining performance obligations. |
• | 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 | $ | 94,689 | $ | — | $ | — | |||||||
Time deposits | Cash equivalents | — | 8,067 | — | ||||||||||
Commercial paper | Cash equivalents | — | 44,800 | — | ||||||||||
Government and corporate bonds | Cash equivalents | — | 500 | — | ||||||||||
Time deposits | Short-term investments | — | 29,538 | — | ||||||||||
Commercial paper | Short-term investments | — | 23,140 | — | ||||||||||
Government and corporate bonds | Short-term investments | — | 100,780 | — | ||||||||||
Government and corporate bonds | Long-term investments | — | 65,255 | — |
(In thousands) | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Description | Balance Sheet Classification | Level 1 | Level 2 | Level 3 | ||||||||||
Money market funds | Cash equivalents | $ | 23,110 | $ | — | $ | — | |||||||
Time deposits | Cash equivalents | — | 11,477 | — | ||||||||||
Time deposits | Short-term investments | — | 40,639 | — | ||||||||||
Commercial paper | Short-term investments | — | 22,301 | — | ||||||||||
Government and corporate bonds | Short-term investments | — | 122,648 | — | ||||||||||
Government and corporate bonds | Long-term investments | — | 95,368 | — |
(In thousands) | Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 94,689 | $ | — | $ | — | $ | 94,689 | ||||||||
Time deposits | 8,067 | — | — | 8,067 | ||||||||||||
Commercial paper | 44,800 | — | — | 44,800 | ||||||||||||
Government and corporate bonds | 500 | — | — | 500 | ||||||||||||
Total cash equivalents | 148,056 | — | — | 148,056 | ||||||||||||
Short-term investments: | ||||||||||||||||
Time deposits | 29,538 | — | — | 29,538 | ||||||||||||
Commercial paper | 23,175 | — | (35 | ) | 23,140 | |||||||||||
Government and corporate bonds | 100,892 | 7 | (119 | ) | 100,780 | |||||||||||
Total short-term investments | 153,605 | 7 | (154 | ) | 153,458 | |||||||||||
Long-term investments: | ||||||||||||||||
Government and corporate bonds | 65,472 | — | (217 | ) | 65,255 | |||||||||||
Total available-for-sale investments | $ | 367,133 | $ | 7 | $ | (371 | ) | $ | 366,769 |
(In thousands) | Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 23,110 | $ | — | $ | — | $ | 23,110 | ||||||||
Time deposits | 11,477 | — | — | 11,477 | ||||||||||||
Total cash equivalents | 34,587 | — | — | 34,587 | ||||||||||||
Short-term investments: | ||||||||||||||||
Time deposits | 40,639 | — | — | 40,639 | ||||||||||||
Commercial paper | 22,325 | — | (24 | ) | 22,301 | |||||||||||
Government and corporate bonds | 122,729 | 3 | (84 | ) | 122,648 | |||||||||||
Total short-term investments | 185,693 | 3 | (108 | ) | 185,588 | |||||||||||
Long-term investments: | ||||||||||||||||
Government and corporate bonds | 95,806 | — | (438 | ) | 95,368 | |||||||||||
Total available-for-sale investments | $ | 316,086 | $ | 3 | $ | (546 | ) | $ | 315,543 |
(In thousands) | April 1, 2017 | December 31, 2016 | |||||
Gross accounts receivable | $ | 1,015,120 | $ | 958,843 | |||
Less: Allowance for doubtful accounts | 48,641 | 43,028 | |||||
Accounts receivable, net of allowance | 966,479 | 915,815 | |||||
Current portion of lease receivables | 19,875 | 29,128 | |||||
Total receivables, net | $ | 986,354 | $ | 944,943 |
Three Months Ended | |||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||
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 | $ | 173,213 | 329,973 | $ | 0.52 | $ | 150,360 | 339,518 | $ | 0.44 | |||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options and non-vested shares | — | 6,217 | — | 6,382 | |||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||
Income available to common shareholders including assumed conversions | $ | 173,213 | 336,190 | $ | 0.52 | $ | 150,360 | 345,900 | $ | 0.43 |
(In thousands, except per share data) | Number of Shares | Weighted- Average Exercise Price | Aggregate Intrinsic Value | Weighted-Average Remaining Contractual Term (Yrs) | ||||||||
Outstanding at beginning of year | 23,601 | $ | 40.33 | |||||||||
Granted | 876 | 55.67 | ||||||||||
Exercised | (882 | ) | 17.88 | |||||||||
Forfeited and expired | (206 | ) | 54.87 | |||||||||
Outstanding as of April 1, 2017 | 23,389 | 41.62 | $ | 431,649 | 6.06 | |||||||
Exercisable as of April 1, 2017 | 12,376 | $ | 28.27 | $ | 381,943 | 4.21 |
Expected volatility (%) | 27.0 | % | ||
Expected term (yrs) | 7 | |||
Risk-free rate (%) | 2.2 | % | ||
Fair value per option | $ | 18.31 |
(In thousands, except per share data) | Number of Shares | Weighted-Average Grant Date Fair Value | ||||
Outstanding at beginning of year | 354 | $ | 61.12 | |||
Granted | 20 | 55.74 | ||||
Vested | (12 | ) | 61.75 | |||
Forfeited | (4 | ) | 52.37 | |||
Outstanding as of April 1, 2017 | 358 | $ | 60.88 |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Stock option and non-vested share and share unit compensation expense | $ | 17,500 | $ | 17,811 | |||
Associate stock purchase plan expense | 1,475 | 1,756 | |||||
Amounts capitalized in software development costs, net of amortization | (120 | ) | (201 | ) | |||
Amounts charged against earnings, before income tax benefit | $ | 18,855 | $ | 19,366 | |||
Amount of related income tax benefit recognized in earnings | $ | 5,416 | $ | 5,955 |
(In thousands) | Domestic | Global | Other | Total | |||||||||||
Three Months Ended 2017 | |||||||||||||||
Revenues | $ | 1,131,804 | $ | 128,682 | $ | — | $ | 1,260,486 | |||||||
Cost of revenues | 176,361 | 22,632 | — | 198,993 | |||||||||||
Operating expenses | 483,380 | 63,523 | 270,464 | 817,367 | |||||||||||
Total costs and expenses | 659,741 | 86,155 | 270,464 | 1,016,360 | |||||||||||
Operating earnings (loss) | $ | 472,063 | $ | 42,527 | $ | (270,464 | ) | $ | 244,126 |
(In thousands) | Domestic | Global | Other | Total | |||||||||||
Three Months Ended 2016 | |||||||||||||||
Revenues | $ | 1,004,965 | $ | 133,170 | $ | — | $ | 1,138,135 | |||||||
Cost of revenues | 149,269 | 26,324 | — | 175,593 | |||||||||||
Operating expenses | 425,559 | 58,871 | 262,664 | 747,094 | |||||||||||
Total costs and expenses | 574,828 | 85,195 | 262,664 | 922,687 | |||||||||||
Operating earnings (loss) | $ | 430,137 | $ | 47,975 | $ | (262,664 | ) | $ | 215,448 |
(In thousands) | 2017 | % of Revenue | 2016 | % of Revenue | % Change | |||||||||||
Revenues | ||||||||||||||||
System sales | $ | 319,856 | 25 | % | $ | 279,354 | 25 | % | 14 | % | ||||||
