Strong Operating Results Generate 11 Percent Revenue Gain
Completion of Spin-Off and Acquisitions on Schedule for Mid-Year
WESTPORT, CT., Apr. 21 /PRNewswire/ -- Cognizant Corporation (NYSE: CZT)
today reported basic earnings per share growth of 28 percent to $0.37 per
share for the quarter ended Mar. 31, 1998. Diluted earnings per share
increased 24 percent to $0.36 per share. Reported revenue and operating
income grew 7 percent and 31 percent, respectively. Constant-dollar revenue
for Cognizant rose 11 percent above the first quarter of 1997.
"Cognizant's core businesses delivered an excellent quarter, putting us
squarely on track to achieve our 1998 growth targets," said Robert E.
Weissman, Cognizant Chairman and CEO. "We're on schedule to complete by
mid-1998 all strategic actions announced during the quarter, including the
spin-off, and acquisitions of both Walsh and PMSI."
On Jan. 15, 1998, Cognizant announced plans to become two independent
companies: IMS HEALTH and Nielsen Media Research through a tax-free
spin-off. Separately, definitive agreements were signed on Mar. 23, 1998 for
IMS HEALTH to acquire Walsh International Inc. (Nasdaq: WSHI) and
Pharmaceutical Marketing Services Inc. (Nasdaq: PMRX).
First-Quarter Results
For the quarter ended Mar. 31, 1998, revenues rose to $337.0 million, a
7 percent increase. Constant-dollar revenue grew 14 percent excluding the
impact of the Pilot Software divestiture. Operating income was up 31 percent
to $62.5 million (Table 1).
Net income of $60.1 million, or $0.37 basic earnings per share, includes
both year 2000 expense of $13.2 million, and gains of $13.6 million from
monetization of Enterprises venture fund investments. Gartner Group generated
a SAB 51 non-cash gain of $8.0 million, as well as a non-cash write-off of
$3.0 million of in-process research and development associated with a recent
Gartner Group acquisition. Also included in 1998 first quarter results is a
$4.8 million expense related to the planned spin-off.
Net income excluding all one-time charges and gains totaled $59.7 million,
or $0.37 basic earnings per share, compared with $48.9 million , or $0.29
basic earnings per share in the 1997 first quarter, an increase in basic
earnings per share of 28 percent. Diluted earnings per share increased 24
percent to $0.36 per share.
Constant-Dollar Results
On a constant-dollar basis, Cognizant revenue grew 11 percent while
operating income increased 37 percent in the 1998 first quarter, before year
2000 and spin-related expense. Excluding the impact of the Pilot Software
divestiture, revenues grew 14 percent for the 1998 first quarter, compared
with the year-earlier period.
Cognizant maintains a hedging program to protect a portion of committed
IMS revenues from the impact of currency fluctuations. IMS's 1998
first-quarter revenue increased 13 percent on a constant-dollar basis,
compared with reported revenue growth of 7 percent. Constant-dollar operating
income for IMS rose 17 percent, versus reported operating income growth of
10 percent.
Operating Unit Results
IMS, the leading provider of global information solutions to the
pharmaceutical and healthcare industries, benefited from strong performance of
its sales management products in North America and Japan, and from its
Cornerstone(TM) electronic territory management software during the 1998 first
quarter. IMS's global reach was extended in China with the acquisition of
ChinaMetrik, a privately held company which collects and publishes the most
authoritative information about the Chinese health market.
The Pharmaceutical Marketing Services (PMSI) and Walsh International
acquisitions, scheduled for completion by mid-year, will augment the IMS
global product portfolio of market research and sales management solutions for
the pharmaceutical and healthcare industries. IMS's Sales Technologies, which
provides electronic territory management services primarily in the U.S., will
broaden its global reach with the addition of sales force automation services
provided by Walsh in Europe and Asia Pacific.
On Apr. 9, 1998 Cognizant Technology Solutions (CTS), filed a registration
statement with the Securities and Exchange Commission for an initial offering
of 2,917,000 shares of its Class A Common Stock.
