Engineering
Modern
Businesses
ANNUAL R EP O RT 2 01 9
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Powering the
Next Phase
of Growth
Corporate information
Directors
Michael Patsalos-Fox (CC) (FC) (GC)
Chairman of the Board
Cognizant
Former CEO
Stroz Friedberg
Executive officers
Brian Humphries
Chief Executive Officer
Karen McLoughlin
Chief Financial Officer
Former Chairman, the Americas
McKinsey & Company
Robert Telesmanic
Senior Vice President,
Zein Abdalla (FC) (GC*)
Former President
PepsiCo
Vinita Bali
Former CEO and Managing Director
Britannia Industries
Former Vice President
The Coca-Cola Company
Maureen Breakiron-Evans (AC*) (GC)
Former CFO
Towers Perrin
Controller and Chief Accounting Officer
Matthew Friedrich
Executive Vice President,
General Counsel, Chief Corporate Affairs
Officer and Secretary
Becky Schmitt
Executive Vice President
Chief People Officer
Dharmendra Kumar Sinha
Executive Vice President
President, North America
Malcolm Frank
Executive Vice President
Executive offices
Glenpointe Centre West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666
Phone: 201.801.0233
www.cognizant.com
Form 10-K
A copy of the Company’s Annual Report
on Form 10-K is available without charge
upon request by contacting Investor
Relations.
Common stock information
The Company’s Class A Common Stock
(CTSH) is listed on the Nasdaq Global
Select Market.
Annual meeting
The Company’s annual meeting
of stockholders will be held on
Tuesday, June 2, 2020 via live webcast at
www.virtualshareholdermeeting.com/
CTSH2020
Online check-in begins at 9:15 am;
Archana Deskus
Chief Information Officer
Intel
John M. Dineen (AC) (FC*)
Former President & CEO
GE Healthcare
John N. Fox, Jr. (CC*) (GC)
Former Vice Chairman
Deloitte & Touche
Brian Humphries
Chief Executive Officer
Cognizant
Leo S. Mackay, Jr. (AC) (CC)
Senior Vice President,
Ethics & Enterprise Assurance
Lockheed Martin
Joseph M. Velli (AC) (CC)
Former Senior Executive Vice President
The Bank of New York
Sandra S. Wijnberg (AC) (FC)
Former Partner
Aquiline Holdings
Board committees
AC Audit
FC Finance & Strategy
CC Management Development
& Compensation
GC Nominating, Governance & Public Affairs
* Denotes committee chairperson
President, Cognizant Digital Business
meeting begins at 9:30 am.
Balu Ganesh Ayyar
Executive Vice President
President, Cognizant Digital Operations
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
Greg Hyttenrauch
Executive Vice President
President, Cognizant Digital Systems
& Technology
300 Madison Avenue
New York, NY 10017
Transfer agent
Pradeep Shilige
Executive Vice President
Head of Global Delivery
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Investor relations
For more information, contact:
Katie Royce
Global Head of Investor Relations
Katie.Royce@cognizant.com.
This Annual Report includes statements which may constitute forward-looking statements made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which
are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be
accurate. These statements include, but are not limited to, express or implied forward-looking statements
relating to our expectations regarding opportunities in the marketplace, our cost structure, investment in and
growth of our business, our realignment plans, the timing, cost and impact of the 2020 Fit for Growth Plan,
our shift to digital solutions and services, our anticipated financial performance, our capital deployment plan
and clarification, if any, by the Indian government as to the application of the Supreme Court’s ruling related
to the India Defined Contribution Obligation. These statements are neither promises nor guarantees, but
are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause
actual results to differ materially from those contemplated in these forward-looking statements. Existing
and prospective investors are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. Factors that could cause actual results to differ materially from
those expressed or implied include general economic conditions, the impact of the COVID-19 pandemic,
changes in the regulatory environment, including with respect to immigration and taxes, and the other
factors discussed in our most recent Annual Report on Form 10-K and other filings with the SEC. Cognizant
undertakes no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as may be required under applicable securities law.
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THE PARADIGM HAS SHIFTED and transformation is on every
agenda. At modern businesses everywhere, new technologies
are being put to work that will enable the next great era of
growth. Data-fueled business models are driving continuous
change, with IoT, AI, digital engineering and cloud working
as one to make organizations more relevant than ever. For
companies on the journey, the question is no longer whether
to keep investing in technology; it is how much to invest and
where to focus next. Competition is nimble, expectations are
higher, and the gap between business as usual and industry
leaders continues to widen. Yet, no matter how quickly
technology changes or how great the challenge, Cognizant
is committed to keeping our clients modern—and serving
them in exactly the ways they need, in times of progress and
during crisis.
Just as this is a pivotal moment for communities across the
globe and institutions on the path to modernization, it is an
important turning point for our organization. We’re laying the
foundation for future growth by embracing a new purpose, one
that will guide and inspire the actions we take as individuals,
as teams and as an enterprise. At Cognizant, we are working to
ensure that the impact of these technologies lives up to their
promise: to modernize our clients’ businesses and enhance the
lives of people around the world.
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To Our
Shareholders
1 See “Non-GAAP Financial Measures” on pages 27-29 of the Annual Report on Form 10-K, which is included in this Annual Report.
2 Free cash flow is a non-GAAP financial measure. See footnote 4 on page 26 for additional information.
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The backdrop to this year’s annual report is a stark reminder
of the truly integrated nature of the world. As of this writing,
the COVID-19 pandemic continues to take a severe toll on
humanity and the global economy. Never in recent memory
has there been a greater need for society to come together
for the greater good of all. This is a test of leadership for those
who exercise power and decision-making authority.
Cognizant’s priority in dealing with this crisis
has been to protect the health and safety of
our associates, whilst maintaining business
continuity for our clients and supporting our
communities. We rapidly enabled work-from-
home capabilities to help protect the health and
safety of our associates and maintain continuity
of service for our clients, while reinforcing
protocols to safeguard their data and systems.
Our associates have risen to the challenge of
serving our clients with empathy, initiative,
integrity and courage—all while supporting and
uplifting one another. We are deeply grateful for
their dedication and leadership. In recognition
of their heroic efforts, we have modified global
human resources policies and provided targeted
incremental financial support to our associates.
I am proud of our life sciences teams, who are
partnering with several life sciences companies
that are in the vanguard of speeding the
development of diagnostics and therapies for
COVID-19. For example, our teams are delivering
critical business process services to a leading
supplier of COVID-19 diagnostic kits and
providing business and technology services in
support of clinical trials for vaccine candidates.
It is important to us to contribute to the global
effort to combat illness and viral disease.
In April, we announced an initial $10 million
commitment to support communities around the
world in addressing the immediate and long-term
impacts of COVID-19. Cognizant and its U.S.- and
India-based foundations aim to provide critical
resources to strengthen public health systems,
education and workforce institutions, as well as
the economic outlook of communities worldwide.
During the pre-pandemic months of 2020, our
optimism about the business was growing.
Over the prior 12 months, we had made
significant progress in what we expect will
be a multi-year effort to reposition Cognizant
to achieve its full growth potential.
Cognizant’s full-year 2019 revenue grew 4.1%, or
5.2% in constant currency,1 to $16.8 billion. GAAP
operating margin was 14.6%, GAAP diluted EPS
was $3.29 and free cash flow was $2.1 billion.2
In 2019, the company returned approximately
$2.6 billion to shareholders through share
repurchases and dividend payments as part of
our capital return program. In February 2020,
we announced a 10% increase in our quarterly
1 See “Non-GAAP Financial Measures” on pages 27-29 of the Annual Report on Form 10-K, which is included in this Annual Report.
2 Free cash flow is a non-GAAP financial measure. See footnote 4 on page 26 for additional information.
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cash dividend, the second increase since
initiating a dividend in 2017, and the Board
of Directors increased our share repurchase
authorization by $2 billion to a total of $7.5
billion, of which $1.9 billion remains unutilized.
Guided by our purpose
As a 290,000-person knowledge business that
spans a multi-generational and diverse workforce,
we recognize the importance of having a clearly
defined purpose, vision and values. Our vision
is to be “the preeminent technology services
partner to the Global 2000 C-suite.” We aim to
achieve this by focusing the entire company
on our new purpose: “We engineer modern
businesses to improve everyday life.” These
statements about who we strive to be, coupled
with appropriate values and behaviors, set the
tone for why we are in business and relevant
to society, how we will measure success and
what achievements we will celebrate in the
years ahead.
Executing the recommendations of the
transformation office, which we established in
mid-2019 to optimize our strategy, structure,
commercial posture, delivery and costs, will
position us well to achieve these aspirations.
A strategy for the challenges
and opportunities ahead
Macro demand has been and will likely continue
to be meaningfully hurt by COVID-19, and this will
certainly impact our 2020 financial performance.
As we weather this crisis, including taking actions
to strengthen our financial flexibility, we are also
preparing for the post-COVID-19 world, which will
require differentiated solutions for our clients and
new methodologies and behaviors in our future
work environment. We aim not just to recover
but also to emerge stronger through our close
partnerships with our associates, clients and
communities.
The implications of this pandemic will
lead to clients accelerating their shift to
This pandemic will lead clients to
operating with digital business models.
accelerate their shift to operating
Digital channels in every industry,
with digital business models.
including retail, education, and
Digital channels in every industry,
healthcare, will increase in relevance.
Remote access to work will be made
including retail, education and
stronger and more secure. Major IT
healthcare, will increase in
trends such as core modernization
relevance. Remote access to work
and cloud adoption will accelerate.
will be made stronger and more
And clients will need to quickly evolve
secure. Major IT trends such as
into modern businesses that are able
to stay relevant, on top of era-defining
core modernization and cloud
innovations, and sustain growth in
adoption will accelerate. Clients
the face of continuous technological
will need to quickly evolve into
change. All of which will make our
modern businesses that are
vision, purpose, and strategy more
able to stay relevant, remain on
relevant than ever.
top of era-defining innovations
and sustain growth in the face
of continuous technological
change. All of this will make our
vision, purpose and strategy
more relevant than ever.
Against this backdrop, our strategy aims
to protect and optimize our traditional
business whilst winning in four strategic
digital battlegrounds: AI and analytics, digital
engineering, cloud and IoT. In refining our
strategic posture, we also exited certain content-
related work no longer in line with our priorities.
We will increasingly lead with technology
consulting as part of our overall evolution to more
managed, outcome-based client engagements.
Our industry expertise will remain a core value
proposition. We aim to significantly increase the
scale of our international business, which has
significant growth potential.
This strategy will help our clients increase their
competitiveness through business model and
technology innovation, greater efficiency and
agility, and superior customer experiences. It will
also ensure that Cognizant is exposed to faster
growth categories, allowing us to accelerate
revenue growth.
Cognizant goes to market in four industry-
based business segments: Financial Services;
Healthcare; Products and Resources; and
Communications, Media and Technology. We
help clients apply their data to drive business
growth and efficiencies through the combined
capabilities and solution portfolios of our
three practice areas: Digital Business, Digital
Operations, and Digital Systems and Technology.
Cognizant’s investments across talent, deep
domain expertise, solutions, ecosystem
partnerships and acquisitions enable
us to help clients remodel their legacy
technology platforms and conceive, develop
and realize meaningful business outcomes
and increased operational efficiencies.
For example, we are partnering with Con
Edison, one of the U.S.’s largest energy delivery
organizations, to modernize its application
and technology infrastructure to better serve
10 million customers in New York City and
the surrounding regions. We are working with
Network Rail, Britain’s principal rail infrastructure
owner, to help make the country’s railways safer
and more efficient. In addition, global healthcare
and nutrition leader Bayer, headquartered
in Germany, has engaged Cognizant to help
accelerate its company-wide digitization
to speed the delivery of new health and
agriculture solutions.
Having invested significant effort clarifying and
communicating our strategy in 2019, we are
aligning everything we do with its execution. This
starts with tried-and-true practices that have
resulted in our long record of accomplishments.
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The implications of this pandemic will
lead to clients accelerating their shift to
operating with digital business models.
Digital channels in every industry,
including retail, education, and
healthcare, will increase in relevance.
Remote access to work will be made
stronger and more secure. Major IT
trends such as core modernization
and cloud adoption will accelerate.
And clients will need to quickly evolve
into modern businesses that are able
to stay relevant, on top of era-defining
innovations, and sustain growth in
the face of continuous technological
change. All of which will make our
vision, purpose, and strategy more
relevant than ever.
Against this backdrop, our strategy aims
to protect and optimize our traditional
business whilst winning in four strategic
digital battlegrounds: AI and analytics, digital
engineering, cloud and IoT. In refining our
strategic posture, we also exited certain content-
related work no longer in line with our priorities.
We will increasingly lead with technology
consulting as part of our overall evolution to more
managed, outcome-based client engagements.
Our industry expertise will remain a core value
proposition. We aim to significantly increase the
scale of our international business, which has
significant growth potential.
This strategy will help our clients increase their
competitiveness through business model and
technology innovation, greater efficiency and
agility, and superior customer experiences. It will
also ensure that Cognizant is exposed to faster
growth categories, allowing us to accelerate
revenue growth.
Cognizant goes to market in four industry-
based business segments: Financial Services;
Healthcare; Products and Resources; and
Communications, Media and Technology. We
help clients apply their data to drive business
growth and efficiencies through the combined
capabilities and solution portfolios of our
three practice areas: Digital Business, Digital
Operations, and Digital Systems and Technology.
Cognizant’s investments across talent, deep
domain expertise, solutions, ecosystem
partnerships and acquisitions enable
us to help clients remodel their legacy
technology platforms and conceive, develop
and realize meaningful business outcomes
and increased operational efficiencies.
For example, we are partnering with Con
Edison, one of the U.S.’s largest energy delivery
organizations, to modernize its application
and technology infrastructure to better serve
10 million customers in New York City and
the surrounding regions. We are working with
Network Rail, Britain’s principal rail infrastructure
owner, to help make the country’s railways safer
and more efficient. In addition, global healthcare
and nutrition leader Bayer, headquartered
in Germany, has engaged Cognizant to help
accelerate its company-wide digitization
to speed the delivery of new health and
agriculture solutions.
Having invested significant effort clarifying and
communicating our strategy in 2019, we are
aligning everything we do with its execution. This
starts with tried-and-true practices that have
resulted in our long record of accomplishments.
We have emphasized a back-to-basics approach
that includes delivering value to clients every day,
running our business with operational rigor and
the highest ethical standards, making revenue
growth a top priority, and streamlining processes
to empower associates and avoid bureaucracy.
Investing in associates,
partners and people
Executing our strategy shapes how we allocate
capital, develop client relationships and industry
partnerships, structure the organization, position
our brand and upskill associates.
To ensure our associates have the right digital
skills, we will continue to invest in Cognizant
Academy, our in-house training organization,
so more of our talented professionals can be
redeployed in support of our digital imperatives.
To speed digital momentum, we plan to hire or
reskill approximately 25,000 people in 2020.
