Cognizant Technology Solutions Reports Record Fourth Quarter Results.Business Editors TEANECK, N.J.--(BUSINESS WIRE)--Feb. 12, 2003 Cognizant Technology Solutions Cognizant redirects here. For a definition of the word see the entry for at Wiktionary Cognizant Technology Solutions (NASDAQ: CTSH) is an information technology services company with headquarters in New Jersey U.S.A. Corporation (Nasdaq: CTSH): Quarterly Revenue grows 54% over prior year 2002 Revenue exceeds $229 million Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. reaches $0.49 for quarter Cognizant Technology Solutions Corporation (Nasdaq: CTSH), a leading provider of custom software development, integration and application outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. services, today announced financial results for the fourth quarter and year ended December 31, 2002. Revenue for the fourth quarter increased to $67.0 million, up 54 percent from $43.5 million in the fourth quarter of 2001, and up 9% sequentially from the third quarter of 2002. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, net income for the fourth quarter increased to $9.1 million, or $0.42 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share, which excludes $1.7 million in transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). related to the IMS Health IMS Health (NYSE: RX) is an international consulting and data services company that supplies the pharmaceutical industry with sales data and consulting services. IMS Health was founded in 1954 by Bill Frohlich and David Dubow. exchange offer, was $0.49. Gross margin was 46.0%, compared with 46.2% in the third quarter of 2002, and 49.4% in the year ago quarter. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the quarter was 19.8%, compared to 19.8% in the third quarter of 2002 and 20.8% in the fourth quarter of 2001. Revenue for the full year 2002 was $229.1 million compared to $177.8 million in 2001. On a GAAP basis, net income for 2002 increased to $34.6 million, or $1.63 per diluted share. Pro forma earnings per share, which excludes $1.7 million in transaction costs related to the IMS Health exchange offer recorded in the fourth quarter, was $1.71 per diluted share. "The year 2002 was successful for Cognizant cog·ni·zant adj. Fully informed; conscious. See Synonyms at aware. [From cognizance.] Adj. 1. on almost all fronts," said Kumar Mahadeva, Chairman and Chief Executive Officer. "Foremost is our belief that we have firmly established Cognizant in the top tier of our peer group, widening the gap between ourselves and other competitors with the successful execution of our industry leading 4th Generation services model. In addition, we continue to benefit from the broad market acceptance of the offshore delivery model, which will fuel our growth in the years to come. This is best illustrated by the growing number of strategic client partnerships that we established over the course of the year, typically with larger companies that have embraced offshore outsourcing Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the product or service will be sold or consumed. as a part of their own strategic initiatives. The growth opportunities with the many strategic clients we won during 2002 gives us a high degree of confidence in our outlook for 2003, as does the potential opportunities in our new deal pipeline which remains robust." "Cognizant's business model continued to generate strong results, with our year-end cash position rising to over $126 million, which includes the generation of $57 million of cash from operations during 2002," said Gordon Coburn, Chief Financial Officer. "DSO See CSO. , including unbilled un·billed adj. 1. Not having been billed or charged for: unbilled medical charges. 2. Appearing, as in a movie, without being credited: an unbilled walk-on. receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , improved further to 56 days, from 59 at the end of September and 64 at the end of June. Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. customers continue to account for a growing portion of our revenue mix, rising to 43% compared to 35% last quarter due to the ramp-up of several large customers. Total headcount increased to over 6,100, reflecting the strength of our business outlook for 2003. And finally, our existing clients remain highly satisfied as well, accounting for 85% of our business this quarter." Conference Call Cognizant will host a conference call on February 12, at 5 PM. (EST EST electroshock therapy. EST abbr. electroshock therapy ) to discuss the Company's quarterly results. To listen to the call please dial 800-953-6584 domestic and 706-645-0156 internationally. The call will also be broadcast live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at Cognizant's web site, www.cognizant.com. Please go to the web site at least fifteen minutes prior to the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. A replay will be made available on the web site at www.cognizant.com or by calling 800-642-1687 and entering "7971735" from two hours after the end of the call until 11:59 p.m. (EST) on February 19, 2003. About Cognizant Technology Solutions Cognizant Technology Solutions Corporation (Nasdaq: CTHS CTHS Cherrybrook Technology High School (Sydney, Australia) - News) is a leading provider of custom information technology design, development, integration and maintenance services. Focused on delivering strategic information technology solutions that address the complex business needs of its clients, Cognizant provides applications management, development, systems integration and business process outsourcing Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in services through its onsite/offshore outsourcing model. Cognizant's more than 6,100 employees are committed to partnerships that sustain long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , proven value for customers by delivering high-quality, cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. solutions through its development centers in India and Ireland, and onsite client teams. Cognizant maintains P-CMM P-CMM People Capability Maturity Model (Software Engineering Institute) P-CMM Personnel Capability Maturity Model and SEI-CMM Level 5 assessments