Support and maintenance | 262,104 | 21 | % | 250,911 | 22 | % | 4 | % | ||||||||
Services | 656,134 | 52 | % | 588,727 | 52 | % | 11 | % | ||||||||
Reimbursed travel | 22,392 | 2 | % | 19,143 | 2 | % | 17 | % | ||||||||
Total revenues | 1,260,486 | 100 | % | 1,138,135 | 100 | % | 11 | % | ||||||||
Costs of revenue | ||||||||||||||||
Costs of revenue | 198,993 | 16 | % | 175,593 | 15 | % | 13 | % | ||||||||
Total margin | 1,061,493 | 84 | % | 962,542 | 85 | % | 10 | % | ||||||||
Operating expenses | ||||||||||||||||
Sales and client service | 560,200 | 44 | % | 501,827 | 44 | % | 12 | % | ||||||||
Software development | 145,901 | 12 | % | 133,532 | 12 | % | 9 | % | ||||||||
General and administrative | 88,392 | 7 | % | 90,134 | 8 | % | (2 | )% | ||||||||
Amortization of acquired-related intangibles | 22,874 | 2 | % | 21,601 | 2 | % | 6 | % | ||||||||
Total operating expenses | 817,367 | 65 | % | 747,094 | 66 | % | 9 | % | ||||||||
Total costs and expenses | 1,016,360 | 81 | % | 922,687 | 81 | % | 10 | % | ||||||||
Operating earnings | 244,126 | 19 | % | 215,448 | 19 | % | 13 | % | ||||||||
Other income (expense), net | (1,116 | ) | 1,681 | |||||||||||||
Income taxes | (69,797 | ) | (66,769 | ) | ||||||||||||
Net earnings | $ | 173,213 | $ | 150,360 | 15 | % |
• | System sales, which include revenues from the sale of licensed software (including perpetual license sales and software as a service), technology resale (hardware, devices, and sublicensed software), deployment period licensed software upgrade rights, installation fees, transaction processing and subscriptions, increased 14% to $320 million in the first quarter of 2017, from $279 million for the same period in 2016. The increase in system sales was primarily driven by strong growth in software. |
• | Support and maintenance revenues increased 4% to $262 million in the first quarter of 2017 from $251 million for the same period in 2016. This increase was primarily attributable to continued success selling Cerner Millennium applications and implementing them at client sites. |
• | Services revenue, which includes professional services (excluding installation) and managed services, increased 11% to $656 million in the first quarter of 2017, from $589 million for the same period in 2016. This increase was driven by a $41 million increase in professional services due to growth in implementation and consulting activities and growth in managed services of $26 million as a result of continued demand for our hosting services. |
• | Sales and client service expenses as a percent of total revenues were 44% in first quarter of both 2017 and 2016. These expenses increased 12% to $560 million in the first quarter of 2017, from $502 million in the same period of 2016. Sales and client service expenses include salaries and benefits of sales, marketing, support, and services personnel, depreciation and other expenses associated with our managed services business, communications expenses, unreimbursed travel expenses, expense for share-based payments, and trade show and advertising costs. The growth in sales and client service expenses reflects hiring of services personnel to support the strong growth in services revenue. |
• | Software development expenses as a percent of total revenues were 12% in the first quarter of both 2017 and 2016. Expenditures for software development include ongoing development and enhancement of the Cerner Millennium® and HealtheIntent platforms, with a focus on supporting key initiatives to enhance physician experience, revenue cycle and population health solutions. A summary of our total software development expense in the first quarters of 2017 and 2016 is as follows: |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Software development costs | $ | 176,432 | $ | 176,258 | |||
Capitalized software costs | (70,419 | ) | (74,612 | ) | |||
Capitalized costs related to share-based payments | (673 | ) | (728 | ) | |||
Amortization of capitalized software costs | 40,561 | 32,614 | |||||
Total software development expense | $ | 145,901 | $ | 133,532 |
• | General and administrative expenses as a percent of total revenues were 7% in the first quarter of 2017, compared to 8% in the same period of 2016. These expenses remained relatively flat at $88 million in the first quarter of 2017, and $90 million for the same period in 2016. General and administrative expenses include salaries and benefits for corporate, financial and administrative staffs, utilities, communications expenses, professional fees, depreciation and amortization, transaction gains or losses on foreign currency, expense for share-based payments, acquisition costs and related adjustments. |
• | Amortization of acquisition-related intangibles as a percent of total revenues were 2% in the first quarter of both 2017 and 2016. These expenses remained relatively flat at $23 million in the first quarter of 2017, and $22 million in the same period in 2016. 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 (expense), net was $(1 million) in the first quarter of 2017, compared to $2 million in the first quarter of 2016. The decrease was primarily attributable to an impairment loss recognized on one of our investments accounted for under the cost method. |
• | Our effective tax rate was 28.7% for the first quarter of 2017 and 30.8% for the first quarter of 2016. The decrease in the effective tax rate in 2017 is a result of the inclusion of net excess tax benefits as discrete items within the tax provision, upon our adoption of ASU 2016-09 in the first quarter of 2017. Refer to Note (1) of the notes to condensed consolidated financial statements for further discussion regarding our adoption of ASU 2016-09 and its impact on our condensed consolidated financial statements. |
(In thousands) | 2017 | % of Revenue | 2016 | % of Revenue | % Change | ||||||||
Domestic Segment | |||||||||||||
Revenues | $ | 1,131,804 | 100% | $ | 1,004,965 | 100% | 13% | ||||||
Costs of revenue | 176,361 | 16% | 149,269 | 15% | 18% | ||||||||
Operating expenses | 483,380 | 43% | 425,559 | 42% | 14% | ||||||||
Total costs and expenses | 659,741 | 58% | 574,828 | 57% | 15% | ||||||||
Domestic operating earnings | 472,063 | 42% | 430,137 | 43% | 10% | ||||||||
Global Segment | |||||||||||||
Revenues | 128,682 | 100% | 133,170 | 100% | (3)% | ||||||||
Costs of revenue | 22,632 | 18% | 26,324 | 20% | (14)% | ||||||||
Operating expenses | 63,523 | 49% | 58,871 | 44% | 8% | ||||||||