Winning in digital requires a broad ecosystem of
partners. Our strategic partners are among the
most trusted names in technology and include
Adobe, AWS, Google Cloud, Microsoft, Oracle,
Salesforce, SAP and ServiceNow. This year we
plan to double the number of associates who
support our strategic alliances.
As cloud computing has changed the way IT
is delivered across infrastructure, applications,
and platforms, we have built especially close
relationships with leading hyperscale companies
and SaaS (software-as-a-service) vendors. For
example, in recent months, we have announced
three acquisitions that extend our cloud
capabilities and alignment with one of our
most valued strategic partners, Salesforce. We
have agreed to acquire the French operations
of EI-Technologies, and acquired both Code
Zero Consulting and Lev, further broadening
our Salesforce offerings to make it easier and
more affordable for clients to create digital value
through the cloud.
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We plan to intensify our focus in 2020
on our social responsibility and sense of
interdependence with the larger world.
Economic development hinges on human
development. We are eager to create new
pathways into today’s economy for those
seeking to join the digital workforce. Cognizant
U.S. Foundation, launched in 2018 with a $100
million investment from the company, supports
STEM education and skills training across the
country. So far, Cognizant U.S. Foundation has
awarded $30 million to organizations working
to educate and train the next generation of
workers in communities throughout the country.
In India, Cognizant Foundation, established in
2005, supports projects that broaden access
to quality education, healthcare and improved
livelihoods that, in aggregate, have affected
more than 3.5 million people. For example,
India has about 12 million individuals who are
blind, and nearly three-quarters of these cases
could have been prevented with timely medical
intervention. In response, Cognizant Foundation
has focused on preventing avoidable blindness
by supporting tertiary eye care centers.
In addition, Cognizant Outreach provides a
global platform for our associates to volunteer
their time and talent to enhance the quality of
education, conserve and protect the environment,
and participate in community welfare initiatives.
Last year, our associates across 27 countries
contributed more than 600,000 volunteer hours.
We are committed to a culture that makes all
people feel welcomed, recognized, included,
connected and valued. We aim to be a leader
in closing the gender diversity gap in the
technology industry. To that end, our Women
Empowered program is an example of an
initiative that is committed to developing more
women leaders at all levels of our company. I am
proud to say that Cognizant is now more than
100,000 women strong across 48 countries,
representing over 100 nationalities. We view
this as a milestone—not an end point.
In these unprecedented times, I would like
more than ever to express my sincere gratitude
and appreciation for our more than 290,000
talented associates across Cognizant. I admire
their determination and optimism as they
go about helping our clients be successful
by solving their most pressing challenges. I
know I speak on their behalf when I say we are
passionately focused on returning Cognizant
to being the IT services industry bellwether.
We thank you, our shareholders,
for your continued support.
contribute more than 600,000 volunteer hours,
impacting over 100,000 people.
We are committed to a culture that makes all
people feel welcomed, recognized, included,
connected, and valued. We aim to be a leader in
closing the gender diversity gap in the technology
industry. To that end, our Women Empowered
program is an example of an initiative that is
Brian Humphries
Chief Executive Officer
April 22, 2020
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Today’s businesses
need more than just
the latest technologies
to stay relevant.
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Today’s businesses
need more than just
the latest technologies
to stay relevant.
They must solve real,
human problems.
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We engineer modern
businesses to improve
everyday life.
This is our purpose.
It’s how we help businesses and institutions stay
relevant, keep on top of era-defining innovations
and sustain growth in the face of continuous
technological change.
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We engineer modern
businesses to improve
everyday life.
AT THE HEART of our new purpose is a desire to improve, not just our clients’ businesses, but also the
lives of the people they serve. We’re focused on keeping enterprises one step ahead of their industries,
ensuring our clients have the technological capabilities to enhance the everyday.
Today, we’re executing on this purpose by helping our clients address daily needs and achieve their
digital priorities, and by being the partner they turn to in IoT, AI, digital engineering and cloud—the
technologies that are changing the nature of business.
Our purpose draws on the best of Cognizant: the drive to see our clients succeed; our entrepreneurial,
get-it-done spirit; the confidence with which we deliver; and our deeply collaborative working style.
Now, we’re also emphasizing a Cognizant designed for what’s ahead—a company where ingenuity
fuels innovation, persistence uncovers new perspectives and an orientation for performance
generates crucial results.
As companies and communities navigate the unprecedented challenges caused by the ongoing
pandemic, we’re helping our clients adapt their businesses to a new normal. And as industries change,
and change again, we will be there to envision, design, build and maintain technologies and services
that keep our clients modern, and ensure they’re ready for every era.
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We’re helping our
clients focus on the
digital technologies
that will make—
and keep—them
modern, ensuring
their relevance today
and into the future.
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IoT
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MODERN BUSINESSES ARE BRINGING THE
PHYSICAL AND DIGITAL TOGETHER TO IMPROVE
EVERYDAY EXPERIENCES.
Real-world, real-time data is fueling bold new business models.
As a preferred IoT partner to leaders across industries,
Cognizant is bringing instrumentation to the physical world,
gathering data, extracting insights and creating new value for
our clients. Together, we’re optimizing industrial performance
by engineering awareness into smart vehicles, buildings and
products. By generating new data and acting on it, IoT is making
new realities more tangible for our clients and their customers.
IoT STOPS FOOD WASTE FROM EATING INTO
PRICING AND PROFITS
By sensing and reacting to anomalies in refrigerator
temperatures, Cognizant helped a large U.S.-based
retailer reduce its $2 billion of food waste by 40% while
improving food safety.
HFS: Top 10 IoT Service Providers 2019
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AI
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MODERN BUSINESSES ARE GETTING
SMARTER, FASTER—TURNING RAW DATA
INTO INFORMED ACTION.
Fast-learning businesses manage the data that matters and
combine it with intelligence to improve productivity, reduce
costs and create moments of magic for consumers. Cognizant
is a trusted guide for companies on the journey to becoming
more data-driven. We help clients modernize their businesses
quickly by making their data more easily accessible in as few as
four weeks. Once data has been converted from a liability into
a business asset, we can help organizations improve decision
making with Cognizant Evolutionary AITM—a pioneering solution
that discovers effective strategies automatically based on
historical data and optimizes existing machine learning models.
AI CUTS CREDIT CARD FRAUD IN REAL TIME
Cognizant built a machine-learning model that saves
a global bank $150 million annually by automating
transaction decisions in milliseconds and reducing
credit card fraud by 35%.
A Leader in the Forrester WaveTM: AI Consultancies, Q3 2019
Leader in IDC MarketScape Worldwide Artificial Intelligence
Services 2019 Vendor Assessment, Q2 20193
3 Document number US44514819
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Digital
Engineering
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MODERN BUSINESSES ARE CREATING SOFTWARE
THAT KEEPS THEM INVALUABLE TO THEIR
CUSTOMERS OVER THE LONG TERM.
Already, some of the best experiences of our everyday lives
are fueled by software. At Cognizant, we help established
businesses adapt to this new reality at enterprise scale,
designing and deploying software that makes them better
banks, better insurers, better retailers. With our agile
engineering approach, global delivery model and cross-industry
expertise, we enable the rapid prototyping and delivery that
helps our clients grow market share and ensure continued
relevance to their customers through changing times.
SOFTWARE HELPS ORGANIZATIONS SLOW THE
SPREAD OF DISEASE
Cognizant helped a leader in the prevention and
mitigation of epidemic disease risk build a platform
to inform its work with government agencies and
insurers, facilitating everything from data aggregation
to visualization to real-time analysis.
HFS Winner’s Circle: Software Product Engineering
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Cloud
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MODERN BUSINESSES ARE USING THE RIGHT
CLOUD FOR EVERY APPLICATION TO DRIVE
BEST-IN-CLASS PERFORMANCE AND UNLEASH
BIG OPPORTUNITIES.
When it comes to cloud, the devil is in the details—get it right,
and the upsides can be big for any business. Since migration and
integration are never one-size-fits-all, our industry knowledge
and technical skills can be the difference between the right
cloud and a missed opportunity. At Cognizant, we recognize
that requirements differ dramatically across IT environments
and enterprise applications, so we rely on our process expertise,
hands-on technical experience and close relationships throughout
the partnership ecosystem to build the right solutions for clients.
Because the right cloud goes beyond technology to empower
employees, streamline processes, enhance products and
experiences, and transform businesses.
CLOUD SPEEDS ACCESS TO HEALTH DATA THAT HELPS
RESEARCHERS FIND CURES
Cognizant helped a global pharmaceuticals company
migrate 150 terabytes of data—10 times the amount
of material in the Library of Congress—to an Amazon
Web Services cloud platform, improving retrieval speeds
by up to 50%.
A Leader in Everest Group DevOps Services PEAK MatrixTM 2019
Leader in ISG’s Provider LensTM Private/Hybrid Cloud – Data Center
Services and Solutions 2019
CO GNIZ ANT 2019 ANNUAL REP ORT
23
370583_CGZ_AnnualReport_04_14_2020_MARKUP_NARR_R1.indd 23
4/17/20 9:33 PM
Cognizant associates
Since serving our clients is our top priority, we are always seeking ways to improve. This year, we’ve
continued to invest in Cognizant Academy to train more of our talent in the digital technologies that are
increasingly essential. We plan to hire or reskill approximately 25,000 people in 2020. By developing our
associates in areas such as IoT, AI and analytics, digital engineering and cloud, we’re preparing to power
every client engagement with the digital nuts and bolts of modern businesses. Cognizant associates vol-
unteered more than 600,000 hours of their time and talents in 2019, making an immediate difference in
neighborhoods and nations around the globe. And since diversity is a potent source of innovation for any
organization, we have a variety of affinity groups supporting women, LGBT+, veterans, people with disabili-
ties, working parents and other historically underserved populations within our ranks.
We’re improving
everyday life at
Cognizant, with
our clients and for
people everywhere.
COMMUNITIES
CLIENTS
370583_CGZ_AnnualReport_04_14_2020_MARKUP_NARR_R1.indd 24
4/17/20 9:33 PM
Our purpose keeps Cognizant client-centric, which Cognizant has
been throughout our 26 years, and which will always remain one
of our most fundamental guiding values. By focusing on what’s
important to our clients, and helping them achieve their missions,
we enhance the lives of the customers, consumers and citizens
they serve around the world. Every day, across our organization, we
challenge ourselves to find new ways to improve everyday life—within
Cognizant, through our clients and for the communities they shape.
Cognizant associates
Since serving our clients is our top priority, we are always seeking ways to improve. This year,
we’ve continued to invest in Cognizant Academy to train more of our talent in the digital technologies
that are increasingly essential. We plan to hire or reskill approximately 25,000 people in 2020. By
developing our associates in areas such as IoT, AI and analytics, digital engineering and cloud, we’re
preparing to power every client engagement with the digital nuts and bolts of modern businesses.
Cognizant associates volunteered more than 600,000 hours of their time and talents in 2019, making
an immediate difference in neighborhoods and nations around the globe. And since diversity is
a potent source of innovation for any organization, we have a variety of affinity groups supporting
women, LGBT+, veterans, people with disabilities, working parents and other historically underserved
populations within our ranks.
Clients
Our purpose is activated through our clients’ organizations. Whether we’re helping leaders in
the life sciences bring lifesaving therapies to market faster or streamlining the critical systems that
make financial institutions—and the global economy—more resilient, we’re improving lives by
modernizing the companies society depends on. We take pride in helping our clients stay relevant
and responsive to their customers, working relentlessly to earn and keep their trust. With markets
demanding more agility, and worldwide challenges forcing us all to rethink how we live, work and play,
Cognizant will continue to be here for our clients, so they can be there for the people they serve.
Communities everywhere
The work we do has a direct impact on the consumers and citizens of the societies in which we
operate: making shopping smarter and drugs safer, keeping trains on schedule and small business
grants swift. We are not only committed to helping our clients become data-enabled and data-driven,
but we’re also preparing the U.S. workforce for the new economy. Launched in 2018 with an initial
investment of $100 million, the Cognizant U.S. Foundation has awarded $30 million to organizations
providing STEM educational opportunities. In addition to our efforts in the U.S., we’re partnering with
schools and other learning programs in communities around the world where new capabilities will
present new possibilities. We are also pursuing a range of efforts that reduce our carbon footprint,
water consumption and waste generation.
CO GNIZ ANT 2019 ANNUAL REP ORT
25
2019 performance
$16.8
$16.1
$14.8
$2,801
$2,481
$2,453
SUSTAINED
GROWTH
$13.5
$12.4
$2,289
$2,142
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Revenue
in billions
CAGR (5-yr): 10%
Operating income
in millions
CAGR (5-yr): 5%
BALANCED
CAPITAL
ALLOCATION
$2.6B
Capital return
through dividends
and share purchases
Growing expertise through acquisitions
In 2019, we expanded our digital, geographic and industry capabilities
STRONG CASH
GENERATION
$2.1B
Free cash flow 4
26
CO GNIZ ANT ANN UAL REP O RT 201 9
DevOps and cloud
transformation consultancy
Creative content agency
Financial software firm
Financial technology services
Life sciences
technology company
4 Free cash flow is not a measurement of financial performance prepared in accordance with GAAP and is defined
as cash flows from operating activities ($2,499 million) net of purchases of property and equipment ($392 million).
Management uses free cash flow to evaluate period-to-period comparisons and comparisons of our results to
those of our competitors, and therefore believes that it provides a meaningful supplemental measure to evaluate
our financial performance. This non-GAAP financial measure is not based on any comprehensive set of accounting
rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in
accordance with GAAP. It may be different from non-GAAP financial measures used by other companies and
should be read in conjunction with our financial statements prepared in accordance with GAAP.
370583_CGZ_AnnualReport_04_20_2020_PG26.indd 2
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
For the transition period from to
Commission File Number 0-24429
OR
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
Glenpointe Centre West
500 Frank W. Burr Blvd.
Teaneck, New Jersey
(Address of Principal Executive Offices)
13-3728359
(I.R.S. Employer
Identification No.)
07666
(Zip Code)
Registrant’s telephone number, including area code: (201) 801-0233
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock, $0.01 par value
Trading Symbol(s)
CTSH
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
The aggregate market value of the registrant’s voting shares of common stock held by non-affiliates of the registrant on June 28, 2019, based on $63.39 per share, the last reported sale
price on the Nasdaq Global Select Market of the Nasdaq Stock Market LLC on that date, was $34.9 billion.
The number of shares of Class A common stock, $0.01 par value, of the registrant outstanding as of February 7, 2020 was 548,637,106 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the Annual Report on Form 10-K: Portions of the registrant’s definitive Proxy Statement for its 2020 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Report.
TABLE OF CONTENTS
PART I
Item
PART I
1.
Business
1A. Risk Factors
1B. Unresolved Staff Comments
2.
3.
Properties
Legal Proceedings
4. Mine Safety Disclosures
PART II
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
6.