from an independent third-party assessor and was recently ranked as the top information technology company in Forbes' 200 Best Small Companies in America and in BusinessWeek's Hot Growth Companies. Further information about Cognizant can be found at http://www.cognizant.com. This press release includes statements which may constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Although Cognizant believes the expectations contained in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove correct. This information may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Potential risks and uncertainties that could cause or contribute to differences include, but are not limited to: (i) the significant fluctuations of Cognizant's quarterly operating results caused by a variety of factors, many of which are not within Cognizant's control, including (a) the number, timing, scope and contractual terms A contractual term is "[a]ny provision forming part of a contract"[1] Each term gives rise to a contractual obligation, breach of which will can give rise to litigation. of application design, development and maintenance projects, (b) delays in the performance of projects, (c) the accuracy of estimates of costs, resources and time to complete projects, (d) seasonal patterns of Cognizant's services required by customers, (e) levels of market acceptance for Cognizant's services, (f) potential adverse impacts of new tax legislation, and (g) the hiring of additional staff; (ii) changes in Cognizant's billing and employee utilization rates; (iii) Cognizant's ability to manage its growth effectively, which will require Cognizant (a) to increase the number of its personnel, particularly skilled technical, marketing and management personnel, (b) to find suitable acquisition candidates to support geographic expansion, and (c) to continue to develop and improve its operational, financial, communications and other internal systems, in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , India and Europe; (iv) Cognizant's limited operating history with unaffiliated customers; (v) Cognizant's reliance on key customers and large projects; (vi) the highly competitive nature of the markets for Cognizant's services; (vii) Cognizant's ability to successfully address the continuing changes in information technology, evolving industry standards and changing customer objectives and preferences; (viii) Cognizant's reliance on the continued services of its key executive officers and leading technical personnel; (ix) Cognizant's ability to attract and retain a sufficient number of highly skilled employees in the future; (x) Cognizant's ability to protect its intellectual property rights; (xi) the concentration of Cognizant's operations in India and the related geo-political risks of local and cross-border conflicts; (xii) terrorist activity, the threat of terrorist activity, and responses to and results of terrorist activity and threats, including, but not limited to, effects, domestically and/or internationally, on Cognizant, its personnel and facilities, its customers and suppliers, financial markets and general economic conditions; (xiii) the effects, domestically and/or internationally, on Cognizant, its personnel and facilities, its customers and suppliers, financial markets and general economic conditions arising from hostilities involving the United States in Iraq or elsewhere; and (xiv) general economic conditions. Such forward-looking statements include risks and uncertainties; consequently, actual transactions and results may differ materially from those expressed or implied thereby. Additional information on factors that may affect the business and financial results of the companies can be found in filings of the companies made from time to time with the Securities and Exchange Commission.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Revenues $62,147 $38,166 $208,657 $158,969
Revenues -related party 4,864 5,295 20,429 18,809
Total revenues 67,011 43,461 229,086 177,778
Cost of revenues 36,194 21,989 122,701 90,848
Gross profit 30,817 21,472 106,385 86,930
Selling, general and
administrative expenses 15,412 10,636 53,345 44,942
Depreciation and
amortization expense 2,163 1,802 7,842 6,368
Income from operations 13,242 9,034 45,198 35,620
Other income:
Interest income 503 495 1,808 2,501
Other expense, net (146) (163) (235) (767)
Total other income 357 332 1,573 1,734
Income before provision
for income taxes 13,599 9,366 46,771 37,354
Provision for income
taxes (2,780) (3,502) (10,529) (13,970)
Pro forma Net income 10,819 5,864 36,242 23,384
(Excluding split-off costs)
Impairment loss on
Investment, net of tax
benefit - (1,224) - (1,224)
Split-off costs,
net of tax benefit (1,680) - (1,680) -
Net income $ 9,139 $ 4,640 $ 34,562 $ 22,160
Pro forma Basic EPS $ 0.53 $ 0.30 $ 1.84 $ 1.23
(Excluding split-off costs)
Pro forma Diluted EPS $ 0.49 $ 0.29 $ 1.71 $ 1.15
(Excluding split-off costs)
Basic earnings per
share $ 0.45 $ 0.24 $ 1.75 $ 1.17
Diluted earnings per
share $ 0.42 $ 0.23 $ 1.63 $ 1.09
Weighted average
number of common
shares outstanding 20,225 19,283 19,747 19,017
Weighted average
number of common
and dilutive shares
outstanding 21,896 20,284 21,231 20,371
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(In thousands)
December 31, December 31,
2002 2001
Assets
Current Assets
Cash and cash equivalents $126,211 $ 84,977
Trade accounts receivable, net of
allowances of $861 and $882,
respectively 35,092 21,063
Trade accounts receivable - related party 1,605 1,481
Unbilled accounts receivable 4,159 5,005
Unbilled accounts receivable - related party 149 417
Current tax asset 3,711 1,451
Other current assets 4,907 2,941
Total Current Assets 175,834 117,335
Property and equipment - net 39,090 24,339
Goodwill - net 878 878
Other Intangible assets - net 12,870 -
Other assets 2,801 2,431
Total Assets $231,473 $144,983
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 6,948 $ 3,652
Accrued and other current liabilities 34,539 18,046
Total Current Liabilities 41,487 21,698
Deferred income taxes 24,505 24,493
Total Liabilities 65,992 46,191
Stockholders' Equity 165,481 98,792
Total Liabilities and Stockholders' Equity $231,473 $144,983
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