Total costs and expenses | 86,155 | 67% | 85,195 | 64% | 1% | ||||||||
Global operating earnings | 42,527 | 33% | 47,975 | 36% | (11)% | ||||||||
Other, net | (270,464 | ) | (262,664 | ) | 3% | ||||||||
Consolidated operating earnings | $ | 244,126 | $ | 215,448 | 13% |
• | Revenues increased 13% to $1.1 billion in the first quarter of 2017, from $1.0 billion in the same period of 2016. This increase was primarily driven by growth in services revenue. |
• | Costs of revenue as a percent of revenues were 16% in the first quarter of 2017, compared to 15% in the same period of 2016. The higher costs of revenue as a percent of revenues was primarily driven by a marginally higher mix of technology resale, which carries a higher cost of revenue. |
• | Operating expenses as a percent of revenues were 43% in the first quarter of 2017, compared to 42% in the same period of 2016. The increase as a percent of revenues reflects a higher mix of services during the first quarter of 2017 that was driven by services revenue growth. |
• | Revenues decreased 3% to $129 million in the first quarter of 2017, from $133 million in the same period of 2016. The decrease was primarily driven by a decline in the value of the British Pound in the first quarter of 2017, compared to the same period of 2016. |
• | Costs of revenue as a percent of revenues were 18% in the first quarter of 2017, compared to 20% in the same period of 2016. The lower costs of revenue as a percent of revenues was primarily driven by a lower amount of third party resources utilized for support and services. |
• | Operating expenses as a percent of revenues were 49% in the first quarter of 2017, compared to 44% in the same period of 2016. The increase as a percent of revenues is primarily due to a higher amount of internal resources utilized for support and services. |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Cash flows from operating activities | $ | 303,585 | $ | 336,205 | |||
Cash flows from investing activities | (103,852 | ) | (303,554 | ) | |||
Cash flows from financing activities | 4,369 | (140,054 | ) | ||||
Effect of exchange rate changes on cash | 3,489 | 870 | |||||
Total change in cash and cash equivalents | 207,591 | (106,533 | ) | ||||
Cash and cash equivalents at beginning of period | 170,861 | 402,122 | |||||
Cash and cash equivalents at end of period | $ | 378,452 | $ | 295,589 | |||
Free cash flow (non-GAAP) | $ | 144,428 | $ | 161,514 |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Cash collections from clients | $ | 1,325,596 | $ | 1,257,886 | |||
Cash paid to employees and suppliers and other | (973,440 | ) | (871,420 | ) | |||
Cash paid for interest | (8,347 | ) | (8,243 | ) | |||
Cash paid for taxes, net of refunds | (40,224 | ) | (42,018 | ) | |||
Total cash from operations | $ | 303,585 | $ | 336,205 |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Capital purchases | $ | (88,065 | ) | $ | (99,351 | ) | |
Capitalized software development costs | (71,092 | ) | (75,340 | ) | |||
Purchases of investments, net of sales and maturities | 61,690 | (125,271 | ) | ||||
Purchases of other intangibles | (6,385 | ) | (3,592 | ) | |||
Total cash flows from investing activities | $ | (103,852 | ) | $ | (303,554 | ) |
Three Months Ended | |||||||
(In thousands) | 2017 | 2016 | |||||
Cash from option exercises (net of taxes paid in connection with shares surrendered by associates) | $ | 5,369 | $ | 10,002 | |||
Treasury stock purchases | — | (150,056 | ) | ||||
Contingent consideration payments for acquisition of businesses | (1,000 | ) | — | ||||
Total cash flows from financing activities | $ | 4,369 | $ | (140,054 | ) |
Three Months Ended | ||||||||||
(In thousands) | 2017 | 2016 | ||||||||
Cash flows from operating activities (GAAP) | $ | 303,585 | $ | 336,205 | ||||||
Capital purchases | (88,065 | ) | (99,351 | ) | ||||||
Capitalized software development costs | (71,092 | ) | (75,340 | ) | ||||||
Free cash flow (non-GAAP) | $ | (17,086 | ) | $ | 144,428 | $ | 161,514 |
a) | Evaluation of Disclosure Controls and Procedures. |
b) | Changes in Internal Control over Financial Reporting. |
c) | Limitations on Controls. |
Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b) | |||||||||||
Period | ||||||||||||||
January 1, 2017 - January 28, 2017 | 3,124 | $ | 49.40 | — | $ | 100,000,000 | ||||||||
January 29, 2017 - February 25, 2017 | 982 | 53.71 | — | 100,000,000 | ||||||||||
February 26, 2017 - April 1, 2017 | — | — | — | 100,000,000 | ||||||||||
Total | 4,106 | $ | 50.43 | — |
(a) | All of the 4,106 shares of common stock, par value $0.01 per share, presented in the table above were originally granted to employees as restricted stock pursuant to our 2011 Omnibus Equity Incentive Plan (the "Omnibus Plan"). The Omnibus Plan allows for the withholding of shares to satisfy the minimum tax obligations due upon the vesting of restricted stock. Pursuant to the Omnibus Plan, the shares reflected above were relinquished by employees in exchange for our agreement to pay U.S. federal and state withholding obligations resulting from the vesting of the Company's restricted stock. |
(b) | As announced on November 14, 2016, our Board of Directors authorized a share repurchase program for an aggregate purchase of up to $500 million of our common stock, excluding transaction costs. As of April 1, 2017, $100 million remained available for repurchase. No time limit has been set for completion of the program. |
(a) | Exhibits | |
3.1 | Amendment No. 1 to the Bylaws, Amended & Restated as of February 25, 2016, filed as Exhibit 3.1 to Form 8-K filed on March 6, 2017 is incorporated herein by reference | |
3.2 | Composite Copy of the Bylaws, Amended & Restated as of February 25, 2016 (as amended through March 3, 2017), filed as Exhibit 3.2 to Form 8-K filed on March 6, 2017 is incorporated herein by reference | |
10.1 | Form of 2017 Executive Performance Agreement - Covered Executives pursuant to the Cerner Corporation Performance-Based Compensation Plan | |
10.2 | Cerner Corporation 2011 Omnibus Equity Incentive Plan - Time Based RSU Agreement | |
10.3 | Cerner Corporation 2011 Omnibus Equity Incentive Plan - Performance Based RSU Agreement | |
31.1 | Certification of Neal L. Patterson pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Marc G. Naughton pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Neal L. Patterson pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Marc G. Naughton pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