Selected Financial Data
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
8.
9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
PART III
10. Directors, Executive Officers and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accountant Fees and Services
PART IV
15. Exhibits, Financial Statements Schedules
16. Form 10-K Summary
SIGNATURES
EXHIBIT INDEX
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
Page
1
1
8
14
14
14
14
15
15
17
18
37
38
38
38
39
40
40
40
40
40
40
41
41
43
44
41
F-1
Table of Contents
Item 1. Business
Overview
centers.
Business Segments
Cognizant is one of the world’s leading professional services companies, transforming clients’ business, operating and
technology models for the digital era. Our services include digital services and solutions, consulting, application development,
systems integration, application testing, application maintenance, infrastructure services and business process services. Digital
services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming data-enabled,
customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an integrated global
delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery
Certain terms used in this Annual Report on Form 10-K are defined in the Glossary included at the end of Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We go to market across our four industry-based business segments. Our clients seek to partner with service providers that
have a deep understanding of their businesses, industry initiatives, customers, markets and cultures and the ability to create solutions
tailored to meet their individual business needs. Across industries, our clients are confronted with the risk of being disrupted by
nimble, digital-native competitors. They are therefore redirecting their focus and investment to digital and embracing DevOps and
key technologies like IoT, analytics, AI, digital engineering, cloud and automation. We believe that our deep knowledge of the
industries we serve and our clients’ businesses has been central to our revenue growth and high client satisfaction, and we continue
to invest in those digital capabilities that help to enable our clients to become modern businesses. Our business segments are as
follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
• Banking
• Insurance
• Healthcare
• Retail and Consumer Goods
• Communications and Media
• Life Sciences
• Manufacturing, Logistics,
• Technology
Energy and Utilities
• Travel and Hospitality
Our Financial Services segment includes banking, capital markets and insurance companies. Demand in this segment is
driven by our clients’ need to be compliant with significant regulatory requirements and adaptable to regulatory change, and their
adoption and integration of digital technologies, including customer experience enhancement, robotic process automation, analytics
and AI in areas such as digital lending, fraud detection and next generation payments.
Our Healthcare segment consists of healthcare providers and payers as well as life sciences companies, including
pharmaceutical, biotech and medical device companies. Demand in this segment is driven by emerging industry trends, including
enhanced compliance, integrated health management, claims investigative services and heightened focus on patient experience,
as well as services that drive operational improvements in areas such as claims processing, enrollment, membership and billing.
Demand is also created by the adoption and integration of digital technologies such as AI to shape personalized care plans and
predictive data analytics to improve patient outcomes.
Our Products and Resources segment includes manufacturers, retailers and travel and hospitality companies, as well as
companies providing logistics, energy and utility services. Demand in this segment is driven by our clients’ focus on improving
the efficiency of their operations, the enablement and integration of mobile platforms to support sales and other omni-channel
commerce initiatives, and their adoption and integration of digital technologies, such as the application of intelligent systems to
manage supply chains and enhance overall customer experiences, and IoT to instrument functions for factories, real estate, fleets
and products to increase access to insight generating data.
Our Communications, Media and Technology segment includes information, media and entertainment, communications
and technology companies. Demand in this segment is driven by our clients’ needs to create differentiated user experiences,
transition to agile development methodologies, enhance their networks, manage their digital content and adopt and integrate
digital technologies, such as cloud, interactive and IoT.
1
TABLE OF CONTENTS
1.
Business
1A. Risk Factors
1B. Unresolved Staff Comments
2.
3.
Properties
Legal Proceedings
4. Mine Safety Disclosures
of Equity Securities
6.
Selected Financial Data
Item
PART I
PART II
8.
9.
PART III
7. Management's Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
11. Executive Compensation
Stockholder Matters
10. Directors, Executive Officers and Corporate Governance
12. Security Ownership of Certain Beneficial Owners and Management and Related
13. Certain Relationships and Related Transactions, and Director Independence
14. Principal Accountant Fees and Services
15. Exhibits, Financial Statements Schedules
16. Form 10-K Summary
PART IV
SIGNATURES
EXHIBIT INDEX
SCHEDULE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
Page
1
1
8
14
14
14
14
15
15
17
18
37
38
38
38
39
40
40
40
40
40
40
41
41
43
44
41
F-1
Table of Contents
Item 1. Business
Overview
PART I
Cognizant is one of the world’s leading professional services companies, transforming clients’ business, operating and
technology models for the digital era. Our services include digital services and solutions, consulting, application development,
systems integration, application testing, application maintenance, infrastructure services and business process services. Digital
services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming data-enabled,
customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an integrated global
delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery
centers.
Certain terms used in this Annual Report on Form 10-K are defined in the Glossary included at the end of Item 7.
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Business Segments
We go to market across our four industry-based business segments. Our clients seek to partner with service providers that
have a deep understanding of their businesses, industry initiatives, customers, markets and cultures and the ability to create solutions
tailored to meet their individual business needs. Across industries, our clients are confronted with the risk of being disrupted by
nimble, digital-native competitors. They are therefore redirecting their focus and investment to digital and embracing DevOps and
key technologies like IoT, analytics, AI, digital engineering, cloud and automation. We believe that our deep knowledge of the
industries we serve and our clients’ businesses has been central to our revenue growth and high client satisfaction, and we continue
to invest in those digital capabilities that help to enable our clients to become modern businesses. Our business segments are as
follows:
Financial Services
• Banking
• Insurance
Healthcare
• Healthcare
• Life Sciences
Products and Resources
• Retail and Consumer Goods
• Manufacturing, Logistics,
Energy and Utilities
• Travel and Hospitality
Communications, Media and Technology
• Communications and Media
• Technology
Our Financial Services segment includes banking, capital markets and insurance companies. Demand in this segment is
driven by our clients’ need to be compliant with significant regulatory requirements and adaptable to regulatory change, and their
adoption and integration of digital technologies, including customer experience enhancement, robotic process automation, analytics
and AI in areas such as digital lending, fraud detection and next generation payments.
Our Healthcare segment consists of healthcare providers and payers as well as life sciences companies, including
pharmaceutical, biotech and medical device companies. Demand in this segment is driven by emerging industry trends, including
enhanced compliance, integrated health management, claims investigative services and heightened focus on patient experience,
as well as services that drive operational improvements in areas such as claims processing, enrollment, membership and billing.
Demand is also created by the adoption and integration of digital technologies such as AI to shape personalized care plans and
predictive data analytics to improve patient outcomes.
Our Products and Resources segment includes manufacturers, retailers and travel and hospitality companies, as well as
companies providing logistics, energy and utility services. Demand in this segment is driven by our clients’ focus on improving
the efficiency of their operations, the enablement and integration of mobile platforms to support sales and other omni-channel
commerce initiatives, and their adoption and integration of digital technologies, such as the application of intelligent systems to
manage supply chains and enhance overall customer experiences, and IoT to instrument functions for factories, real estate, fleets
and products to increase access to insight generating data.
Our Communications, Media and Technology segment includes information, media and entertainment, communications
and technology companies. Demand in this segment is driven by our clients’ needs to create differentiated user experiences,
transition to agile development methodologies, enhance their networks, manage their digital content and adopt and integrate
digital technologies, such as cloud, interactive and IoT.
1
Table of Contents
Table of Contents
For the year ended December 31, 2019, the distribution of our revenues across our four industry-based business segments
We have organized our services and solutions into four practice areas: Digital Business, Digital Operations, Digital Systems
was as follows:
and Technology and Consulting. These practice areas are supported by Cognizant Accelerator.
See Note 2 to our consolidated financial statements for additional information related to disaggregation of revenues by client
location, service line and contract-type for each of our business segments.
Services and Solutions
Our services include digital services and solutions, consulting, application development, systems integration, application
testing, application maintenance, infrastructure services and business process services. Additionally, we develop, license,
implement and support proprietary and third-party software products and platforms. Central to our strategy to align with our clients’
need to modernize is our investment in four key areas of digital: IoT, AI, digital engineering and cloud. These four capabilities
enable clients to put data at the core of their operations, improve the experiences they offer their customers, tap into new revenue
streams, defend against technology-enabled competitors and reduce costs. In many cases, our clients' new digital systems are built
upon the backbone of their existing legacy systems. Also, clients often look for efficiencies in the way they run their operations
so they can fund investments in new digital technologies. We believe our deep knowledge of their infrastructure and systems
provides us with a significant advantage as we work with them to build new digital capabilities to make their operations more
efficient and effective. We deliver all of our services and solutions across our four industry-based business segments to best address
our clients' individual needs.
We seek to drive organic growth through investments in our digital capabilities across industries and geographies, including
the extensive training and re-skilling of our technical teams and the expansion of our local workforces in the United States and
other markets around the world where we operate. Additionally, we pursue select strategic acquisitions, joint ventures, investments
and alliances that can expand our digital capabilities or the geographic or industry coverage of our business. In 2019, we completed
five such acquisitions:
• Mustache, a creative content agency based in the United States, that extends our capabilities in creating original and
branded content for digital, broadcast and social mediums;
• Meritsoft, a financial software company based in Ireland, that complements our service offerings to capital markets
institutions;
• Samlink, a developer of services and solutions for the financial sector based in Finland, that strengthens our banking
capabilities and brings with it a strategic partnership with three Finnish financial institutions to transform and operate
a shared core banking platform;
• Zenith, a life sciences company based in Ireland, that extends our service capabilities for connected biopharmaceutical
and medical device manufacturers; and
• Contino, a technology consulting firm that extends our capabilities in enterprise DevOps and cloud transformation.
Digital Business
Digital Operations
Our digital business practice helps clients build modern enterprises. Areas of focus within this practice area are:
•
interactive, which is our global network of studios that help clients craft new experiences;
• application modernization, which updates legacy applications using modern technology stacks;
• AI and analytics, which drive business growth and efficiencies through a greater understanding of customers
and operations;
•
IoT, which unlocks greater productivity and new business models;
• digital advisory, which provides enterprise transformation expertise; and
• digital engineering, which designs, engineers, and delivers software that powers modern businesses.
Our digital operations practice helps clients rethink their operating models by assessing their existing processes and recommending
automation and change management, allowing clients to fundamentally transform how their processes run while also realizing
cost savings benefits from these process improvements. Areas of focus within this practice area are:
• automation, analytics and consulting for business process outsourcing;
• platform-based operations; and
• core business process operations.
We have extensive knowledge of core front office, middle office and back office processes, including finance and accounting,
research and analytics, procurement and data management, which we integrate with our industry and technology expertise to
deliver targeted business process services and solutions.
Digital Systems & Technology
Our digital systems and technology practice helps clients reshape their technology models to simplify, modernize and secure the
enabling systems that form the backbone of their business. With cloud becoming an essential catalyst for large-scale transformation
efforts, cloud adoption is driving changes across the entire IT value chain. Areas of focus within this practice area include:
• enterprise application services;
• application development and maintenance;
• quality engineering and assurance;
• cloud;
•
infrastructure; and
• security.
Our consulting practice helps clients drive the changes that the evolving technology landscape requires of their organizations by
providing global business, process, operations and technology consulting services. Our consulting professionals and domain experts
from our industry-based business segments work closely with our practice areas to create modern frameworks, platforms and
solutions that leverage a wide range of digital technologies across our clients’ businesses to deliver higher levels of efficiency and
Consulting
new value for their customers.
Cognizant Accelerator
Cognizant Accelerator supports our business segments and four practice areas by developing innovative and practical offerings
for clients' emerging needs through the application of new technologies.
2
3
Table of Contents
was as follows:
For the year ended December 31, 2019, the distribution of our revenues across our four industry-based business segments
We have organized our services and solutions into four practice areas: Digital Business, Digital Operations, Digital Systems
and Technology and Consulting. These practice areas are supported by Cognizant Accelerator.
Table of Contents
See Note 2 to our consolidated financial statements for additional information related to disaggregation of revenues by client
location, service line and contract-type for each of our business segments.
Services and Solutions
Our services include digital services and solutions, consulting, application development, systems integration, application
testing, application maintenance, infrastructure services and business process services. Additionally, we develop, license,
implement and support proprietary and third-party software products and platforms. Central to our strategy to align with our clients’
need to modernize is our investment in four key areas of digital: IoT, AI, digital engineering and cloud. These four capabilities
enable clients to put data at the core of their operations, improve the experiences they offer their customers, tap into new revenue
streams, defend against technology-enabled competitors and reduce costs. In many cases, our clients' new digital systems are built
upon the backbone of their existing legacy systems. Also, clients often look for efficiencies in the way they run their operations
so they can fund investments in new digital technologies. We believe our deep knowledge of their infrastructure and systems
provides us with a significant advantage as we work with them to build new digital capabilities to make their operations more
efficient and effective. We deliver all of our services and solutions across our four industry-based business segments to best address
our clients' individual needs.
We seek to drive organic growth through investments in our digital capabilities across industries and geographies, including
the extensive training and re-skilling of our technical teams and the expansion of our local workforces in the United States and
other markets around the world where we operate. Additionally, we pursue select strategic acquisitions, joint ventures, investments
and alliances that can expand our digital capabilities or the geographic or industry coverage of our business. In 2019, we completed
five such acquisitions:
• Mustache, a creative content agency based in the United States, that extends our capabilities in creating original and
branded content for digital, broadcast and social mediums;
• Meritsoft, a financial software company based in Ireland, that complements our service offerings to capital markets
institutions;
• Samlink, a developer of services and solutions for the financial sector based in Finland, that strengthens our banking
capabilities and brings with it a strategic partnership with three Finnish financial institutions to transform and operate
a shared core banking platform;
and medical device manufacturers; and
• Contino, a technology consulting firm that extends our capabilities in enterprise DevOps and cloud transformation.
Digital Business
Our digital business practice helps clients build modern enterprises. Areas of focus within this practice area are:
•
interactive, which is our global network of studios that help clients craft new experiences;
• application modernization, which updates legacy applications using modern technology stacks;
• AI and analytics, which drive business growth and efficiencies through a greater understanding of customers
and operations;
IoT, which unlocks greater productivity and new business models;
•
• digital advisory, which provides enterprise transformation expertise; and
• digital engineering, which designs, engineers, and delivers software that powers modern businesses.
Digital Operations
Our digital operations practice helps clients rethink their operating models by assessing their existing processes and recommending
automation and change management, allowing clients to fundamentally transform how their processes run while also realizing
cost savings benefits from these process improvements. Areas of focus within this practice area are:
• automation, analytics and consulting for business process outsourcing;
• platform-based operations; and
• core business process operations.
We have extensive knowledge of core front office, middle office and back office processes, including finance and accounting,
research and analytics, procurement and data management, which we integrate with our industry and technology expertise to
deliver targeted business process services and solutions.
