Strong Fourth Quarter Delivers Earnings Per Share Growth of 34 Percent
WESTPORT, Conn., Feb. 17 /PRNewswire/ -- Cognizant Corporation (NYSE: CZT)
today reported that basic earnings per share rose 29 percent to $1.89 per
share, with net income growing 25 percent to $312.4 million for the year ended
December 31, 1997. Diluted earnings per share increased 27 percent to
$1.86 per share. Reported revenue and operating income increased 9 percent
and 17 percent, respectively, in 1997. Constant-dollar revenue for Cognizant
grew 11 percent above the 1996 level.
"Cognizant's strategy to focus on our core businesses delivered results
in 1997," said Robert E. Weissman, Cognizant Chairman and CEO. "Strategic
decisions which progressively sharpened operational focus included conversion
of Gartner Group to an equity investment, divestiture of non-strategic assets
such as Pilot Software, monetization of Enterprises properties generating
substantial gains, and investment in IMS and Media. The culmination of our
strategy will create two independent operating companies: IMS Health and
Nielsen Media Research."
"We delivered on our commitment to enhance shareholder value in 1997,"
said Victoria R. Fash, Cognizant executive vice president and chief financial
officer. "All of our businesses performed at or above expectations,
generating EPS above our guidance range. We completed the repurchase of five
percent of outstanding shares and began a second stock buyback program.
Enterprises investments generated nearly $44 million in cash proceeds.
Finally, cash flow finished ahead of forecast. 1997 ended with a net positive
cash balance, after funding nearly $325 million in share repurchases."
Net income of $312.4 million, or $1.89 per share, in 1997 includes
after-tax net gains from dispositions of $6.8 million, and SAB 51 gains of
$10.7 million related to the change in value of Cognizant's Gartner Group
investment. Net income from continuing operations (which excludes all
one-time charges and gains) totaled $294.9 million, or $1.79 per share,
compared with $250.1 million, or $1.47 per share, in 1996, an increase in
earnings per share of 22 percent.
Fourth Quarter Results
For the quarter ended December 31, 1997, revenues rose to $423.3 million,
a 7 percent increase. Revenues grew 13 percent, excluding the impact of the
Pilot Software divestiture and foreign exchange. Operating income grew
19 percent to $133.6 million, and net income rose 29 percent to
$122.3 million, or $0.75 per share, in the 1997 fourth quarter. Diluted
earnings per share increased 30 percent to $0.73 per share. Excluding SAB
51 after-tax gains of $10.2 million during the 1997 fourth quarter, net income
rose to $112.2 million, or $0.69 per share, an increase in earnings per share
of 23 percent, versus net income of $94.9 million, or $0.56 per share, in the
1996 fourth quarter.
Constant-Dollar Results
On a constant-dollar basis, Cognizant revenue grew 10.0 percent in the
fourth quarter and 10.7 percent for the 1997 full year, while operating income
grew 18.7 percent in the fourth quarter, and 18.0 percent for the 1997 full
year, compared with the 1996 periods.
Cognizant maintains a hedging program to protect a portion of committed
IMS revenues from the impact of currency fluctuations. For 1997, this program
protected operating income through the use of forward contracts. IMS's 1997
fourth-quarter revenue grew 12.0 percent on a constant-dollar basis, compared
with reported revenue growth of 8.1 percent, while operating income grew
19.8 percent.
Share Repurchase Program
During 1997, Cognizant purchased 9.1 million shares, or more than five
percent, of the company's outstanding stock under two share repurchase
programs. The first share repurchase program was completed during the third
quarter of 1997, significantly ahead of schedule. The current share
repurchase program, announced October 21, 1997, authorizes the purchase of an
additional 9.4 million shares, or six percent, of the company's outstanding
stock.
Operating Unit Results
The leading provider of global information solutions to the pharmaceutical
and healthcare industries, IMS continues to benefit from the excellent
performance of its Xponent(R) prescription database product. With the
addition of Bristol-Myers Squibb and Pfizer as clients in 1997, eight of the
10 largest U.S. pharmaceutical companies now use Xponent to optimize sales
force and market performance. Xplorer(R), IMS's client/server sales
management solution, now is used by 12 major pharmaceutical companies in the
U.S., including three companies added as clients in 1997.