CERNER CORPORATION | |||
Registrant | |||
Date: April 28, 2017 | By: | /s/ Marc G. Naughton | |
Marc G. Naughton | |||
Executive Vice President and Chief | |||
Financial Officer (duly authorized | |||
officer and principal financial officer) |
2017 Executive Performance Agreement - Covered Executives | ||
Pursuant to the Cerner Corporation Performance-Based Compensation Plan, as amended and restated May 27, 2016 (as amended, the "162(m) Plan") |
Weighting | Performance Metric | Timing Code | PF Applies | Scope |
100% | Earnings per Share | Y | Yes | Corporate |
Attainment % of Performance Metric | TBL Payout % | |
103% | 140% | |
102% | 120% | |
100% (target) | 100% | |
98% | 75% | |
97% | 50% | |
<97% | 0% |
1 |
1. | In order to be eligible for any payments under this Agreement, Cerner must have received your signed Cerner Associate Employment Agreement, which governs the terms and conditions of your employment with Cerner. |
2. | Participation under this Agreement begins as of the beginning of the first full quarter of employment in, or assignment to, an eligible role under Cerner's 162(m) Plan. If you are newly eligible to participate under this Agreement, you will satisfy the "full quarter" requirement as long as you are actively working within the first sixteen (16) working days of the quarter. |
3. | Payments under Cerner's 162(m) Plan for any one quarter or the year will be forfeited if you fail to complete performance reviews/self-appraisals as required by Cerner's Human Resources group. Any balance of the payout that could have been attained is forfeited and will not be paid in subsequent quarters. |
4. | Exceptions to the above items will be considered and determined by the Plan Administrator(s), in its sole discretion. |
1. | Termination of Eligibility: Your eligibility under the 162(m) Plan will be terminated immediately in the event of termination of employment with Cerner Corporation or any of its subsidiaries ("Cerner"), for any reason (voluntarily or involuntarily), or transfer to a non-Cerner Performance Plan (CPP) eligible role. Payments are earned only for completed periods (quarters, semi-annual, or annual metrics); i.e., if employment with Cerner is terminated or if participation in the 162(m) Plan is otherwise terminated at any time before the completion of a period, no incentive will be earned or paid for that period. You will be entitled to payment for the earned CPP incentive only if you are employed in your CPP-eligible role on the last day of the fiscal period. The 2017 fiscal year calendar can be found in Exhibit III of the CPP Glossary (effective January 1, 2017) available on uCERN. |
2. | Leave of Absence: If you are not actively at work for more than six weeks of any quarter, your Total Opportunity will be reduced as set forth in the CPP Leave Policy (located on uCERN). |
3. | Repayments to Cerner: In the event your employment is terminated, for any reason (voluntarily or involuntarily), and you owe money to Cerner, for any reason, or you are required to return incentive payments, Cerner may deduct the amounts owed from all accounts due to you, such as salary, advances, vacation pay, expense reimbursements, incentive payments, and other Cerner monies owed to you. To the extent such amounts are not setoff, you will |
2 |
4. | Incentive Payment Recovery; Clawback: |
a. | In the Event of a Restatement. If Cerner implements a Mandatory Restatement (as defined in Section 11(viii) of the 162(m) Plan), which restatement relates in whole or in part to the 2017 fiscal year or prior years while you were eligible for CPP, some or all of any amounts paid as an incentive payment earned by you under this Agreement and related to such restated period(s) shall be recoverable and, as determined appropriate by Cerner's Board of Directors, must be repaid within ninety (90) days of such restatement(s) or such other period as determined by the Board of Directors. The amount which must be repaid, if any as determined by the Board of Directors, will be up to the amount by which the compensation paid or received exceeds the amount that would have been paid or received based on the financial results reported in the restated financial statement, in each case determined by the Plan Administrator. Any amount required to be repaid may be repaid directly by you, setoff against future amounts owed to you by Cerner under this Agreement (if such amounts will be earned and paid within the ninety (90) day payment period) or any other amount owed to you by Cerner, as permitted by applicable law, or paid as otherwise agreed in writing between you and Cerner. Cerner will not be required to award additional CPP payments should the restated financial statements result in a higher CPP payout. |
b. | In the Event of Fraud or Misconduct. Additionally, if Cerner implements a Mandatory Restatement, which restatement relates in whole or in part to the 2017 fiscal year or prior years while you were eligible for CPP, all amounts paid as an incentive payment earned by you under this Agreement and related to such restated period(s) shall be fully recoverable if it is determined by Cerner’s Board of Directors that you engaged in fraud or misconduct that caused or partially caused the need for the restatement and must be repaid within ninety (90) days of such restatement(s) or such other period as determined by the Board of Directors. Any amount required to be repaid may be repaid directly by you, setoff against future amounts owed to you by Cerner under this Agreement (if such amounts will be earned and paid within the ninety (90) day payment period) or any other amount owed to you by Cerner, as permitted by applicable law, or paid as otherwise agreed in writing between you and Cerner. |
c. | Dodd-Frank Clawback. Additionally, any amounts paid under the 162(m) Plan and this Agreement may be subject to certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) that will require Cerner to recover certain amounts of incentive compensation paid to certain executive officers if Cerner is required to prepare an accounting restatement due to the material noncompliance of Cerner with any financial reporting requirements under any applicable securities laws. By participating in the 162(m) Plan and whether or not any compensation is ultimately paid hereunder, you agree and consent to any forfeiture or required recovery or reimbursement obligations of Cerner with respect to any compensation paid to you that is forfeitable or recoverable by Cerner pursuant to Dodd-Frank and in accordance with any Cerner policies and procedures adopted by the Compensation Committee in order to comply with Dodd Frank, even if such policies or procedures are adopted in the future. |