Digital Systems & Technology
Our digital systems and technology practice helps clients reshape their technology models to simplify, modernize and secure the
enabling systems that form the backbone of their business. With cloud becoming an essential catalyst for large-scale transformation
efforts, cloud adoption is driving changes across the entire IT value chain. Areas of focus within this practice area include:
• enterprise application services;
• application development and maintenance;
• quality engineering and assurance;
• cloud;
•
• security.
infrastructure; and
• Zenith, a life sciences company based in Ireland, that extends our service capabilities for connected biopharmaceutical
Consulting
Our consulting practice helps clients drive the changes that the evolving technology landscape requires of their organizations by
providing global business, process, operations and technology consulting services. Our consulting professionals and domain experts
from our industry-based business segments work closely with our practice areas to create modern frameworks, platforms and
solutions that leverage a wide range of digital technologies across our clients’ businesses to deliver higher levels of efficiency and
new value for their customers.
Cognizant Accelerator
Cognizant Accelerator supports our business segments and four practice areas by developing innovative and practical offerings
for clients' emerging needs through the application of new technologies.
2
3
Table of Contents
Global Delivery Model
We utilize a global delivery model, with delivery centers worldwide to provide the full range of services we offer to our
clients. Our delivery model includes employees deployed at client sites, local or in-country delivery centers, regional delivery
centers and offshore delivery centers, as required to best serve our clients. As we scale our digital services and solutions, we are
focused on hiring in the United States and other countries where we deliver services to our clients to expand our in-country
delivery capabilities. Our extensive facilities, technology and communications infrastructure are designed to enable the
effective collaboration of our global workforce across locations and geographies.
Sales and Marketing
We market and sell our services directly through our professional staff, senior management and direct sales personnel operating
out of our many offices around the world. We are increasing our investment in sales and marketing professionals to help us expand
existing accounts and acquire new ones, and amplify our brand's stature in the marketplace. These new investments are designed
to support and enhance the sales and marketing group, which works with our client delivery team as the sales process moves closer
to a client's selection of a services provider. The duration of the sales process may vary widely depending on the type and complexity
of services.
Clients
The services we provide are distributed among a number of clients in each of our business segments. Revenues from our
top clients as a percentage of total revenues were as follows:
For the years ended December 31,
2018
2017
2019
Top five clients
Top ten clients
7.9%
14.6%
8.6%
15.4%
8.9%
14.9%
A loss of a significant client or a few significant clients in a particular segment could materially reduce revenues for that
segment. The services we provide to our larger clients are often critical to their operations and a termination of our services would
typically require an extended transition period with gradually declining revenues. Nevertheless, the volume of work performed
for specific clients may vary significantly from year to year.
In the fourth quarter of 2019, we announced that we will exit certain content-related work that is not in line with our long-
term strategic vision for the Company. We intend to exit this work in 2020 and this may negatively impact our relationship with
the affected clients and the revenues from other services we provide to them. Refer to Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations for further information.
Competition
The markets for our services are highly competitive, characterized by a large number of participants and subject to rapid
change. Competitors may include systems integration firms, contract programming companies, application software companies,
cloud computing service providers, traditional consulting firms, professional services groups of computer equipment companies,
infrastructure management companies, outsourcing companies and boutique digital companies. Our direct competitors include,
among others, Accenture, Atos, Capgemini, Deloitte Digital, DXC Technology, EPAM Systems, Genpact, HCL Technologies,
IBM Global Services, Infosys Technologies, Tata Consultancy Services and Wipro. In addition, we compete with numerous smaller
local companies in the various geographic markets in which we operate.
The principal competitive factors affecting the markets for our services include the provider’s reputation and experience,
vision and strategic advisory capabilities, digital services capabilities, performance and reliability, responsiveness to customer
needs, financial stability, corporate governance and competitive pricing of services. Accordingly, we rely on the following to
compete effectively:
• investments to scale our digital services;
• our recruiting, training and retention model;
• our global delivery model;
• an entrepreneurial culture and approach to our work;
• a broad client referral base;
• investment in process improvement and knowledge capture;
• financial stability and good corporate governance;
• continued focus on responsiveness to client needs, quality of services and competitive prices; and
• project management capabilities and technical expertise.
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5
Table of Contents
Intellectual Property
We provide value to our clients based, in part, on our proprietary innovations, methodologies, software, reusable knowledge
capital and other IP assets. We recognize the importance of IP and its ability to differentiate us from our competitors. We seek IP
protection for some of our innovations and rely on a combination of IP laws, confidentiality procedures and contractual provisions,
to protect our IP and our Cognizant brand, which is one of our most valuable assets. We have registered, and applied for the
registration of, U.S. and international trademarks, service marks, domain names and copyrights. We own or are licensed under a
number of patents, trademarks and copyrights of varying duration, relating to our products and services. While our proprietary IP
rights are important to our success, we believe our business as a whole is not materially dependent on any particular IP right or
any particular group of patents, trademarks, copyrights or licenses, other than our Cognizant brand.
Cognizant® and other trademarks appearing in this report are registered trademarks or trademarks of Cognizant and its
affiliates in the United States and other countries, or third parties, as applicable.
Employees
We had approximately 292,500 employees at the end of 2019, with approximately 46,400 in North America, approximately
21,200 in Europe and approximately 224,900 in various other locations throughout the rest of the world, including approximately
203,700 in India. We are not party to any significant collective bargaining agreements.
Information About Our Executive Officers
The following table identifies our current executive officers:
Name
Brian Humphries (1)
Karen McLoughlin (2)
Robert Telesmanic (3)
Matthew Friedrich (4)
Becky Schmitt (5)
Santosh Thomas (7)
Malcolm Frank (8)
Balu Ganesh Ayyar (9)
Greg Hyttenrauch (10)
Pradeep Shilige (11)
Age
Capacities in Which Served
In Current
Position Since
46 Chief Executive Officer
55 Chief Financial Officer
53 Senior Vice President, Controller and Chief Accounting Officer
53 Executive Vice President, General Counsel, Chief Corporate Affairs
Officer and Secretary
46 Executive Vice President, Chief People Officer
51 Executive Vice President and President, Global Growth Markets
53 Executive Vice President and President, Cognizant Digital Business
58 Executive Vice President and President, Cognizant Digital Operations
52 Executive Vice President and President, Cognizant Digital Systems &
Technology
51 Executive Vice President and Head of Global Delivery
2019
2012
2017
2017
2020
2019
2016
2019
2019
2019
2019
Dharmendra Kumar Sinha (6)
57 Executive Vice President and President, North America
(1) Brian Humphries has been our Chief Executive Officer and a member of the Board of Directors since April 2019. Prior to
joining Cognizant, he served as Chief Executive Officer of Vodafone Business, a division of Vodafone Group, from 2017
until 2019. Mr. Humphries joined Vodafone from Dell Technologies where his positions from 2013 to 2017 included President
and Chief Operating Officer of Dell’s Infrastructure Solutions Group, President of Dell’s Global Enterprise Solutions, and
Vice President and General Manager, EMEA Enterprise Solutions. Before joining Dell, Mr. Humphries was with Hewlett-
Packard where his roles from 2008 to 2013 included Senior Vice President, Emerging Markets, Senior Vice President, Strategy
and Corporate Development, and Chief Financial Officer of HP Services. The early part of his career was spent with Compaq
and Digital Equipment Corporation. He holds a bachelor’s degree in Business Administration from the University of Ulster,
Northern Ireland.
(2) Karen McLoughlin has been our Chief Financial Officer since February 2012. Ms. McLoughlin has held various senior
management positions in our finance department since she joined Cognizant in 2003. Prior to joining Cognizant, Ms.
McLoughlin held various financial management positions at Spherion Corporation and Ryder System, Inc. and served in
various audit roles at Price Waterhouse (now PricewaterhouseCoopers). Ms. McLoughlin has served on the Board of Directors
of Best Buy Co., Inc. since 2015, where she is currently a member of the Audit Committee and chair of the Finance and
Investment Policy Committee. Ms. McLoughlin has a Bachelor of Arts degree in Economics from Wellesley College and an
MBA degree from Columbia University.
(3) Robert Telesmanic has been our Senior Vice President, Controller and Chief Accounting Officer since January 2017, a Senior
Vice President since 2010 and our Corporate Controller since 2004. Prior to that, he served as our Assistant Corporate
Table of Contents
Global Delivery Model
We utilize a global delivery model, with delivery centers worldwide to provide the full range of services we offer to our
clients. Our delivery model includes employees deployed at client sites, local or in-country delivery centers, regional delivery
centers and offshore delivery centers, as required to best serve our clients. As we scale our digital services and solutions, we are
focused on hiring in the United States and other countries where we deliver services to our clients to expand our in-country
delivery capabilities. Our extensive facilities, technology and communications infrastructure are designed to enable the
effective collaboration of our global workforce across locations and geographies.
Sales and Marketing
We market and sell our services directly through our professional staff, senior management and direct sales personnel operating
out of our many offices around the world. We are increasing our investment in sales and marketing professionals to help us expand
existing accounts and acquire new ones, and amplify our brand's stature in the marketplace. These new investments are designed
to support and enhance the sales and marketing group, which works with our client delivery team as the sales process moves closer
to a client's selection of a services provider. The duration of the sales process may vary widely depending on the type and complexity
of services.
Clients
Top five clients
Top ten clients
Competition
For the years ended December 31,
2019
7.9%
14.6%
2018
8.6%
15.4%
2017
8.9%
14.9%
A loss of a significant client or a few significant clients in a particular segment could materially reduce revenues for that
segment. The services we provide to our larger clients are often critical to their operations and a termination of our services would
typically require an extended transition period with gradually declining revenues. Nevertheless, the volume of work performed
for specific clients may vary significantly from year to year.
In the fourth quarter of 2019, we announced that we will exit certain content-related work that is not in line with our long-
term strategic vision for the Company. We intend to exit this work in 2020 and this may negatively impact our relationship with
the affected clients and the revenues from other services we provide to them. Refer to Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations for further information.
The markets for our services are highly competitive, characterized by a large number of participants and subject to rapid
change. Competitors may include systems integration firms, contract programming companies, application software companies,
cloud computing service providers, traditional consulting firms, professional services groups of computer equipment companies,
infrastructure management companies, outsourcing companies and boutique digital companies. Our direct competitors include,
among others, Accenture, Atos, Capgemini, Deloitte Digital, DXC Technology, EPAM Systems, Genpact, HCL Technologies,
IBM Global Services, Infosys Technologies, Tata Consultancy Services and Wipro. In addition, we compete with numerous smaller
local companies in the various geographic markets in which we operate.
The principal competitive factors affecting the markets for our services include the provider’s reputation and experience,
vision and strategic advisory capabilities, digital services capabilities, performance and reliability, responsiveness to customer
needs, financial stability, corporate governance and competitive pricing of services. Accordingly, we rely on the following to
compete effectively:
• investments to scale our digital services;
• our recruiting, training and retention model;
• our global delivery model;
• an entrepreneurial culture and approach to our work;
• a broad client referral base;
• investment in process improvement and knowledge capture;
• financial stability and good corporate governance;
• continued focus on responsiveness to client needs, quality of services and competitive prices; and
• project management capabilities and technical expertise.
Table of Contents
Intellectual Property
We provide value to our clients based, in part, on our proprietary innovations, methodologies, software, reusable knowledge
capital and other IP assets. We recognize the importance of IP and its ability to differentiate us from our competitors. We seek IP
protection for some of our innovations and rely on a combination of IP laws, confidentiality procedures and contractual provisions,
to protect our IP and our Cognizant brand, which is one of our most valuable assets. We have registered, and applied for the
registration of, U.S. and international trademarks, service marks, domain names and copyrights. We own or are licensed under a
number of patents, trademarks and copyrights of varying duration, relating to our products and services. While our proprietary IP
rights are important to our success, we believe our business as a whole is not materially dependent on any particular IP right or
any particular group of patents, trademarks, copyrights or licenses, other than our Cognizant brand.
Cognizant® and other trademarks appearing in this report are registered trademarks or trademarks of Cognizant and its
affiliates in the United States and other countries, or third parties, as applicable.
Employees
We had approximately 292,500 employees at the end of 2019, with approximately 46,400 in North America, approximately
21,200 in Europe and approximately 224,900 in various other locations throughout the rest of the world, including approximately
203,700 in India. We are not party to any significant collective bargaining agreements.
The services we provide are distributed among a number of clients in each of our business segments. Revenues from our
top clients as a percentage of total revenues were as follows:
Information About Our Executive Officers
The following table identifies our current executive officers:
Name
Brian Humphries (1)
Karen McLoughlin (2)
Robert Telesmanic (3)
Matthew Friedrich (4)
Becky Schmitt (5)
Dharmendra Kumar Sinha (6)
Santosh Thomas (7)
Malcolm Frank (8)
Balu Ganesh Ayyar (9)
Greg Hyttenrauch (10)
Pradeep Shilige (11)
Age
46 Chief Executive Officer
55 Chief Financial Officer
Capacities in Which Served
53 Senior Vice President, Controller and Chief Accounting Officer
53 Executive Vice President, General Counsel, Chief Corporate Affairs
Officer and Secretary
46 Executive Vice President, Chief People Officer
57 Executive Vice President and President, North America
51 Executive Vice President and President, Global Growth Markets
53 Executive Vice President and President, Cognizant Digital Business
58 Executive Vice President and President, Cognizant Digital Operations
52 Executive Vice President and President, Cognizant Digital Systems &
Technology
51 Executive Vice President and Head of Global Delivery
In Current
Position Since
2019
2012
2017
2017
2020
2019
2016
2019
2019
2019
2019
(1) Brian Humphries has been our Chief Executive Officer and a member of the Board of Directors since April 2019. Prior to
joining Cognizant, he served as Chief Executive Officer of Vodafone Business, a division of Vodafone Group, from 2017
until 2019. Mr. Humphries joined Vodafone from Dell Technologies where his positions from 2013 to 2017 included President
and Chief Operating Officer of Dell’s Infrastructure Solutions Group, President of Dell’s Global Enterprise Solutions, and
Vice President and General Manager, EMEA Enterprise Solutions. Before joining Dell, Mr. Humphries was with Hewlett-
Packard where his roles from 2008 to 2013 included Senior Vice President, Emerging Markets, Senior Vice President, Strategy
and Corporate Development, and Chief Financial Officer of HP Services. The early part of his career was spent with Compaq
and Digital Equipment Corporation. He holds a bachelor’s degree in Business Administration from the University of Ulster,
Northern Ireland.
(2) Karen McLoughlin has been our Chief Financial Officer since February 2012. Ms. McLoughlin has held various senior
management positions in our finance department since she joined Cognizant in 2003. Prior to joining Cognizant, Ms.
McLoughlin held various financial management positions at Spherion Corporation and Ryder System, Inc. and served in
various audit roles at Price Waterhouse (now PricewaterhouseCoopers). Ms. McLoughlin has served on the Board of Directors
of Best Buy Co., Inc. since 2015, where she is currently a member of the Audit Committee and chair of the Finance and
Investment Policy Committee. Ms. McLoughlin has a Bachelor of Arts degree in Economics from Wellesley College and an
MBA degree from Columbia University.