Erisco, a provider of software-based administrative and analytical
solutions to the healthcare industry, achieved excellent revenue growth during
the quarter. Sierra Health Services, Inc. of Las Vegas, Nev. selected
Erisco's Facets(TM) as its core information system solution for managed-care
business, and an agreement was signed with First Consulting Group to provide
implementation management and support services to the growing list of Facets
users.
Reported revenue for Cognizant's Emerging Markets group declined by
10 percent for the 1998 first quarter, due to the sale of Pilot Software in
August 1997. Excluding Pilot, revenue growth for current businesses was
48 percent. Operating income grew to $0.9 million.
Enterprises, the company's in-house venture capital firm which focuses on
investments in emerging healthcare businesses, generated cash proceeds of
$23.2 million during the first quarter of 1998 from the sale of
non-strategic assets. Net gains from dispositions totaled $13.6 million
during the first quarter of 1998.
Nielsen Media Research, the premier provider of television audience
measurement services, achieved double-digit revenue and operating income
growth in the 1998 first quarter. Revenue increases were driven by expansion
of metered market service and continued growth of the cable television
business. Greensboro, NC, was added as the thirty-ninth local metered market
in April 1998, the first of six additional metered markets planned in 1998.
During the first quarter, field testing began on Nielsen Media's
Active/Passive meter, which will measure digital television transmission
formats. Working with Microsoft, Nielsen Media has jointly developed the
first metering system for Windows 98, enabling the measurement of television
audiences via personal computers.
Balance Sheet Highlights
Cash and cash equivalents on Cognizant's summary balance sheet (Table 2)
shows a cash balance of $344.3 million at Mar. 31, 1998, compared with
$318.4 million at Dec. 31, 1997. The cash balance change reflects strong cash
flow from operations and proceeds from Enterprises dispositions. At Mar. 31,
1998, Cognizant shares outstanding totaled 162.8 million.
Pro Forma Financial Results
Pro forma income statements for IMS HEALTH (Table 3) and Nielsen Media
Research (Table 4) present financial results of the two companies as if
they had operated as independent companies during the 1998 and 1997 first
quarters.
IMS HEALTH's pro forma basic earnings per share increased 37 percent to
$0.26 per share, compared with $0.19 per share in the first quarter of 1997.
Reported revenue rose 5 percent to $240.9 million. On a constant-dollar
basis, IMS HEALTH revenue grew 11 percent, and excluding the impact of Pilot
Software divestiture, 1998 first quarter revenue increased 15 percent.
Reported IMS HEALTH operating income rose 55 percent to $33.6 million, while
net income rose 32 percent to $41.5 million.
Pro forma net income for Nielsen Media Research grew 15 percent to
$12.2 million in the 1998 first quarter, and basic earnings per share grew
17 percent to $0.07 per share. Reported revenue rose 11 percent to
$96.1 million, while operating income totaled $24.5 million, a 12 percent
increase.
Cognizant Corporation integrates information and technology to create
business insight. Its principal operating units are IMS, which offers global
information solutions to the pharmaceutical and healthcare industries, and
Nielsen Media Research, the leader in audience measurement for electronic
media. Cognizant also is the largest shareholder of Gartner Group, the
premier provider of research and advisory services to the information
technology industry. Additional information is available at
Cognizant's web site: http://www.cognizantcorp.com.
This press release includes statements which may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act 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 of Cognizant to differ materially from the forward-looking statements.
Factors which could cause or contribute to such differences include, but are
not limited to (i) the risks associated with operating on a global basis,
including fluctuations in the value of foreign currencies relative to the U.S.
dollar, and the ability to successfully hedge such risks, (ii) the extent in
which Cognizant seeks growth through acquisitions, and the ability to identify
and consummate acquisitions on satisfactory terms, (iii) the ability to
develop new or advanced technologies and systems for their businesses on a
cost-effective basis, (iv) competition in the market for audience measurement
services, (v) regulatory and legislative initiatives, particularly in the area
of medical privacy, and (vi) deterioration in economic conditions,
particularly in the pharmaceutical, healthcare, media, information technology
or other industries in which Cognizant's customers operate.