5. | Modifications to this Agreement: The Plan Administrator reserves the right, in its sole discretion, to interpret and modify this Agreement: (a) during the performance period to coincide with changing corporate objectives, and (b) during or after the performance period to: (i) avoid windfall payments unintentionally derived from the 162(m) Plan design that may result from the highly variable nature of many Client Agreement(s) or market conditions and/or (ii) adjust payments or terminate this Agreement when an Associate's performance has been documented by management to be unacceptable. Such modifications will occur only under the authority of the Plan Administrator(s), in its sole discretion. Any component of this Agreement may be adjusted to ensure that you receive adequate, yet reasonable, compensation. In no event may the Plan Administrator (i) increase the amount of compensation payable that would otherwise have been payable upon the attainment of the original performance metric, as such metric was established during the initial allowable period of time under Section 162(m) of the Internal Revenue Code for establishing "performance-based compensation" or (ii) make any modifications or interpretations to the 162(m) Plan which will jeopardize the deductibility of performance-based compensation payable hereunder, unless the Plan Administrator expressly acknowledges in connection with the modification or interpretation that the availability of Internal Revenue Code Section 162(m)'s performance-based compensation exemption is not desired. |
3 |
Date: April 28, 2017 | /s/Neal L. Patterson | ||||||
Neal L. Patterson | |||||||
Chief Executive Officer | |||||||
(Principal Executive Officer) |
Date: April 28, 2017 | /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/Neal L. Patterson |
Neal L. Patterson, Chairman of the |
Board and Chief Executive Officer |
(principal executive officer) |
Date: April 28, 2017 |
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: April 28, 2017 |
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 20, 2017 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | CERNER CORP /MO/ | |
Entity Central Index Key | 0000804753 | |
Document Type | 10-Q | |
Document Period End Date | Apr. 01, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 330,429,274 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Apr. 01, 2017 |
Dec. 31, 2016 |
---|---|---|
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 354,442,293 | 353,731,237 |
Treasury stock, shares | 24,089,737 | 24,089,737 |
Consolidated Statements Of Operations (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Income Statement [Abstract] | ||
Software development, amortization | $ 40,561 | $ 32,614 |
Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||
Net earnings | $ 173,213 | $ 150,360 |
Foreign currency translation adjustment and other (net of taxes of $187 and $2,122, respectively) | 10,405 | 8,290 |
Unrealized holding gain on available-for-sale investments (net of taxes of $68 and $233, respectively) | 111 | 380 |
Comprehensive income | $ 183,729 | $ 159,030 |
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Foreign currency translation adjustment and other, taxes (benefit) | $ 187 | $ 2,122 |
Change in net unrealized holding gain (loss) on available-for-sale investments, taxes (benefit) | $ 68 | $ 233 |
Interim Statement Presentation (Notes) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interim Statement Presentation | Interim Statement Presentation Basis of Presentation The condensed consolidated financial statements included herein have been prepared by Cerner Corporation ("Cerner," the "Company," "we," "us" or "our") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our latest annual report on Form 10-K. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows for the periods presented. Our interim results as presented in this Form 10-Q are not necessarily indicative of the operating results for the entire year. The condensed consolidated financial statements were prepared using GAAP. These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Fiscal Period End Our first fiscal quarter ends on the Saturday closest to March 31. The 2017 and 2016 first quarters ended on April 1, 2017 and April 2, 2016, respectively. All references to years in these notes to condensed consolidated financial statements represent the respective three months ended on such dates, unless otherwise noted. Accounting Pronouncements Adopted in 2017 Share-Based Compensation. In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 impacts several aspects of the accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification. ASU 2016-09 was effective for the Company in the first quarter of 2017. This new guidance impacts our condensed consolidated financial statements as follows:
Under the new guidance, all excess tax benefits and tax deficiencies are recognized as a component of income tax expense. They are not estimated when determining the annual estimated effective tax rate; instead, they are recorded as discrete items in the reporting period they occur. During the three months ended April 1, 2017 we recognized $8 million of net excess tax benefits as discrete items, which are included in income taxes in our condensed consolidated statements of operations. These net excess tax benefits recognized during the three months ended April 1, 2017 resulted in a $0.02 favorable impact on diluted earnings per share. This provision of the new guidance may have a significant impact on our future income tax expense, including increased variability in our quarterly effective tax rates. The impact will be dependent on a number of factors, including the price of our common stock, grant activity under our stock and equity plans, and the timing of option exercises by our associates. This provision of the new guidance was required to be applied prospectively. Prior periods have not been retrospectively adjusted.