(3) Robert Telesmanic has been our Senior Vice President, Controller and Chief Accounting Officer since January 2017, a Senior
Vice President since 2010 and our Corporate Controller since 2004. Prior to that, he served as our Assistant Corporate
4
5
Karnataka, India.
Corporate History
Available Information
(11) Pradeep Shilige has been the Executive Vice President and Head of Global Delivery at Cognizant since July 2019. Prior to
that, he served as Executive Vice President, Global Delivery and Digital Systems & Technology at Cognizant from 2015
through June 2019. Mr. Shilige has held multiple other leadership roles at Cognizant since joining the organization in 1996.
Mr. Shilige is a member of the IT Services Council of NASSCOM, the premier industry association for the IT-BPM sector
in India since 2017. He has a bachelor’s degree in Computer Engineering from the National Institute of Technology in
None of our executive officers is related to any other executive officer or to any of our Directors. Our executive officers are
appointed annually by the Board of Directors and generally serve until their successors are duly appointed and qualified.
We began our IT development and maintenance services business in early 1994 as an in-house technology development
center for The Dun & Bradstreet Corporation and its operating units. In 1996, we were spun-off from The Dun & Bradstreet
Corporation and, in 1998, we completed an initial public offering to become a public company.
We make available the following public filings with the SEC free of charge through our website at www.cognizant.com as
soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC:
• our Annual Reports on Form 10-K and any amendments thereto;
• our Quarterly Reports on Form 10-Q and any amendments thereto; and
• our Current Reports on Form 8-K and any amendments thereto.
In addition, we make available our code of ethics entitled “Core Values and Code of Ethics” free of charge through our
website. We intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing standards
concerning any amendments to, or waivers from, any provision of our code of ethics.
No information on our website is incorporated by reference into this Form 10-K or any other public filing made by us with
the SEC.
Table of Contents
Table of Contents
Controller from 2003 to 2004. Prior to joining Cognizant, Mr. Telesmanic spent over 14 years with Deloitte & Touche LLP.
Mr. Telesmanic has a Bachelor of Science degree from New York University and an MBA degree from Columbia University.
(4) Matthew Friedrich has been our Executive Vice President, General Counsel, Chief Corporate Affairs Officer and Secretary
since May 2017. Prior to joining Cognizant, Mr. Friedrich served as Chief Corporate Counsel for Chevron Corporation from
2014 to 2017. Mr. Friedrich was a partner with the law firms of Freshfields Bruckhaus Deringer LLP and Boies Schiller &
Flexner LLP prior to his role with Chevron. Mr. Friedrich began his legal career in 1995 as a federal prosecutor with the
DOJ, where he remained for nearly 14 years, culminating with his designation as the acting Assistant Attorney General of
the Criminal Division in 2008. Mr. Friedrich has served as a member of the Council on Foreign Relations since 2016, as a
member of the Board of Directors of the U.S.-India Business Council since 2018 and as a member of the Board of Directors
of the US Chamber of Commerce, Litigation Center since 2018. Mr. Friedrich has a Bachelor of Arts degree in Foreign
Affairs from the University of Virginia and a Juris Doctor degree from the University of Texas School of Law. Following
law school, Mr. Friedrich clerked for U.S. District Judge Royal Furgeson in the Western District of Texas.
(5) Becky Schmitt has been our Executive Vice President, Chief People Officer since February 2020. Prior to joining Cognizant,
Ms. Schmitt was the Chief People Officer of Sam’s Club, a division of Walmart, Inc. from October 2018 through January
2020. Prior to that, she served as SVP, Chief People Officer, US eCommerce & Corporate Functions for Walmart from
October 2016 through September 2018 and as VP, HR - Technology from February 2016 until October 2016. Prior to joining
Walmart, Ms. Schmitt spent over 20 years with Accenture plc in various human resources roles, culminating in her role as
HR Managing Director, North America Business from March 2014 through February 2016. Ms. Schmitt has served as a
Board Member at Large for the Girl Scouts National Board since 2017. Ms. Schmitt has a Bachelor of Arts degree from
University of Michigan, Ann Arbor.
(6) Dharmendra Kumar Sinha has been our Executive Vice President and President, North America since June 2019. Prior to
that, he served as Executive Vice President and President, Global Client Services from December 2013 until June 2019. He
has also served as President and a director of the Cognizant U.S. Foundation, a non-profit organization, since April 2018.
From 2007 to December 2013, Mr. Sinha served as our Senior Vice President and General Manager, Global Sales and Field
Marketing. From 2004 to 2007, Mr. Sinha served as our Vice President responsible for our Manufacturing and Logistics,
Retail and Hospitality, and Technology verticals. From 1997 to 2004, Mr. Sinha held a variety of other management roles.
Prior to joining Cognizant in 1997, Mr. Sinha worked with Tata Consultancy Services and CMC Limited, an IT solutions
provider. Mr. Sinha has a Bachelor of Science degree from Patna Science College, Patna and an MBA degree from the Birla
Institute of Technology, Mesra.
(7) Santosh Thomas has been our Executive Vice President and President, Global Growth Markets since August 2016. Prior to
his current role, Mr. Thomas served as our Head, Growth Markets from 2011 through July 2016. From 1999 to 2011, Mr.
Thomas held various senior positions at Cognizant including leading Continental European operations and various roles in
client relationships and market development in North America. Prior to joining Cognizant in 1999, Mr. Thomas worked with
Informix and HCL Hewlett Packard Limited. Mr. Thomas has an undergraduate degree in engineering from R.V. College of
Engineering in Bangalore, India and a Postgraduate Diploma in Business Management from Xavier School of Management,
India.
(8) Malcolm Frank has been our Executive Vice President and President, Cognizant Digital Business since May 2019. Prior to
that, he served as Executive Vice President, Strategy and Marketing at Cognizant from 2012 to May 2019 and as our Senior
Vice President of Strategy and Marketing from 2005 to 2012. Prior to joining Cognizant in 2005, Mr. Frank was a founder
and the President and Chief Executive Officer of CXO Systems, Inc., an independent software vendor providing dashboard
solutions for senior managers, a founder and the President, Chief Executive Officer and Chairman of NerveWire Inc., a
management consulting and systems integration firm, and a founder and executive officer at Cambridge Technology Partners,
an information technology professional services firm. Mr. Frank has served on the Board of Directors of Factset Research
Systems Inc. since June 2016, where he is a member of the Compensation Committee. He is also a member of the Board of
Directors of the US-India Strategic Partnership Forum since May 2018. Mr. Frank has a Bachelor of Arts degree in Economics
from Yale University.
(9) Balu Ganesh Ayyar has been our Executive Vice President and President, Cognizant Digital Operations since August 2019.
Prior to joining Cognizant, Mr. Ayyar was the CEO of Mphasis, a global IT services company listed in India, from 2009 to
2017. Prior to Mphasis, Mr. Ayyar spent nearly two decades with Hewlett-Packard, holding a variety of leadership roles
across multiple geographies.
(10) Greg Hyttenrauch has been our Executive Vice President and President, Cognizant Digital Systems & Technology since
December 2019. Prior to joining Cognizant, Mr. Hyttenrauch served as Director, Global Cloud and Security Services for
Vodafone from October 2015 to November 2019. Prior to Vodafone, Mr. Hyttenrauch held a variety of senior leadership
positions at Capgemini from 2008 to 2015, including Deputy CEO, Global Infrastructure Services, and Global Sales Officer
and CEO of the UK and Nordic Outsourcing Business Unit. Before joining Capgemini, Mr. Hyttenrauch held positions with
CSC and EDS. He began his career with 13 years in the Canadian military, rising to the rank of captain. Mr. Hyttenrauch
holds a bachelor’s degree in Mechanical Engineering from the Royal Military College of Canada and an MBA in International
Management from the University of Ottawa.
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7
Table of Contents
Table of Contents
(11) Pradeep Shilige has been the Executive Vice President and Head of Global Delivery at Cognizant since July 2019. Prior to
that, he served as Executive Vice President, Global Delivery and Digital Systems & Technology at Cognizant from 2015
through June 2019. Mr. Shilige has held multiple other leadership roles at Cognizant since joining the organization in 1996.
Mr. Shilige is a member of the IT Services Council of NASSCOM, the premier industry association for the IT-BPM sector
in India since 2017. He has a bachelor’s degree in Computer Engineering from the National Institute of Technology in
Karnataka, India.
None of our executive officers is related to any other executive officer or to any of our Directors. Our executive officers are
appointed annually by the Board of Directors and generally serve until their successors are duly appointed and qualified.
Corporate History
We began our IT development and maintenance services business in early 1994 as an in-house technology development
center for The Dun & Bradstreet Corporation and its operating units. In 1996, we were spun-off from The Dun & Bradstreet
Corporation and, in 1998, we completed an initial public offering to become a public company.
Available Information
We make available the following public filings with the SEC free of charge through our website at www.cognizant.com as
soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC:
• our Annual Reports on Form 10-K and any amendments thereto;
• our Quarterly Reports on Form 10-Q and any amendments thereto; and
• our Current Reports on Form 8-K and any amendments thereto.
In addition, we make available our code of ethics entitled “Core Values and Code of Ethics” free of charge through our
website. We intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing standards
concerning any amendments to, or waivers from, any provision of our code of ethics.
No information on our website is incorporated by reference into this Form 10-K or any other public filing made by us with
the SEC.
Controller from 2003 to 2004. Prior to joining Cognizant, Mr. Telesmanic spent over 14 years with Deloitte & Touche LLP.
Mr. Telesmanic has a Bachelor of Science degree from New York University and an MBA degree from Columbia University.
(4) Matthew Friedrich has been our Executive Vice President, General Counsel, Chief Corporate Affairs Officer and Secretary
since May 2017. Prior to joining Cognizant, Mr. Friedrich served as Chief Corporate Counsel for Chevron Corporation from
2014 to 2017. Mr. Friedrich was a partner with the law firms of Freshfields Bruckhaus Deringer LLP and Boies Schiller &
Flexner LLP prior to his role with Chevron. Mr. Friedrich began his legal career in 1995 as a federal prosecutor with the
DOJ, where he remained for nearly 14 years, culminating with his designation as the acting Assistant Attorney General of
the Criminal Division in 2008. Mr. Friedrich has served as a member of the Council on Foreign Relations since 2016, as a
member of the Board of Directors of the U.S.-India Business Council since 2018 and as a member of the Board of Directors
of the US Chamber of Commerce, Litigation Center since 2018. Mr. Friedrich has a Bachelor of Arts degree in Foreign
Affairs from the University of Virginia and a Juris Doctor degree from the University of Texas School of Law. Following
law school, Mr. Friedrich clerked for U.S. District Judge Royal Furgeson in the Western District of Texas.
(5) Becky Schmitt has been our Executive Vice President, Chief People Officer since February 2020. Prior to joining Cognizant,
Ms. Schmitt was the Chief People Officer of Sam’s Club, a division of Walmart, Inc. from October 2018 through January
2020. Prior to that, she served as SVP, Chief People Officer, US eCommerce & Corporate Functions for Walmart from
October 2016 through September 2018 and as VP, HR - Technology from February 2016 until October 2016. Prior to joining
Walmart, Ms. Schmitt spent over 20 years with Accenture plc in various human resources roles, culminating in her role as
HR Managing Director, North America Business from March 2014 through February 2016. Ms. Schmitt has served as a
Board Member at Large for the Girl Scouts National Board since 2017. Ms. Schmitt has a Bachelor of Arts degree from
University of Michigan, Ann Arbor.
(6) Dharmendra Kumar Sinha has been our Executive Vice President and President, North America since June 2019. Prior to
that, he served as Executive Vice President and President, Global Client Services from December 2013 until June 2019. He
has also served as President and a director of the Cognizant U.S. Foundation, a non-profit organization, since April 2018.
From 2007 to December 2013, Mr. Sinha served as our Senior Vice President and General Manager, Global Sales and Field
Marketing. From 2004 to 2007, Mr. Sinha served as our Vice President responsible for our Manufacturing and Logistics,
Retail and Hospitality, and Technology verticals. From 1997 to 2004, Mr. Sinha held a variety of other management roles.
Prior to joining Cognizant in 1997, Mr. Sinha worked with Tata Consultancy Services and CMC Limited, an IT solutions
provider. Mr. Sinha has a Bachelor of Science degree from Patna Science College, Patna and an MBA degree from the Birla
Institute of Technology, Mesra.
(7) Santosh Thomas has been our Executive Vice President and President, Global Growth Markets since August 2016. Prior to
his current role, Mr. Thomas served as our Head, Growth Markets from 2011 through July 2016. From 1999 to 2011, Mr.
Thomas held various senior positions at Cognizant including leading Continental European operations and various roles in
client relationships and market development in North America. Prior to joining Cognizant in 1999, Mr. Thomas worked with
Informix and HCL Hewlett Packard Limited. Mr. Thomas has an undergraduate degree in engineering from R.V. College of
Engineering in Bangalore, India and a Postgraduate Diploma in Business Management from Xavier School of Management,
India.
(8) Malcolm Frank has been our Executive Vice President and President, Cognizant Digital Business since May 2019. Prior to
that, he served as Executive Vice President, Strategy and Marketing at Cognizant from 2012 to May 2019 and as our Senior
Vice President of Strategy and Marketing from 2005 to 2012. Prior to joining Cognizant in 2005, Mr. Frank was a founder
and the President and Chief Executive Officer of CXO Systems, Inc., an independent software vendor providing dashboard
solutions for senior managers, a founder and the President, Chief Executive Officer and Chairman of NerveWire Inc., a
management consulting and systems integration firm, and a founder and executive officer at Cambridge Technology Partners,
an information technology professional services firm. Mr. Frank has served on the Board of Directors of Factset Research
Systems Inc. since June 2016, where he is a member of the Compensation Committee. He is also a member of the Board of
Directors of the US-India Strategic Partnership Forum since May 2018. Mr. Frank has a Bachelor of Arts degree in Economics
(9) Balu Ganesh Ayyar has been our Executive Vice President and President, Cognizant Digital Operations since August 2019.
Prior to joining Cognizant, Mr. Ayyar was the CEO of Mphasis, a global IT services company listed in India, from 2009 to
2017. Prior to Mphasis, Mr. Ayyar spent nearly two decades with Hewlett-Packard, holding a variety of leadership roles
from Yale University.
across multiple geographies.
(10) Greg Hyttenrauch has been our Executive Vice President and President, Cognizant Digital Systems & Technology since
December 2019. Prior to joining Cognizant, Mr. Hyttenrauch served as Director, Global Cloud and Security Services for
Vodafone from October 2015 to November 2019. Prior to Vodafone, Mr. Hyttenrauch held a variety of senior leadership
positions at Capgemini from 2008 to 2015, including Deputy CEO, Global Infrastructure Services, and Global Sales Officer
and CEO of the UK and Nordic Outsourcing Business Unit. Before joining Capgemini, Mr. Hyttenrauch held positions with
CSC and EDS. He began his career with 13 years in the Canadian military, rising to the rank of captain. Mr. Hyttenrauch
holds a bachelor’s degree in Mechanical Engineering from the Royal Military College of Canada and an MBA in International
Management from the University of Ottawa.