Table 1
Cognizant Corporation Income Statement(a)
Three Months Ended March 31
(unaudited, in millions except per share)
1998 1997 % Change Constant
$Growth
Revenue
IMS $ 223.4 $209.8 7% 13%
Nielsen Media Research 96.1 86.3 11 11
Emerging Markets 17.5 19.5 (10) (8)
Total Revenue 337.0 315.6 7 11
Operating Income
IMS 40.9 37.3 10 17
Nielsen Media Research 28.9 26.3 10 10
Emerging Markets 0.9 (8.8) -- --
Corporate and Other (8.2) (6.9) (19) (19)
Operating Income Before
Year 2000 and
Spin Expense 62.5 47.9 31 37
Year 2000 Expense (13.2) -- --
Spin-Related Expense (4.8) -- --
Total Operating Income 44.5 47.9 (7)
Interest Income 3.9 3.2 23
Gartner Equity Income 18.6 15.5 20
Gartner SAB 51 Gains 8.0 -- --
Gartner R&D Write-Off (3.0) -- --
Gains from
Dispositions, Net 13.6 -- --
Other Income (Expense) (2.8) (0.8) (263)
Income Before
Provision for Income
Taxes 82.8 65.8 26
Provision for
Income Taxes (22.7) (16.9) (34)
Net Income(b) $60.1 $48.9 23%
Basic Earnings
Per Share $0.37 $0.29 28%
Diluted Earnings
Per Share $0.36 $0.29 24%
Average Shares
Outstanding
Basic 162.4 169.8 (4)%
Diluted 167.3 170.0 (2)%
(a)Restated to reflect Cognizant's Gartner Group ownership under
equity accounting as if in effect since Jan. 1, 1997, and to exclude an
Enterprises after-tax gain of $3.7 million, or $0.02 per share, in the
1997 first quarter.
(b)Excluding year 2000 and spin-related expense, Gartner SAB 51 gains
and in-process R&D write-off, and gains from dispositions, net income for
the quarter ended Mar. 31, 1998 was $59.7 million, an increase of 22
percent over the 1997 first quarter.
Table 2
Cognizant Corporation Summary Balance Sheet(a)
(unaudited, dollars in millions)
March 31, December 31,
1998 1997
Assets
Current Assets
Cash and Cash Equivalents $344.3 $318.4
Accounts Receivable, Net 303.0 303.6
Other Current Assets 77.2 72.4
Total Current Assets 724.5 694.4
Gartner Equity Investment 212.9 195.7
Notes Receivable and
Other Investments 98.6 109.7
Property, Plant and
Equipment, Net 233.6 233.6
Computer Software 147.9 142.3
Goodwill 91.5 87.4
Other Assets, Net 119.2 116.4
TOTAL ASSETS $1,628.2 $1,579.5
Liabilities and Shareholders' Equity
Current Liabilities $425.4 $441.2
Minority Interests 102.9 101.2
Other Liabilities 229.2 235.5
TOTAL LIABILITIES 757.5 777.9
Total Shareholders' Equity 870.7 801.6
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,628.2 $1,579.5
(a)Reflects Cognizant's Gartner Group ownership under equity accounting,
as if in effect since Jan. 1, 1997.