Under the new guidance, excess tax benefits generated from the hypothetical exercise of dilutive options are excluded from the calculation of diluted earnings per share. Therefore, the denominator in our diluted earnings per share calculation has increased (comparatively). We estimate that this provision of the new guidance will reduce our calculation of diluted earnings per share by approximately $0.01 to $0.02 for our fiscal year ended December 30, 2017. This provision of the new guidance was required to be applied prospectively. Prior periods have not been retrospectively adjusted.
Income Taxes. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which provides new guidance regarding when an entity should recognize the income tax consequences of certain intra-entity asset transfers. Prior to the adoption of ASU 2016-16, U.S. GAAP prohibited entities from recognizing the income tax consequences of intercompany asset transfers, including transfers of intellectual property. The seller deferred any net tax effect, and the buyer was prohibited from recognizing a deferred tax asset on the difference between the newly created tax basis of the asset in its tax jurisdiction and its financial statement carrying amount as reported in the consolidated financial statements. ASU 2016-16 requires entities to recognize these tax consequences in the period in which the transfer takes place, with the exception of inventory transfers. ASU 2016-16 is effective for the Company in the first quarter of 2018, with early adoption permitted in the first quarter of 2017. The standard requires the use of the modified retrospective (cumulative effect) transition approach. The Company adopted the standard early, in the first quarter of 2017. In connection with such adoption, we recorded a cumulative effect adjustment reducing prepaid expenses and other, other assets, and retained earnings within our condensed consolidated balance sheets by $8 million, $14 million, and $22 million, respectively. This cumulative effect adjustment includes recognition of the income tax consequences of intra-entity transfers of assets other than inventory that occurred prior to the adoption date. Prior periods were not retrospectively adjusted. Recently Issued Accounting Pronouncements Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under existing U.S. GAAP. The FASB has issued the following amendments to ASU 2014-09 from August 2015 through March 2017:
Such amendments provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for the Company in the first quarter of 2018, with early adoption permitted in the first quarter of 2017. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. In 2015, we formed a cross-functional implementation team and began our analysis of this new guidance. Such analysis includes assessment of the impact of the new guidance on our consolidated financial statements and related disclosures, as well as related impacts on processes, accounting systems, and internal controls. Based on our analysis to-date, we have reached the following tentative conclusions regarding this new guidance and how we expect it to impact our consolidated financial statements and related disclosures:
Our analysis and evaluation of the new standard will continue through the effective date in the first quarter of 2018. A significant amount of work remains, due to the complexity of revenue recognition within our industry, the increased number of judgments and estimates required by this new guidance, and the volume of our contract portfolio which must be examined. We must quantify all impacts of this new guidance, including the topics discussed above, which may be material to our consolidated financial statements and related disclosures. We must also implement any necessary changes/modifications to processes, accounting systems, and internal controls. Financial Instruments. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company in the first quarter of 2018, with early adoption permitted. We are currently evaluating the effect that ASU 2016-01 will have on our consolidated financial statements and related disclosures, and we have determined that we will not early adopt. Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces a new model that requires most leases to be reported on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard. ASU 2016-02 is effective for the Company in the first quarter of 2019, with early adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt. Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables and evaluate our available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of 2020, with early adoption permitted in the first quarter of 2019. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt. Callable Debt Securities. In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring the premium be amortized to the earliest call date. Such guidance will impact how premiums are amortized on our available-for-sale investments. ASU 2017-08 is effective for the Company in the first quarter of 2019, with early adoption permitted. The standard requires the use of the modified retrospective (cumulative effect) transition approach. We are currently evaluating the effect that ASU 2017-08 will have on our consolidated financial statements and related disclosures, and have not determined if we will early adopt. |
Fair Value Measurements |
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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 April 1, 2017:
The following table details our financial assets measured and recorded at fair value on a recurring basis at December 31, 2016:
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 April 1, 2017 and December 31, 2016 was approximately $512 million and $515 million, respectively. The carrying amount of such debt at both April 1, 2017 and December 31, 2016 was $500 million. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Available-for-sale Investments Available-for-sale investments at April 1, 2017 were as follows:
Available-for-sale investments at December 31, 2016 were as follows:
We sold available-for-sale investments for proceeds of $20 million during both the three months ended April 1, 2017 and April 2, 2016, resulting in insignificant gains or losses. |
Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables | Receivables A summary of net receivables is as follows:
During the second quarter of 2008, Fujitsu Services Limited’s ("Fujitsu") contract as the prime contractor in the National Health Service ("NHS") initiative to automate clinical processes and digitize medical records in the Southern region of England was terminated by the NHS. This had the effect of automatically terminating our subcontract for the project. We continue to be in dispute with Fujitsu regarding Fujitsu’s obligation to pay the amounts comprised of accounts receivable and contracts receivable related to that subcontract, and we are working with Fujitsu to resolve these issues based on processes provided for in the contract. Part of that process requires final resolution of disputes between Fujitsu and the NHS regarding the contract termination. As of April 1, 2017, it remains unlikely that our matter with Fujitsu will be resolved in the next 12 months. Therefore, these receivables have been classified as long-term and represent less than the majority of other long-term assets at April 1, 2017 and December 31, 2016. While the ultimate collectability of the receivables pursuant to this process is uncertain, we believe that we have valid and equitable grounds for recovery of such amounts and that collection of recorded amounts is probable. Nevertheless, it is reasonably possible that our estimates regarding collectability of such amounts might materially change in the near term, considering that we do not have complete knowledge of the status of the proceedings between Fujitsu and NHS and their effect on our claim. During the first three months of both 2017 and 2016, we received total client cash collections of $1.3 billion. |
Income Taxes |
3 Months Ended |