During 1997, Sales Technologies' Cornerstone(TM) electronic territory
management product was used to successfully complete the largest sales force
automation project in the history of the pharmaceutical industry, an effort
involving 2,800 Wyeth-Ayerst sales representatives.
The number of national clients using IMS's Xtrend(TM) prescription
database increased to a total of 44 companies in the U.K., Germany, the
Netherlands and Belgium, the four European countries where the service is now
available. Pharmatrend(TM), which tracks over-the-counter pharmaceutical
products, experienced strong growth, driven by offering services in six
additional European countries during 1997. In Japan, IMS introduced a new
on-line service, IMSBase, which consolidates and offers access to all major
pharmaceutical, medical and detailing databases.
Nielsen Media Research, the premier provider of electronic media
measurement services in the United States and Canada, achieved continuing
growth during 1997. Revenue increased more than 12 percent to $358.6 million,
and operating income grew 11 percent to $110.4 million in 1997, compared with
the year-earlier period.
During 1997, Nielsen Media accelerated its investments in data
collection, processing and delivery technology, new business development and
data quality improvements.
Nielsen Media is on schedule to begin a 500-household test this year of
its new Digital Meter System. The test, which will cover the northeastern
United States, is the only metering system in the world that will actively
read video and audio codes in programs, and take passive video and audio
signatures -- or electronic fingerprints -- to ensure fail-safe backup. In
addition, through working partnerships with Lucent Technologies and Microsoft
Corporation, Nielsen Media Research is developing even more robust,
cost-effective data collection technologies.
Revenue growth from national services was fueled by the expansion of
network schedules, demand for custom analyses, and the addition of five cable
networks in 1997. At year-end, the number of national cable clients totaled
45. Local revenue growth was driven by the expansion of electronic
measurement service into three markets in 1997, for a total of 38 metered
markets. Metered service will be expanded into six additional markets in
1998. Nielsen Media Research also achieved growth in its Hispanic and
Monitor-Plus competitive advertising intelligence services.
Reported revenue for Cognizant's Emerging Markets group, which includes
technology and information services businesses, declined 22.3 percent for the
1997 fourth quarter and 4.0 percent for the 1997 full year due to the sale of
Pilot Software in August 1997. Excluding Pilot, constant-dollar revenue
growth for current Emerging Markets operations was 27.9 percent for the 1997
fourth quarter and 49.6 percent for the 1997 full year. Operating income grew
to $6.7 million for the 1997 fourth quarter.
Erisco, a provider of software-based administrative and analytical
solutions to the healthcare industry, posted high double-digit revenue growth
and a significant increase in operating income in 1997. Managed-care
organizations that became new customers of Facets(TM), Erisco's client/server
system, during the year include Sierra Health Services, Healthnet and OSF
Health Plans. Erisco also released a new version of its Facets managed-care
information system, which includes Medicare risk support and Internet
applications in 1997, and extended its market reach with partnership
agreements with Ernst & Young, Arthur Andersen and Sweetwater Health Services.
Cognizant Technology Solutions (CTS), an outsourcer of software
applications and development services, doubled its revenues in 1997 for the
third consecutive year. Year 2000 conversion services were provided to
several major clients, including First Data Corporation, Aetna Life Insurance
Company of Canada, and the Pacific Stock Exchange. Agreements for CTS
application development services were signed with Microsoft and Symantec, and
CTS became an IBM business partner to develop a special year 2000
pre-assessment service offered to IBM VisualAge 2000 customers. CTS operates
six offshore software development centers in India, and has offices in New
York City, Boston, Chicago, Washington D.C., Toronto and London.
Enterprises, the company's in-house venture capital firm which focuses on
investments in emerging healthcare businesses, generated cash proceeds of
nearly $44 million during 1997.
Balance Sheet Highlights
Cash and Cash Equivalents on Cognizant's Summary Balance Sheet (Table 3)
shows a cash balance of $318.4 million at December 31, 1997, compared with
$304.8 million (excluding Gartner) at December 31, 1996. The cash balance
change reflects strong cash flow from operations and proceeds from Enterprises
distributions, largely offset by share repurchases.
At December 31, 1997, shares outstanding totaled 162.1 million.
