The ABCs of systemic healthcare reform - Cerner Corporation

All of the auction rate securities that the Company currently holds are A rated or higher and are collateralized by student loan
portfolios, the majority of which are backed by the U.S. government through its Federal Family Education Loan Program.
Management regularly reviews investment securities for impairment based on both quantitative and qualitative criteria that
include the extent to which cost exceeds fair value, the duration of the market decline, our intent and ability to hold to maturity
or until forecasted recovery, and the financial health of and specific prospects for the issuer. Unrealized losses that are other
than temporary are recognized in earnings. We do not believe the auction failures will materially impact our ability to fund our
working capital needs, capital expenditures or other business requirements.
(8) Interest Income (Expense)
A summary of interest income and expense is as follows:
(9) Stock Options and Equity
At the end of 2008 and 2007, the Company had 1,000,000 shares of authorized but unissued preferred stock, $.01 par value.
As of January 3, 2009, the Company had four fixed stock option and equity plans in effect for associates. The awards granted
under these plans qualify for equity classification pursuant to SFAS 123R. Amounts recognized in the consolidated financial
statements with respect to these plans are as follows:
During 2008, the Company had two shareholder approved long-term incentive plans from which it could issue grants.
Under the 2001 Long-Term Incentive Plan F, the Company is authorized to grant to associates, directors and consultants
4,000,000 shares of common stock awards taking into account the stock-split effective January 10, 2006. Awards under this
plan may consist of stock options, restricted stock and performance shares, as well as other awards such as stock appreciation
rights, phantom stock and performance unit awards which may be payable in the form of common stock or cash at the
Company’s discretion. However, not more than 1,000,000 of such shares will be available for granting any types of grants other
than options or stock appreciation rights. Options under Plan F are exercisable at a price not less than fair market value on the
date of grant as determined by the Stock Option Committee. Options under this plan typically vest over a period of five years as
determined by the Stock Option Committee and are exercisable for periods of up to 25 years.
Under the 2004 Long-Term Incentive Plan G, the Company is authorized to grant to associates and directors 4,000,000 shares
of common stock awards taking into account the stock-split effective January 10, 2006. Awards under this plan may consist of
stock options, restricted stock and performance shares, as well as other awards such as stock appreciation rights, phantom
stock and performance unit awards which may be payable in the form of common stock or cash at the Company’s discretion.
Options under Plan G are exercisable at a price not less than fair market value on the date of grant as determined by the Stock
Option Committee. Options under this plan typically vest over a period of five years as determined by the Stock Option
Committee and are exercisable for periods of up to 12 years. In 2007, Long-Term Incentive Plan G was amended to provide the
Company the ability to recover fringe benefit tax payments made by the Company on behalf of its associates in India.
The fair market value of each stock option award is estimated on the date of grant using a lattice option-pricing model. In 2006,
the Company changed its valuation model from the Black-Scholes option-pricing model to the lattice pricing model because it is
believed to provide greater flexibility for valuing the substantive characteristics of employee share instruments, resulting in a
more accurate estimate of fair market value. The pricing model requires the use of the following estimates and assumptions:
• Expected volatilities under the lattice model are based on an equal weighting of implied volatilities from traded options
on the Company’s shares and historical volatility. The Company uses historical data to estimate the stock option
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