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Apr. 01, 2017 | |
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 28.7% and 30.8% for the first three months of 2017 and 2016, respectively. The decrease in the effective tax rate in 2017 is a result of the inclusion of net excess tax benefits as a discrete item within the tax provision, upon our adoption of ASU 2016-09 in the first quarter of 2017. Refer to Note (1) for further discussion regarding our adoption of ASU 2016-09 and its impact on our condensed consolidated financial statements. |
Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings 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 April 1, 2017 and April 2, 2016, options to purchase 10.6 million and 7.2 million shares of common stock at per share prices ranging from $44.05 to $73.40 and $44.05 to $73.40, respectively, were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation and Equity | Share-Based Compensation Stock Options Stock option activity for the three months ended April 1, 2017 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 three months ended April 1, 2017 were as follows:
As of April 1, 2017, there was $147 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 3.21 years. Non-vested Shares and Share Units Non-vested share and share unit activity for the three months ended April 1, 2017 was as follows:
As of April 1, 2017, there was $7 million of total unrecognized compensation cost related to non-vested share awards granted under all plans. That cost is expected to be recognized over a weighted-average period of 1.74 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:
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Contingencies |
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Apr. 01, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies Disclosure | Contingencies We accrue estimates for resolution of any legal and other contingencies when losses are probable and estimable, in accordance with Accounting Standards Codification Topic 450, Contingencies. The terms of our software license agreements with our clients generally provide for a limited indemnification of such clients against losses, expenses and liabilities arising from third party claims based on alleged infringement by our solutions of an intellectual property right of such third party. The terms of such indemnification often limit the scope of and remedies for such indemnification obligations and generally include a right to replace or modify an infringing solution. To date, we have not had to reimburse any of our clients for any judgments or settlements to third parties related to these indemnification provisions pertaining to intellectual property infringement claims. For several reasons, including the lack of a sufficient number of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases under the terms of the corresponding agreements with our clients, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions. In addition to commitments and obligations in the ordinary course of business, we are subject to various legal proceedings and claims that arise in the ordinary course of business, including for example, employment and client disputes and litigation alleging solution and implementation defects, personal injury, intellectual property infringement, violations of law and breaches of contract and warranties. In addition, we are a defendant in lawsuits filed in federal and state courts brought as putative class or collective actions on behalf of various groups of current and former associates in the U.S alleging that we misclassified associates as exempt from overtime pay under the Fair Labor Standards Act and state wage and hour laws. These proceedings are at various procedural stages (for example one case is newly filed while two cases have classes certified) and seek unspecified monetary damages, injunctive relief, costs and attorneys’ fees. Given the substantial uncertainties, such as the impact of discovery and the extent to which significant factual issues are resolved, the disposition of pre-trial motions, the extent of potential damages, which are often unspecified or indeterminate, and the status of settlement discussions (if any), we cannot predict with any reasonable certainty the timing or outcome of such contingencies. At this time, we do not believe any material losses under these claims to be probable or estimable. No less than quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made. Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. Should any one or a combination of more than one of these proceedings be successful, or should we determine to settle any one or a combination of these matters, we may be required to pay substantial sums, become subject to the entry of an injunction or be forced to change the manner in which we operate our business, which could have a material adverse impact on our business, results of operations, cash flows or financial condition. |
Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have two operating segments, Domestic and Global. Revenues are derived primarily from the sale of clinical, financial and administrative information systems and solutions. 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, acquisition costs and related adjustments, 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 months ended April 1, 2017 and April 2, 2016:
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Fair Value Measurements (Tables) |
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 April 1, 2017:
The following table details our financial assets measured and recorded at fair value on a recurring basis at December 31, 2016:
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Investments Investments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of available-for-sale investments | Available-for-sale investments at April 1, 2017 were as follows:
Available-for-sale investments at December 31, 2016 were as follows:
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Receivables (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Receivables | A summary of net receivables is as follows:
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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Share-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Stock Options Activity | Stock option activity for the three months ended April 1, 2017 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 three months ended April 1, 2017 were as follows:
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Schedule of Share-based Compensation, Restricted Stock Activity | Non-vested share and share unit activity for the three months ended April 1, 2017 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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Segment Reporting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 01, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Operating Information | The following table presents a summary of our operating segments and other expense for the three months ended April 1, 2017 and April 2, 2016:
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Interim Statement Presentation Policies (Details) - USD ($) shares in Millions |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
Dec. 30, 2017 |
Dec. 31, 2016 |
Jan. 02, 2016 |
Jan. 03, 2015 |
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Interim Statement Presentation [Line Items] | ||||||
Basis of Accounting, Policy [Policy Text Block] | The condensed consolidated financial statements were prepared using GAAP | |||||
Use of Estimates, Policy [Policy Text Block] | These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses | |||||
Fiscal Period, Policy [Policy Text Block] | Our first fiscal quarter ends on the Saturday closest to March 31. The 2017 and 2016 first quarters ended on April 1, 2017 and April 2, 2016, respectively. All references to years in these notes to condensed consolidated financial statements represent the respective three months ended on such dates, unless otherwise noted. | |||||