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
website, 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*
Three Months Ended December 31
(unaudited, in millions except per share)
1997 1996** % Change Constant
$ Growth
Revenue
IMS $ 308.1 $ 285.1 8% 12%
Nielsen Media Research 95.2 84.6 13 13
Emerging Markets 20.0 25.6 (22) (21)
Total Revenue 423.3 395.3 7 10
Operating Income
IMS 113.2 94.5 20 20
Nielsen Media Research 28.2 25.6 10 10
Emerging Markets 6.7 (1.1) -- --
Corporate and Other (14.5)*** (6.3) (131) (131)
Total Operating Income 133.6 112.7 19 19
Interest Income 2.7 1.6 72
Gartner Equity Income 20.7 16.5 26
Gartner SAB 51 Gains 14.0 -- --
Other Income (Expense) (2.5) 2.0 --
Income Before Provision
for Income Taxes 168.5 132.8 27
Provision for Income
Taxes (46.2) (37.9) (22)
Net Income $122.3 $94.9 29%
Basic Earnings
Per Share $0.75 $0.56 34%
Diluted Earnings
Per Share $0.73 $0.56 30%
Average Shares Outstanding 162.0 170.3 (5)
*Reflects Cognizant's Gartner Group ownership under equity accounting, as
if in effect since January 1, 1996.
**1996 results are continuing operations, defined as operating results for
Cognizant businesses on an on-going basis, which excludes all discontinued
operations, pre-spin one-time charges and gains, and non-recurring items.
***Includes impact of year 2000 costs totaling $7.5 million in the 1997
fourth quarter.
Table 2
COGNIZANT CORPORATION Income Statement*
Twelve Months Ended December 31
(unaudited, in millions except per share)
1997 1996** % Change Constant
$ Growth
Revenue
IMS $ 980.5 $ 904.4 8% 11%
Nielsen Media Research 358.6 319.4 12 12
Emerging Markets 79.1 82.4 (4) (2)
Total Revenue 1,418.2 1,306.2 9 11
Operating Income
IMS 275.2 234.8 17 18
Nielsen Media Research 110.4 99.5 11 11
Emerging Markets (9.8) (14.9) 35 36
Corporate and Other (40.5)*** (33.1) (23) (23)
Total Operating Income 335.3 286.3 17 18
Interest Income 10.5 6.2 68
Gartner Equity Income 65.1 49.5 31
Gartner SAB 51 Gains 14.7 -- --
Gains from Dispositions,
Net 9.4 -- --
Other Income (Expense) (4.8) 4.8 --
Income Before Provision
for Income Taxes 430.2 346.9 24
Provision for Income
Taxes (117.9) (96.8) (22)
Net Income $ 312.4 $ 250.1 25%
Basic Earnings Per Share $1.89 $1.47 29%
Diluted Earnings
Per Share $1.86 $1.47 27%
Average Shares Outstanding 165.2 169.9 (3)
*Reflects Cognizant's Gartner Group ownership under equity accounting, as
if in effect since January 1, 1996.
**1996 results are continuing operations, defined as operating results for
Cognizant businesses on an on-going basis, which excludes all discontinued
operations, pre-spin one-time charges and gains, and non-recurring items.
***Includes impact of year 2000 costs totaling $12.5 million in 1997.
Table 3
COGNIZANT CORPORATION Summary Balance Sheet*
(unaudited, dollars in millions)
December 31, December 31,
1997 1996
Assets
Current Assets
Cash and Cash Equivalents $318.4 $304.8
Accounts Receivable,
Net 303.6 307.9
Other Current Assets 72.4 56.9
Total Current Assets 694.4 669.6
Gartner Equity Investment 195.7 135.5
Notes Receivable and
Other Investments 109.7 114.3
Property, Plant and Equipment,
Net 233.6 236.0
Computer Software 142.3 138.2
Goodwill 87.4 117.2
Other Assets, Net 116.4 100.9
TOTAL ASSETS $1,579.5 $1,511.7
Liabilities and Shareholders' Equity
Current Liabilities $441.2 $396.3
Minority Interests 101.2 0.9
Other Liabilities 235.5 241.9
TOTAL LIABILITIES 777.9 639.1
Total Shareholders' Equity 801.6 872.6
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,579.5 $1,511.7
*Reflects Cognizant's Gartner Group ownership under equity accounting, as
if in effect since January 1, 1996.
SOURCE Cognizant Corporation
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CONTACT:
Joseph C. Allen of Cognizant Corporation,
203-222-4235
CNOC: http://www.prnewswire.com or fax, 800-758-5804, ext.
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