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Table of Contents
Item 1A. Risk Factors
Factors That May Affect Future Results
We face various important risks and uncertainties, including those described below, that could adversely affect our
business, results of operations and financial condition and, as a result, cause a decline in the trading price of our common
stock.
Our results of operations could be adversely affected by economic and political conditions globally and in particular
in the markets in which our clients and operations are concentrated.
Global macroeconomic conditions have a significant effect on our business as well as the businesses of our clients. Volatile,
negative or uncertain economic conditions could cause our clients to reduce, postpone or cancel spending on projects with us and
could make it more difficult for us to accurately forecast client demand and have available the right resources to profitably address
such client demand. The short-term nature of contracts in our industry means that actions by clients may occur quickly and with
little warning, which may cause us to incur extra costs where we have employed more professionals than client demand supports.
Our business is particularly susceptible to economic and political conditions in the markets where our clients or operations
are concentrated. Our revenues are highly dependent on clients located in the United States and Europe, and any adverse economic,
political or legal uncertainties or adverse developments, including due to the uncertainty related to the potential economic and
regulatory impacts of the United Kingdom's exit from the European Union, may cause clients in these geographies to reduce their
spending and materially adversely impact our business. Many of our clients are in the financial services and healthcare industries,
so any decrease in growth or significant consolidation in these industries or regulatory policies that restrict these industries may
reduce demand for our services. Economic and political developments in India, where a significant majority of our operations and
technical professionals are located, or in other countries where we maintain delivery operations, may also have a significant impact
on our business and costs of operations. As a developing country, India has experienced and may continue to experience high
inflation and wage growth, fluctuations in gross domestic product growth and volatility in currency exchange rates, any of which
could materially adversely affect our cost of operations. Additionally, we benefit from governmental policies in India that encourage
foreign investment and promote the ease of doing business, such as tax incentives, and any change in policy or circumstances that
results in the elimination of such benefits or degradation of the rule of law, or imposition of new adverse restrictions or costs on
our operations could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to attract, train and retain skilled professionals, including highly skilled technical personnel to satisfy
client demand and senior management to lead our business globally, our business and results of operations may be materially
adversely affected.
Our success is dependent, in large part, on our ability to keep our supply of skilled professionals, including project managers,
IT engineers and senior technical personnel, in balance with client demand around the world and on our ability to attract and retain
senior management with the knowledge and skills to lead our business globally. Each year, we must hire tens of thousands of new
professionals and reskill, retain, and motivate our workforce of hundreds of thousands of professionals with diverse skills and
expertise in order to serve client demands across the globe, respond quickly to rapid and ongoing technological, industry and
macroeconomic developments and grow and manage our business. We also must continue to maintain an effective senior leadership
team that, among other things, is effective in executing on our strategic goals and growing our digital business. The loss of senior
executives, or the failure to attract, integrate and retain new senior executives as the needs of our business require, could have a
material adverse effect on our business and results of operations.
Competition for skilled labor is intense and, in some jurisdictions in which we operate, there are more jobs for IT professionals
than qualified persons to fill these jobs. Our business has experienced significant employee attrition, which may cause us to incur
increased costs to hire new professionals with the desired skills. Costs associated with recruiting and training professionals are
significant. If we are unable to hire or deploy professionals with the needed skillsets or if we are unable to adequately equip our
professionals with the skills needed, this could materially adversely affect our business. Additionally, if we are unable to maintain
an employee environment that is competitive and contemporary, it could have an adverse effect on engagement and retention,
which may materially adversely affect our business.
Table of Contents
We face challenges related to growing our business organically as well as inorganically through acquisitions, and we
may not be able to achieve our targeted growth rates.
Achievement of our targeted growth rates requires continued significant organic growth of our business as well as inorganic
growth through acquisitions. To achieve such growth, we must, among other things, continue to significantly expand our global
operations, increase our product and service offerings, in particular with respect to digital, and scale our infrastructure to support
such business growth. Continued business growth increases the complexity of our business and places significant strain on our
management, personnel, operations, systems, technical performance, financial resources, and internal financial control and
reporting functions, which we will have to continue to develop and improve to sustain such growth. We must continually recruit
and train new personnel and retain and reskill, as necessary, existing sales, technical, finance, marketing and management personnel
with the knowledge, skills and experience that our business model requires and effectively manage our personnel worldwide to
support our culture, values, strategies and goals. Additionally, we expect to continue pursuing strategic and targeted acquisitions,
investments and joint ventures to enhance our offerings of services and solutions or to enable us to expand in certain geographic
and other markets. We may not be successful in identifying suitable opportunities, completing targeted transactions or achieving
the desired results, and such opportunities may divert our management's time and focus away from our core business. We may
face challenges in effectively integrating acquired businesses into our ongoing operations and in assimilating and retaining
employees of those businesses into our culture and organizational structure. If we are unable to manage our growth effectively,
complete acquisitions of the number, magnitude and nature we have targeted, or successfully integrate any acquired businesses
into our operations, we may not be able to achieve our targeted growth rates or improve our market share, profitability or competitive
position generally or in specific markets or services.
We may not be able to achieve our profitability and capital return goals.
Our goals for profitability and capital return rely upon a number of assumptions, including our ability to improve the efficiency
of our operations and make successful investments to grow and further develop our business. Our profitability depends on the
efficiency with which we run our operations and the cost of our operations, especially the compensation and benefits costs of the
professionals we employ. We have incurred, and expect to continue to incur, substantial costs related to implementing our strategy
to optimize such costs, and we may not realize the ultimate cost savings that we expect. We may not be able to efficiently utilize
our professionals if increased regulation, policy changes or administrative burdens of immigration, work visas or outsourcing
prevents us from deploying our professionals globally on a timely basis, or at all, to fulfill the needs of our clients. Increases in
wages and other costs may put pressure on our profitability. Fluctuations in foreign currency exchange rates can also have adverse
effects on our revenues, income from operations and net income when items originally denominated in other currencies are
translated or remeasured into U.S. dollars for presentation of our consolidated financial statements. We have entered into foreign
exchange forward contracts intended to partially offset the impact of the movement of the exchange rates on future operating costs
and to mitigate foreign currency risk on foreign currency denominated net monetary assets. However, the hedging strategies that
we have implemented, or may in the future implement, to mitigate foreign currency exchange rate risks may not reduce or completely
offset our exposure to foreign exchange rate fluctuations and may expose our business to unexpected market, operational and
counterparty credit risks. We are particularly susceptible to wage and cost pressures in India and the exchange rate of the Indian
rupee relative to the currencies of our client contracts due to the fact that the substantial majority of our employees are in India
while our contracts with clients are typically in the local currency of the country where our clients are located. If we are unable
to improve the efficiency of our operations, our operating margin may decline and our business, results of operations and financial
condition may be materially adversely affected. Failure to achieve our profitability goals could adversely affect our business,
financial condition and results of operations.
With respect to capital return, our ability and decisions to pay dividends and repurchase shares consistent with our announced
goals or at all depend on a variety of factors, including our cash flow generated from operations, the amount and geographic
location of our cash and investment balances, our net income, our overall liquidity position, potential alternative uses of cash,
such as acquisitions, and anticipated future economic conditions and financial results. Failure to achieve our capital return goals
may adversely impact our reputation with shareholders and shareholders’ perception of our business and the value of our common
stock.
Our failure to meet specified service levels or milestones required by certain of our client contracts may result in our
client contracts being less profitable, potential liability for penalties or damages or reputational harm.
Many of our client contracts include clauses that tie our compensation to the achievement of agreed-upon performance
standards or milestones. Failure to satisfy these measures could significantly reduce or eliminate our fees under the contracts,
increase the cost to us of meeting performance standards or milestones, delay expected payments, subject us to potential damage
claims under the contract terms or harm our reputation. The use of new technologies in our offerings can expose us to additional
risks if those technologies fail to work as predicted, or there are unintended consequences of new designs or uses, which could
lead to cost overruns, project delays, financial penalties, or damage to our reputation. Clients also often have the right to terminate
8
9
Table of Contents
Item 1A. Risk Factors
Factors That May Affect Future Results
We face various important risks and uncertainties, including those described below, that could adversely affect our
business, results of operations and financial condition and, as a result, cause a decline in the trading price of our common
stock.
Our results of operations could be adversely affected by economic and political conditions globally and in particular
in the markets in which our clients and operations are concentrated.
Global macroeconomic conditions have a significant effect on our business as well as the businesses of our clients. Volatile,
negative or uncertain economic conditions could cause our clients to reduce, postpone or cancel spending on projects with us and
could make it more difficult for us to accurately forecast client demand and have available the right resources to profitably address
such client demand. The short-term nature of contracts in our industry means that actions by clients may occur quickly and with
little warning, which may cause us to incur extra costs where we have employed more professionals than client demand supports.
Our business is particularly susceptible to economic and political conditions in the markets where our clients or operations
are concentrated. Our revenues are highly dependent on clients located in the United States and Europe, and any adverse economic,
political or legal uncertainties or adverse developments, including due to the uncertainty related to the potential economic and
regulatory impacts of the United Kingdom's exit from the European Union, may cause clients in these geographies to reduce their
spending and materially adversely impact our business. Many of our clients are in the financial services and healthcare industries,
so any decrease in growth or significant consolidation in these industries or regulatory policies that restrict these industries may
reduce demand for our services. Economic and political developments in India, where a significant majority of our operations and
technical professionals are located, or in other countries where we maintain delivery operations, may also have a significant impact
on our business and costs of operations. As a developing country, India has experienced and may continue to experience high
inflation and wage growth, fluctuations in gross domestic product growth and volatility in currency exchange rates, any of which
could materially adversely affect our cost of operations. Additionally, we benefit from governmental policies in India that encourage
foreign investment and promote the ease of doing business, such as tax incentives, and any change in policy or circumstances that
results in the elimination of such benefits or degradation of the rule of law, or imposition of new adverse restrictions or costs on
our operations could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to attract, train and retain skilled professionals, including highly skilled technical personnel to satisfy
client demand and senior management to lead our business globally, our business and results of operations may be materially
adversely affected.
Our success is dependent, in large part, on our ability to keep our supply of skilled professionals, including project managers,
IT engineers and senior technical personnel, in balance with client demand around the world and on our ability to attract and retain
senior management with the knowledge and skills to lead our business globally. Each year, we must hire tens of thousands of new
professionals and reskill, retain, and motivate our workforce of hundreds of thousands of professionals with diverse skills and
expertise in order to serve client demands across the globe, respond quickly to rapid and ongoing technological, industry and
macroeconomic developments and grow and manage our business. We also must continue to maintain an effective senior leadership
team that, among other things, is effective in executing on our strategic goals and growing our digital business. The loss of senior
executives, or the failure to attract, integrate and retain new senior executives as the needs of our business require, could have a
material adverse effect on our business and results of operations.
Competition for skilled labor is intense and, in some jurisdictions in which we operate, there are more jobs for IT professionals
than qualified persons to fill these jobs. Our business has experienced significant employee attrition, which may cause us to incur
increased costs to hire new professionals with the desired skills. Costs associated with recruiting and training professionals are
significant. If we are unable to hire or deploy professionals with the needed skillsets or if we are unable to adequately equip our
professionals with the skills needed, this could materially adversely affect our business. Additionally, if we are unable to maintain
an employee environment that is competitive and contemporary, it could have an adverse effect on engagement and retention,
which may materially adversely affect our business.
Table of Contents
We face challenges related to growing our business organically as well as inorganically through acquisitions, and we
may not be able to achieve our targeted growth rates.
Achievement of our targeted growth rates requires continued significant organic growth of our business as well as inorganic
growth through acquisitions. To achieve such growth, we must, among other things, continue to significantly expand our global
operations, increase our product and service offerings, in particular with respect to digital, and scale our infrastructure to support
such business growth. Continued business growth increases the complexity of our business and places significant strain on our
management, personnel, operations, systems, technical performance, financial resources, and internal financial control and
reporting functions, which we will have to continue to develop and improve to sustain such growth. We must continually recruit
and train new personnel and retain and reskill, as necessary, existing sales, technical, finance, marketing and management personnel
with the knowledge, skills and experience that our business model requires and effectively manage our personnel worldwide to
support our culture, values, strategies and goals. Additionally, we expect to continue pursuing strategic and targeted acquisitions,
investments and joint ventures to enhance our offerings of services and solutions or to enable us to expand in certain geographic
and other markets. We may not be successful in identifying suitable opportunities, completing targeted transactions or achieving
the desired results, and such opportunities may divert our management's time and focus away from our core business. We may
face challenges in effectively integrating acquired businesses into our ongoing operations and in assimilating and retaining
employees of those businesses into our culture and organizational structure. If we are unable to manage our growth effectively,
complete acquisitions of the number, magnitude and nature we have targeted, or successfully integrate any acquired businesses
into our operations, we may not be able to achieve our targeted growth rates or improve our market share, profitability or competitive
position generally or in specific markets or services.
We may not be able to achieve our profitability and capital return goals.
Our goals for profitability and capital return rely upon a number of assumptions, including our ability to improve the efficiency
of our operations and make successful investments to grow and further develop our business. Our profitability depends on the
efficiency with which we run our operations and the cost of our operations, especially the compensation and benefits costs of the
professionals we employ. We have incurred, and expect to continue to incur, substantial costs related to implementing our strategy
to optimize such costs, and we may not realize the ultimate cost savings that we expect. We may not be able to efficiently utilize
our professionals if increased regulation, policy changes or administrative burdens of immigration, work visas or outsourcing
prevents us from deploying our professionals globally on a timely basis, or at all, to fulfill the needs of our clients. Increases in
wages and other costs may put pressure on our profitability. Fluctuations in foreign currency exchange rates can also have adverse
effects on our revenues, income from operations and net income when items originally denominated in other currencies are
translated or remeasured into U.S. dollars for presentation of our consolidated financial statements. We have entered into foreign
exchange forward contracts intended to partially offset the impact of the movement of the exchange rates on future operating costs
and to mitigate foreign currency risk on foreign currency denominated net monetary assets. However, the hedging strategies that
we have implemented, or may in the future implement, to mitigate foreign currency exchange rate risks may not reduce or completely
offset our exposure to foreign exchange rate fluctuations and may expose our business to unexpected market, operational and
counterparty credit risks. We are particularly susceptible to wage and cost pressures in India and the exchange rate of the Indian
rupee relative to the currencies of our client contracts due to the fact that the substantial majority of our employees are in India
while our contracts with clients are typically in the local currency of the country where our clients are located. If we are unable
to improve the efficiency of our operations, our operating margin may decline and our business, results of operations and financial
condition may be materially adversely affected. Failure to achieve our profitability goals could adversely affect our business,
financial condition and results of operations.