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation | $ 9,000,000 | |||||
Diluted earnings per share calculation, assumed share repurchases from excess tax benefit | 2.2 | |||||
Sales Commissions and Fees | $ 44,000,000 | $ 45,000,000 | $ 35,000,000 | |||
ASU 2016-09 Share-Based Compensation [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Name | Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting | |||||
New Accounting Pronouncement or Change in Accounting Principle, Description | ASU 2016-09 impacts several aspects of the accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification | |||||
ASU 2016-16 Income Taxes [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Name | ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory | |||||
New Accounting Pronouncement or Change in Accounting Principle, Description | provides new guidance regarding when an entity should recognize the income tax consequences of certain intra-entity asset transfers. Prior to the adoption of ASU 2016-16, U.S. GAAP prohibited entities from recognizing the income tax consequences of intercompany asset transfers, including transfers of intellectual property. The seller deferred any net tax effect, and the buyer was prohibited from recognizing a deferred tax asset on the difference between the newly created tax basis of the asset in its tax jurisdiction and its financial statement carrying amount as reported in the consolidated financial statements. ASU 2016-16 requires entities to recognize these tax consequences in the period in which the transfer takes place, with the exception of inventory transfers | |||||
Revenue from Contracts with Customers [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under existing U.S. GAAP | |||||
ASU 2016-01 Financial Instruments [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for the Company in the first quarter of 2018, with early adoption permitted. We are currently evaluating the effect that ASU 2016-01 will have on our consolidated financial statements and related disclosures, and we have determined that we will not early adopt. | |||||
ASU 2016-02 Leases [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which introduces a new model that requires most leases to be reported on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard. ASU 2016-02 is effective for the Company in the first quarter of 2019, with early adoption permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt. | |||||
ASU 2016-13 Credit Losses [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables and evaluate our available-for-sale investments for impairment. ASU 2016-13 is effective for the Company in the first quarter of 2020, with early adoption permitted in the first quarter of 2019. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures, and we have not determined if we will early adopt | |||||
ASU 2017-08 Callable Debt Securities [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring the premium be amortized to the earliest call date. Such guidance will impact how premiums are amortized on our available-for-sale investments. ASU 2017-08 is effective for the Company in the first quarter of 2019, with early adoption permitted. The standard requires the use of the modified retrospective (cumulative effect) transition approach. We are currently evaluating the effect that ASU 2017-08 will have on our consolidated financial statements and related disclosures, and have not determined if we will early adopt | |||||
Net earnings [Member] | ASU 2016-09 Share-Based Compensation [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 8,000,000 | |||||
Diluted earnings per share [Member] | ASU 2016-09 Share-Based Compensation [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 0.02 | |||||
Minimum [Member] | Estimate impact on dilute earnings per share [Member] | ASU 2016-09 Share-Based Compensation [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 0.01 | |||||
Maximum [Member] | Estimate impact on dilute earnings per share [Member] | ASU 2016-09 Share-Based Compensation [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 0.02 | |||||
Prepaid Expenses and Other Current Assets [Member] | ASU 2016-16 Income Taxes [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 8,000,000 | |||||
Other Assets [Member] | ASU 2016-16 Income Taxes [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | 14,000,000 | |||||
Retained Earnings [Member] | ASU 2016-16 Income Taxes [Member] | ||||||
Interim Statement Presentation [Line Items] | ||||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 22,000,000 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions |
Apr. 01, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Fair value of long-term debt, including current maturities | $ 512 | $ 515 |
Carrying amount of long-term debt | $ 500 |
Investments (Narrative) (Details) $ in Millions |
3 Months Ended |
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Apr. 01, 2017
USD ($)
| |
Investments [Abstract] | |
Proceeds from sale of available-for-sale securities | $ 20 |
Receivables (Narrative) (Details) $ in Billions |
3 Months Ended |
---|---|
Apr. 01, 2017
USD ($)
| |
Receivables [Abstract] | |
Client cash collections | $ 1.3 |
Receivables (Summary Of Net Receivables) (Details) - USD ($) $ in Thousands |
Apr. 01, 2017 |
Dec. 31, 2016 |
---|---|---|
Receivables [Abstract] | ||
Gross accounts receivable | $ 1,015,120 | $ 958,843 |
Less: Allowance for doubtful accounts | 48,641 | 43,028 |
Accounts receivable, net of allowance | 966,479 | 915,815 |
Current portion of lease receivables | 19,875 | 29,128 |
Total receivables, net | $ 986,354 | $ 944,943 |
Income Taxes (Details) |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 28.70% | 30.80% |
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 | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Earnings Per Share [Abstract] | ||
Income available to common shareholders, basic | $ 173,213 | $ 150,360 |
Income available to common shareholders including assumed conversions, diluted | $ 173,213 | $ 150,360 |
Basic weighted average shares outstanding | 329,973 | 339,518 |
Stock options and non-vested shares, incremental shares | 6,217 | 6,382 |
Diluted weighted average shares outstanding | 336,190 | 345,900 |
Basic earnings per share | $ 0.52 | $ 0.44 |
Diluted earnings per share | $ 0.52 | $ 0.43 |
Earnings Per Share (Narrative) (Details) - $ / shares shares in Millions |
3 Months Ended | |
---|---|---|
Apr. 01, 2017 |
Apr. 02, 2016 |
|
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share, amount | 10.6 | 7.2 |
Antidilutive securities excluded from computation of earnings per share, exercise price, lower range limit | $ 44.05 | $ 44.05 |
Antidilutive securities excluded from computation of earnings per share, exercise price, upper range limit | $ 73.40 | $ 73.40 |
Share-Based Compensation (Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions) (Details) |
3 Months Ended |
---|---|
Apr. 01, 2017
$ / shares
| |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Expected volatility (%) | 27.00% |
Expected term (yrs) | 7 years |
Risk-free rate (%) | 2.20% |
Fair value per option | $ 18.31 |
Share-Based Compensation (Schedule Of Non-Vested Shares Activity) (Details) - Restricted Stock [Member] shares in Thousands |
3 Months Ended |
---|---|
Apr. 01, 2017
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding at beginning of year, number of shares | shares | 354 |
Outstanding at beginning of year, weighted-average grant date fair value | $ / shares | $ 61.12 |
Granted, number of shares | shares | 20 |
Granted, weighted-average grant date fair value | $ / shares | $ 55.74 |
Vested, number of shares | shares | (12) |
Vested, weighted-average grant date fair value | $ / shares | $ 61.75 |
Forfeited, number of shares | shares | (4) |
Forfeited, weighted-average grant date fair value | $ / shares | $ 52.37 |
Outstanding at end of year, number of shares | shares | 358 |
Outstanding at end of year, weighted-average grant date fair value | $ / shares | $ 60.88 |
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