Table 3
IMS HEALTH
Pro Forma Income Statement(a)
Three Months Ended March 31
(unaudited, in millions except per share)
1998 1997 % Change Constant
$ Growth
Revenue
IMS $ 223.4 $ 209.8 7% 13%
Emerging Markets 17.5 19.5 (10) (8)
Total Revenue 240.9 229.3 5 15
Operating Income
IMS 40.9 37.3 10 17
Emerging Markets 0.9 (8.8) -- --
Corporate and Other (8.2) (6.9) (19) (19)
Operating Income Before
Year 2000 Expense 33.6 21.6 55
Year 2000 Expense (10.0) -- --
Total Operating Income 23.6 21.6 9
Interest Income 7.8 7.0 10
Gartner Equity Income 18.6 15.5 20
Gartner SAB 51 Gains 8.0 -- --
Gartner R&D Write-off (3.0) -- --
Gains from Dispositions, Net 10.4 -- --
Other Income (Expense) (2.8) (0.7) (263)
Income Before Provision for
Income Taxes 62.6 43.4 44
Provision for Income Taxes (17.1) (11.9) (44)
Net Income $45.5 $31.5 44%
Basic Earnings Per Share $ 0.28 $ 0.19 47%
Diluted Earnings Per Share $ 0.27 $ 0.19 42%
Average Shares Outstanding
Basic 162.4 169.8 (4)%
Diluted 167.3 170.0 (2)%
Excluding All One-Time
Charges and Gains
Net Income $41.5 $31.5 32%
Basic Earnings Per Share $0.26 $0.19 37%
Diluted Earnings Per Share $0.25 $0.19 32%
(a) Restated to reflect Cognizant's Gartner Group ownership under equity
accounting, as if in effect since Jan. 1, 1997, and to exclude an Enterprises
after-tax gain of $3.7 million, or $0.02 per share, in the 1997 first quarter.
Revenue and operating income are as reported by Cognizant Corporation,
excluding revenue, operating income, year 2000 expenses of Nielsen Media
Research ($3.2 million in the 1998 first quarter), and spin-related expense.
Interest income is as reported by Cognizant Corporation, plus pro forma
interest income of $3.9 million on $300.0 million proceeds from the planned
Nielsen Media Research debt financing to repay inter-company loans. Gains
from Dispositions, Net is as reported by Cognizant Corporation, less gains
allocated to Nielsen Media Research of $3.2 million. The tax provision
reflects an effective tax rate of 27.4 percent for both periods. Average
shares outstanding are as reported by Cognizant Corporation.
Table 4
Nielsen Media Research
Pro Forma Income Statement
Three Months Ended March 31
(unaudited, in millions except per share)
1998 1997 % Change
Revenue $96.1 $86.3 11%
Operating Income
Nielsen Media Research 28.9 26.3 10
Corporate and Other (4.4) (4.4) --
Operating Income Before
Year 2000 Expense 24.5 21.9 12
Year 2000 Expense (3.2) -- --
Total Operating Income 21.3 21.9 (3)
Interest Expense (4.8) (4.8) --
Gains from Dispositions, Net 3.2 -- --
Income Before Provision for
Income Taxes 19.7 17.1 15
Provision for Income Taxes (7.5) (6.5) (15)
Net Income $12.2 $10.6 15%
Basic Earnings Per Share $0.07 $0.06 17%
Diluted Earnings Per Share $0.07 $0.06 17%
Average Shares Outstanding
Basic 162.4 169.8 (4)%
Diluted 167.3 170.0 (2)%
Revenue and operating income are as reported by Cognizant Corporation for
the Nielsen Media Research business. Corporate and Other includes pro forma
expense of maintaining a separate corporate office facility ($3.8 million) and
separate employee benefit and business insurance plans ($0.6 million), as if
Nielsen Media Research had been a standalone publicly traded company in all
periods. Nielsen Media Research's share of Cognizant's total year 2000
expenses ($3.2 million in the 1998 first quarter) is included as a separate
line item. Interest expense is pro forma interest expense of $4.8 million on
the planned $300.0 million of Nielsen Media Research debt financing to repay
inter-company debt. Nielsen Media Research's share of Gains from
Dispositions, Net is included as a separate line item. The tax provision
reflects an anticipated pro forma effective tax rate of 38.2 percent. Average
shares outstanding are as reported by Cognizant Corporation.
SOURCE Cognizant Corporation
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CONTACT:
Joseph C. Allen of Cognizant, 203-222-4235
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