With respect to capital return, our ability and decisions to pay dividends and repurchase shares consistent with our announced
goals or at all depend on a variety of factors, including our cash flow generated from operations, the amount and geographic
location of our cash and investment balances, our net income, our overall liquidity position, potential alternative uses of cash,
such as acquisitions, and anticipated future economic conditions and financial results. Failure to achieve our capital return goals
may adversely impact our reputation with shareholders and shareholders’ perception of our business and the value of our common
stock.
Our failure to meet specified service levels or milestones required by certain of our client contracts may result in our
client contracts being less profitable, potential liability for penalties or damages or reputational harm.
Many of our client contracts include clauses that tie our compensation to the achievement of agreed-upon performance
standards or milestones. Failure to satisfy these measures could significantly reduce or eliminate our fees under the contracts,
increase the cost to us of meeting performance standards or milestones, delay expected payments, subject us to potential damage
claims under the contract terms or harm our reputation. The use of new technologies in our offerings can expose us to additional
risks if those technologies fail to work as predicted, or there are unintended consequences of new designs or uses, which could
lead to cost overruns, project delays, financial penalties, or damage to our reputation. Clients also often have the right to terminate
8
9
Table of Contents
Table of Contents
a contract and pursue damage claims for serious or repeated failure to meet these service commitments. Some of our contracts
provide that a portion of our compensation depends on performance measures such as cost-savings, revenue enhancement, benefits
produced, business goals attained and adherence to schedule. These goals can be complex and may depend on our clients’ actual
levels of business activity or may be based on assumptions that are later determined not to be achievable or accurate. As such,
these provisions may increase the variability in revenues and margins earned on those contracts.
We face intense and evolving competition and significant technological advances that our service offerings must keep
pace with in the rapidly changing markets we compete in.
The markets we serve and operate in are highly competitive, subject to rapid change and characterized by a large number of
participants, as described in “Part I, Item 1. Business-Competition.” In addition to large, global competitors, we face competition
from numerous smaller, local competitors in many geographic markets that may have more experience with operations in these
markets, have well-established relationships with our desired clients, or be able to provide services and solutions at lower costs
or on terms more attractive to clients than we can. Consolidation activity may also result in new competitors with greater scale,
a broader footprint or vertical integration that makes them more attractive to clients as a single provider of integrated products
and services. In addition, the short-term nature of contracts in our industry and the long-term concurrent use by many clients of
multiple professional service providers means that we are required to be continually competitive on the quality, scope and pricing
of our offerings or face a reduction or elimination of our business.
Our success depends on our ability to continue to develop and implement services and solutions that anticipate and respond
to rapid and continuing changes in technology to serve the evolving needs of our clients. Examples of areas of significant change
include digital-, cloud- and security-related offerings, which are continually evolving, as well as developments in areas such as
AI, augmented reality, automation, blockchain, IoT, quantum computing and as-a-service solutions. If we do not sufficiently invest
in new technologies, successfully adapt to industry developments and changing demand, and evolve and expand our business at
sufficient speed and scale to keep pace with the demands of the markets we serve, we may be unable to develop and maintain a
competitive advantage and execute on our growth strategy, which would materially adversely affect our business, results of
operations and financial condition.
Our relationships with our third party alliance partners, who supply us with necessary components to the services and solutions
we offer our clients, are also critical to our ability to provide many of our services and solutions that address client demands. There
can be no assurance that we will be able to maintain such relationships. Among other things, such alliance partners may in the
future decide to compete with us, form exclusive or more favorable arrangements with our competitors or otherwise reduce our
access to their products impairing our ability to provide the services and solutions demanded by clients.
We face legal, reputational and financial risks if we fail to protect client and/or Cognizant data from security breaches
or cyberattacks.
In order to provide our services and solutions, we depend on global information technology networks and systems, including
those of third parties, to process, transmit, host and securely store electronic information (including our confidential information
and the confidential information of our clients) and to communicate among our locations around the world and with our clients,
suppliers and partners. Security breaches, employee malfeasance, or human or technological error could lead to shutdowns or
disruptions of our operations and potential unauthorized disclosure of our or our clients’ sensitive data, which in turn could
jeopardize projects that are critical to our operations or the operations of our clients’ businesses. Like other global companies, we
and the businesses we interact with have experienced threats to data and systems, including by perpetrators of random or targeted
malicious cyberattacks, computer viruses, malware, worms, bot attacks or other destructive or disruptive software and attempts
to misappropriate client information and cause system failures and disruptions.
A security compromise of our information systems or of those of businesses with whom we interact that results in confidential
information being accessed by unauthorized or improper persons could harm our reputation and expose us to regulatory actions,
client attrition, remediation expenses, disruption of our business, and claims brought by our clients or others for breaching
contractual confidentiality and security provisions or data protection laws. Monetary damages imposed on us could be significant
and not covered by our liability insurance. Techniques used by bad actors to obtain unauthorized access, disable or degrade service,
or sabotage systems evolve frequently and may not immediately produce signs of intrusion, and we may be unable to anticipate
these techniques or to implement adequate preventative measures. In addition, a security breach could require that we expend
substantial additional resources related to the security of our information systems, diverting resources from other projects and
disrupting our businesses. If we experience a data security breach, our reputation could be damaged and we could be subject to
additional litigation, regulatory risks and business losses.
We are required to comply with increasingly complex and changing data security and privacy regulations in the United States,
the United Kingdom, the European Union and in other jurisdictions in which we operate that regulate the collection, use and
transfer of personal data, including the transfer of personal data between or among countries. For example, the European Union’s
10
General Data Protection Regulation has imposed stringent compliance obligations regarding the handling of personal data and
has resulted in the issuance of significant financial penalties for noncompliance. In the United States, there have been proposals
for federal privacy legislation and many new state privacy laws are on the horizon. Recently enacted legislation, such as the
California Consumer Privacy Act, impose extensive privacy requirements on organizations governing personal information.
Existing US sectoral laws such as the Health Insurance Portability and Accountability Act also impose extensive privacy and
security requirements on organizations operating in the healthcare industry, which Cognizant serves. Additionally, in India, the
Personal Data Protection Bill, 2018 was recently cleared for introduction in the current session of the Indian Parliament. If enacted
in its current form it would impose stringent obligations on the handling of personal data, including certain localization requirements
for sensitive data. Other countries have enacted or are considering enacting data localization laws that require certain data to stay
within their borders. We may also face audits or investigations by one or more domestic or foreign government agencies or our
clients pursuant to our contractual obligations relating to our compliance with these regulations. Complying with changing
regulatory requirements requires us to incur substantial costs, exposes us to potential regulatory action or litigation, and may
require changes to our business practices in certain jurisdictions, any of which could materially adversely affect our business
operations and operating results.
If our business continuity and disaster recovery plans are not effective and our global delivery capability is impacted,
our business and results of operations may be materially adversely affected and we may suffer harm to our reputation.
Our business model is dependent on our global delivery capability, which includes coordination between our main operating
offices in India, our other global and regional delivery centers, the offices of our clients and our associates worldwide. System
failures, outages and operational disruptions may be caused by factors outside of our control such as hostilities, political unrest,
terrorist attacks, natural disasters, pandemics and public health emergencies, such as the coronavirus, affecting the geographies
where our operations and transmission equipment is located. Our business continuity and disaster recovery plans may not be
effective at preventing or mitigating the effects of such disruptions, particularly in the case of a catastrophic event. Any such
disruption may result in lost revenues, a loss of clients and reputational damage, which would have an adverse effect on our
business, results of operations and financial condition.
A substantial portion of our employees in the United States, United Kingdom, European Union and other jurisdictions
rely on visas to work in those areas such that any restrictions on such visas or immigration more generally or increased
costs of obtaining such visas may affect our ability to compete for and provide services to clients in these jurisdictions,
which could materially adversely affect our business, results of operations and financial condition.
A substantial portion of our employees in the United States and in many other jurisdictions, including countries in Europe,
rely upon temporary work authorization or work permits, which makes our business particularly vulnerable to changes and variations
in immigration laws and regulations, including written changes and policy changes to the manner in which the laws and regulations
are interpreted or enforced, and potential enforcement actions and penalties that might cause us to lose access to such visas. The
political environment in the United States, the United Kingdom and other countries in recent years has included significant support
for anti-immigrant legislation and administrative changes. Many of these recent changes have resulted in, and various proposed
changes may result in, increased difficulty in obtaining timely visas that impact our ability to staff projects, including as a result
of visa application rejects and delays in processing applications, and significantly increased costs for us in obtaining visas. For
example, in the United States, the current administration has implemented policy changes to increase scrutiny of the issuance of
new and the renewal of existing H-1B visa applications and the placement of H-1B visa workers on third party worksites, and has
issued executive orders designed to limit immigration. In addition, the administration has proposed for implementation in 2020 a
policy change applicable to entities where more than 50% of the workers in the United States hold certain types of visas that, if
implemented, would significantly increase the visa costs for such entities. In the EU, many countries continue to implement new
regulations to move into compliance with the EU Directive of 2014 to harmonize immigration rules for intracompany transferees
in most EU member states and to facilitate the transfer of managers, specialists and graduate trainees both into and within the
region. The changes have had significant impacts on mobility programs and have led to new notification and documentation
requirements for companies sending professionals to EU countries. Recent changes or any additional adverse revisions to
immigration laws and regulations in the jurisdictions in which we operate may cause us delays, staffing shortages, additional costs
or an inability to bid for or fulfill projects for clients, any of which could have a material adverse effect on our business, results
of operations and financial condition.
Anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing could impair
our ability to serve our clients and materially adversely affect our business, results of operations and financial condition.
The practice of outsourcing services to organizations operating in other countries is a topic of political discussion in the
United States, which is our largest market, as well as other regions in which we have clients. For example, measures aimed at
limiting or restricting outsourcing by U.S. companies have been put forward for consideration by the U.S. Congress and in state
11
Table of Contents
Table of Contents
a contract and pursue damage claims for serious or repeated failure to meet these service commitments. Some of our contracts
provide that a portion of our compensation depends on performance measures such as cost-savings, revenue enhancement, benefits
produced, business goals attained and adherence to schedule. These goals can be complex and may depend on our clients’ actual
levels of business activity or may be based on assumptions that are later determined not to be achievable or accurate. As such,
these provisions may increase the variability in revenues and margins earned on those contracts.
We face intense and evolving competition and significant technological advances that our service offerings must keep
pace with in the rapidly changing markets we compete in.
The markets we serve and operate in are highly competitive, subject to rapid change and characterized by a large number of
participants, as described in “Part I, Item 1. Business-Competition.” In addition to large, global competitors, we face competition
from numerous smaller, local competitors in many geographic markets that may have more experience with operations in these
markets, have well-established relationships with our desired clients, or be able to provide services and solutions at lower costs
or on terms more attractive to clients than we can. Consolidation activity may also result in new competitors with greater scale,
a broader footprint or vertical integration that makes them more attractive to clients as a single provider of integrated products
and services. In addition, the short-term nature of contracts in our industry and the long-term concurrent use by many clients of
multiple professional service providers means that we are required to be continually competitive on the quality, scope and pricing
of our offerings or face a reduction or elimination of our business.
Our success depends on our ability to continue to develop and implement services and solutions that anticipate and respond
to rapid and continuing changes in technology to serve the evolving needs of our clients. Examples of areas of significant change
include digital-, cloud- and security-related offerings, which are continually evolving, as well as developments in areas such as
AI, augmented reality, automation, blockchain, IoT, quantum computing and as-a-service solutions. If we do not sufficiently invest
in new technologies, successfully adapt to industry developments and changing demand, and evolve and expand our business at
sufficient speed and scale to keep pace with the demands of the markets we serve, we may be unable to develop and maintain a
competitive advantage and execute on our growth strategy, which would materially adversely affect our business, results of
operations and financial condition.
Our relationships with our third party alliance partners, who supply us with necessary components to the services and solutions
we offer our clients, are also critical to our ability to provide many of our services and solutions that address client demands. There
can be no assurance that we will be able to maintain such relationships. Among other things, such alliance partners may in the
future decide to compete with us, form exclusive or more favorable arrangements with our competitors or otherwise reduce our
access to their products impairing our ability to provide the services and solutions demanded by clients.
We face legal, reputational and financial risks if we fail to protect client and/or Cognizant data from security breaches
or cyberattacks.
In order to provide our services and solutions, we depend on global information technology networks and systems, including
those of third parties, to process, transmit, host and securely store electronic information (including our confidential information
and the confidential information of our clients) and to communicate among our locations around the world and with our clients,
suppliers and partners. Security breaches, employee malfeasance, or human or technological error could lead to shutdowns or
disruptions of our operations and potential unauthorized disclosure of our or our clients’ sensitive data, which in turn could
jeopardize projects that are critical to our operations or the operations of our clients’ businesses. Like other global companies, we
and the businesses we interact with have experienced threats to data and systems, including by perpetrators of random or targeted
malicious cyberattacks, computer viruses, malware, worms, bot attacks or other destructive or disruptive software and attempts
to misappropriate client information and cause system failures and disruptions.
A security compromise of our information systems or of those of businesses with whom we interact that results in confidential
information being accessed by unauthorized or improper persons could harm our reputation and expose us to regulatory actions,
client attrition, remediation expenses, disruption of our business, and claims brought by our clients or others for breaching
contractual confidentiality and security provisions or data protection laws. Monetary damages imposed on us could be significant
and not covered by our liability insurance. Techniques used by bad actors to obtain unauthorized access, disable or degrade service,
or sabotage systems evolve frequently and may not immediately produce signs of intrusion, and we may be unable to anticipate
these techniques or to implement adequate preventative measures. In addition, a security breach could require that we expend
substantial additional resources related to the security of our information systems, diverting resources from other projects and
disrupting our businesses. If we experience a data security breach, our reputation could be damaged and we could be subject to
additional litigation, regulatory risks and business losses.
We are required to comply with increasingly complex and changing data security and privacy regulations in the United States,
the United Kingdom, the European Union and in other jurisdictions in which we operate that regulate the collection, use and
transfer of personal data, including the transfer of personal data between or among countries. For example, the European Union’s
General Data Protection Regulation has imposed stringent compliance obligations regarding the handling of personal data and
has resulted in the issuance of significant financial penalties for noncompliance. In the United States, there have been proposals
for federal privacy legislation and many new state privacy laws are on the horizon. Recently enacted legislation, such as the
California Consumer Privacy Act, impose extensive privacy requirements on organizations governing personal information.
Existing US sectoral laws such as the Health Insurance Portability and Accountability Act also impose extensive privacy and
security requirements on organizations operating in the healthcare industry, which Cognizant serves. Additionally, in India, the
Personal Data Protection Bill, 2018 was recently cleared for introduction in the current session of the Indian Parliament. If enacted
in its current form it would impose stringent obligations on the handling of personal data, including certain localization requirements
for sensitive data. Other countries have enacted or are considering enacting data localization laws that require certain data to stay
within their borders. We may also face audits or investigations by one or more domestic or foreign government agencies or our
clients pursuant to our contractual obligations relating to our compliance with these regulations. Complying with changing
regulatory requirements requires us to incur substantial costs, exposes us to potential regulatory action or litigation, and may
require changes to our business practices in certain jurisdictions, any of which could materially adversely affect our business
operations and operating results.
If our business continuity and disaster recovery plans are not effective and our global delivery capability is impacted,
our business and results of operations may be materially adversely affected and we may suffer harm to our reputation.
Our business model is dependent on our global delivery capability, which includes coordination between our main operating
offices in India, our other global and regional delivery centers, the offices of our clients and our associates worldwide. System
failures, outages and operational disruptions may be caused by factors outside of our control such as hostilities, political unrest,
terrorist attacks, natural disasters, pandemics and public health emergencies, such as the coronavirus, affecting the geographies
where our operations and transmission equipment is located. Our business continuity and disaster recovery plans may not be
effective at preventing or mitigating the effects of such disruptions, particularly in the case of a catastrophic event. Any such
disruption may result in lost revenues, a loss of clients and reputational damage, which would have an adverse effect on our
business, results of operations and financial condition.
A substantial portion of our employees in the United States, United Kingdom, European Union and other jurisdictions
rely on visas to work in those areas such that any restrictions on such visas or immigration more generally or increased
costs of obtaining such visas may affect our ability to compete for and provide services to clients in these jurisdictions,
which could materially adversely affect our business, results of operations and financial condition.
A substantial portion of our employees in the United States and in many other jurisdictions, including countries in Europe,
rely upon temporary work authorization or work permits, which makes our business particularly vulnerable to changes and variations
in immigration laws and regulations, including written changes and policy changes to the manner in which the laws and regulations
are interpreted or enforced, and potential enforcement actions and penalties that might cause us to lose access to such visas. The
political environment in the United States, the United Kingdom and other countries in recent years has included significant support
for anti-immigrant legislation and administrative changes. Many of these recent changes have resulted in, and various proposed
changes may result in, increased difficulty in obtaining timely visas that impact our ability to staff projects, including as a result
of visa application rejects and delays in processing applications, and significantly increased costs for us in obtaining visas. For
example, in the United States, the current administration has implemented policy changes to increase scrutiny of the issuance of
new and the renewal of existing H-1B visa applications and the placement of H-1B visa workers on third party worksites, and has
issued executive orders designed to limit immigration. In addition, the administration has proposed for implementation in 2020 a
policy change applicable to entities where more than 50% of the workers in the United States hold certain types of visas that, if
implemented, would significantly increase the visa costs for such entities. In the EU, many countries continue to implement new
regulations to move into compliance with the EU Directive of 2014 to harmonize immigration rules for intracompany transferees
in most EU member states and to facilitate the transfer of managers, specialists and graduate trainees both into and within the
region. The changes have had significant impacts on mobility programs and have led to new notification and documentation
requirements for companies sending professionals to EU countries. Recent changes or any additional adverse revisions to
immigration laws and regulations in the jurisdictions in which we operate may cause us delays, staffing shortages, additional costs
or an inability to bid for or fulfill projects for clients, any of which could have a material adverse effect on our business, results
of operations and financial condition.
Anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing could impair
our ability to serve our clients and materially adversely affect our business, results of operations and financial condition.
The practice of outsourcing services to organizations operating in other countries is a topic of political discussion in the
United States, which is our largest market, as well as other regions in which we have clients. For example, measures aimed at
limiting or restricting outsourcing by U.S. companies have been put forward for consideration by the U.S. Congress and in state
10
11
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Table of Contents
legislatures to address concerns over the perceived association between offshore outsourcing and the loss of jobs domestically. If
any such measure is enacted, our ability to provide services to our clients could be impaired.
In addition, from time to time there has been publicity about purported negative experiences associated with offshore
outsourcing, such as alleged domestic job loss and theft and misappropriation of sensitive client data, particularly involving service
providers in India. Current or prospective clients may elect to perform certain services themselves or may be discouraged from
utilizing global service delivery providers like us due to negative perceptions that may be associated with using global service
delivery models or firms. Any slowdown or reversal of existing industry trends toward global service delivery would seriously
harm our ability to compete effectively with competitors that provide the majority of their services from within the country in
which our clients operate.
We are subject to numerous and evolving legal and regulatory requirements and client expectations in the many
jurisdictions in which we operate, and violations of, unfavorable changes in or an inability to meet such requirements or
expectations could harm our business.
We provide services to clients and have operations in many parts of the world and in a wide variety of different industries,
subjecting us to numerous, and sometimes conflicting, laws and regulations on matters as diverse as import and export controls,
temporary work authorizations or work permits, content requirements, trade restrictions, tariffs, taxation, anti-corruption laws
(including the FCPA and the U.K. Bribery Act), government affairs, internal and disclosure control obligations, data privacy,
intellectual property and labor relations. We are subject to a wide range of potential enforcement actions, audits or investigations
regarding our compliance with these laws or regulations in the conduct of our business, and any finding of a violation could subject
us to a wide range of civil or criminal penalties, including fines, debarment, or suspension or disqualification from government
contracting, prohibitions or restrictions on doing business, loss of clients and business, legal claims by clients and damage to our
reputation.
We face significant regulatory compliance costs and risks as a result of the size and breadth of our business. For example,
we commit significant financial and managerial resources to comply with our internal control over financial reporting requirements,
but we have in the past and may in the future identify material weaknesses or deficiencies in our internal control over financial
reporting that causes us to incur incremental remediation costs in order to maintain adequate controls. As another example, we
had to spend significant resources on conducting an internal investigation and cooperating with investigations by the U.S. DOJ
and the SEC, each of which is now concluded, focused on whether certain payments relating to Company-owned facilities in India
were made in violation of the FCPA and other applicable laws.
Various governmental bodies and many customers and businesses are increasingly focused on environmental and social
issues, which has resulted and may in the future continue to result in the adoption of new laws and regulations and changing buying
practices. If we fail to keep pace with these developments, our reputation and business could be adversely impacted.
Changes in tax laws or in their interpretation or enforcement, failure by us to adapt our corporate structure and
intercompany arrangements to achieve global tax efficiencies or adverse outcomes of tax audits, investigations or
proceedings could have a material adverse effect on our effective tax rate, results of operations and financial condition.
The interpretation of tax laws and regulations in the many jurisdictions in which we operate and the related tax accounting
principles are complex and require considerable judgment to determine our income taxes and other tax liabilities worldwide. Tax
laws and regulations affecting us and our clients, including applicable tax rates, and the interpretation and enforcement of such
laws and regulations are subject to change as a result of economic, political and other factors, and any such changes or changes
in tax accounting principles could increase our effective worldwide income tax rate and have a material adverse effect on our net
earnings and financial condition. We routinely review and update our corporate structure and intercompany arrangements, including
transfer pricing policies, consistent with applicable laws and regulations, to align with our evolving business operations and provide
global tax efficiencies across the numerous jurisdictions, such as the United States, India and the United Kingdom, in which we
operate. Failure to successfully adapt our corporate structure and intercompany arrangements to align with our evolving business
operations and achieve global tax efficiencies may increase our worldwide effective tax rate and have a material adverse effect
on our earnings and financial condition.
The following are several examples of changes in tax laws that may impact us:
• The Tax Reform Act was enacted in December 2017 and made a number of significant changes to the corporate
tax regime in the United States. The U.S. Treasury department continues to issue proposed and final regulations which
modify relevant aspects of the new tax regime.
•
In December 2019, the Government of India enacted the India Tax Law effective retroactively to April 1, 2019
that enables Indian companies to elect to be taxed at a lower income tax rate of 25.17% as compared to the current rate
of 34.94%. Once a company elects into the lower income tax rate, a company may not benefit from any tax holidays
associated with SEZs and certain other tax incentives, including MAT carryforwards, and may not reverse its election.
As of December 31, 2019, we had deferred income tax assets related to the MAT carryforwards of approximately $176
million. See Note 11 to our consolidated financial statements. Our current intent is to elect into the new tax regime once
our MAT carryforwards are fully or substantially utilized. Our intent is based on a number of current assumptions and
financial projections, and if our intent were to change and we were to opt into the new tax regime at an earlier time, the
write-off of any remaining MAT deferred tax assets may materially increase our provision for income taxes and effective
income tax rate and decrease our earnings per share, while the loss of the benefit of the MAT carryforwards may increase
our cash tax payments.
• The OECD has been working on a Base Erosion and Profit Shifting project and is expected to continue to issue
guidelines and proposals that may change numerous long-standing tax principles. The changes recommended by the
OECD have been or are being adopted by many of the countries in which we do business and could lead to disagreements
among jurisdictions over the proper allocation of profits among them. The OECD has also undertaken a new project
focused on “Addressing the Tax Challenges of the Digitalization of the Economy.” This project may impact multinational
businesses by implementing a global model for minimum taxation. Similarly, the European Commission and
various jurisdictions have introduced proposals to or passed laws that impose a separate tax on specified digital services.
These recent and potential future tax law changes create uncertainty and may materially adversely impact our provision
for income taxes.
Our worldwide effective income tax rate may increase as a result of these recent developments, changes in interpretations
and assumptions made, additional guidance that may be issued and ongoing and future actions the Company has or may take with
respect to our corporate structure and intercompany arrangements.
Additionally, we are subject from time to time to tax audits, investigations and proceedings. Tax authorities have disagreed,
and may in the future disagree, with our judgments, and are taking increasingly aggressive positions, including with respect to
our intercompany transactions. For example, we are currently involved in an ongoing dispute with the ITD in which the ITD
asserts that we owe additional taxes for two transactions by which CTS India repurchased shares from its shareholders, as more
fully described in Note 11 to the consolidated financial statements. Adverse outcomes in any such audits, investigations or
proceedings could increase our tax exposure and cause us to incur increased expense, which could materially adversely affect our
results of operations and financial condition.
adversely affected if we incur legal liability.
Our business subjects us to considerable potential exposure to litigation and legal claims and could be materially
We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time in
the conduct of our business. Our business is subject to the risk of litigation involving current and former employees, clients, alliance
partners, subcontractors, suppliers, competitors, shareholders, government agencies or others through private actions, class actions,
whistleblower claims, administrative proceedings, regulatory actions or other litigation. While we maintain insurance for certain
potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions
as well as caps on amounts recoverable.
Our client engagements expose us to significant potential legal liability and litigation expense if we fail to meet our contractual
obligations or otherwise breach obligations to third parties or if our subcontractors breach or dispute the terms of our agreements
with them and impede our ability to meet our obligations to our clients. For example, third parties could claim that we or our
clients, whom we typically contractually agree to indemnify with respect to the services and solutions we provide, infringe upon
their intellectual property rights. Any such claims of intellectual property infringement could harm our reputation, cause us to
incur substantial costs in defending ourselves, expose us to considerable legal liability or prevent us from offering some services
or solutions in the future. We may have to engage in legal action to protect our own intellectual property rights, and enforcing our
rights may require considerable time, money and oversight, and existing laws in the various countries in which we provide services
or solutions may offer only limited protection.
We also face considerable potential legal liability from a variety of other sources. Our acquisition activities have in the past
and may in the future be subject to litigation or other claims, including claims from professionals, clients, stockholders, or other
third parties. We have also been the subject of a number of putative securities class action complaints and putative shareholder
derivative complaints relating to the matters that were the subject of our now concluded internal investigation into potential
violations of the FCPA and other applicable laws, and may be subject to such legal actions for these or other matters in the future.
See "Part I, Item 3. Legal Proceedings" for more information. We establish reserves for these and other matters when a loss is
considered probable and the amount can be reasonably estimated; however, the estimation of legal reserves and possible losses
involves significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation,
12
13
Table of Contents
Table of Contents
legislatures to address concerns over the perceived association between offshore outsourcing and the loss of jobs domestically. If
any such measure is enacted, our ability to provide services to our clients could be impaired.
In addition, from time to time there has been publicity about purported negative experiences associated with offshore
outsourcing, such as alleged domestic job loss and theft and misappropriation of sensitive client data, particularly involving service
providers in India. Current or prospective clients may elect to perform certain services themselves or may be discouraged from
utilizing global service delivery providers like us due to negative perceptions that may be associated with using global service
delivery models or firms. Any slowdown or reversal of existing industry trends toward global service delivery would seriously
harm our ability to compete effectively with competitors that provide the majority of their services from within the country in
which our clients operate.
We are subject to numerous and evolving legal and regulatory requirements and client expectations in the many
jurisdictions in which we operate, and violations of, unfavorable changes in or an inability to meet such requirements or
expectations could harm our business.
We provide services to clients and have operations in many parts of the world and in a wide variety of different industries,
subjecting us to numerous, and sometimes conflicting, laws and regulations on matters as diverse as import and export controls,
temporary work authorizations or work permits, content requirements, trade restrictions, tariffs, taxation, anti-corruption laws
(including the FCPA and the U.K. Bribery Act), government affairs, internal and disclosure control obligations, data privacy,
intellectual property and labor relations. We are subject to a wide range of potential enforcement actions, audits or investigations
regarding our compliance with these laws or regulations in the conduct of our business, and any finding of a violation could subject
us to a wide range of civil or criminal penalties, including fines, debarment, or suspension or disqualification from government
contracting, prohibitions or restrictions on doing business, loss of clients and business, legal claims by clients and damage to our
reputation.
We face significant regulatory compliance costs and risks as a result of the size and breadth of our business. For example,
we commit significant financial and managerial resources to comply with our internal control over financial reporting requirements,
but we have in the past and may in the future identify material weaknesses or deficiencies in our internal control over financial
reporting that causes us to incur incremental remediation costs in order to maintain adequate controls. As another example, we
had to spend significant resources on conducting an internal investigation and cooperating with investigations by the U.S. DOJ
and the SEC, each of which is now concluded, focused on whether certain payments relating to Company-owned facilities in India
were made in violation of the FCPA and other applicable laws.
Various governmental bodies and many customers and businesses are increasingly focused on environmental and social
issues, which has resulted and may in the future continue to result in the adoption of new laws and regulations and changing buying
practices. If we fail to keep pace with these developments, our reputation and business could be adversely impacted.
Changes in tax laws or in their interpretation or enforcement, failure by us to adapt our corporate structure and
intercompany arrangements to achieve global tax efficiencies or adverse outcomes of tax audits, investigations or
proceedings could have a material adverse effect on our effective tax rate, results of operations and financial condition.
The interpretation of tax laws and regulations in the many jurisdictions in which we operate and the related tax accounting
principles are complex and require considerable judgment to determine our income taxes and other tax liabilities worldwide. Tax
laws and regulations affecting us and our clients, including applicable tax rates, and the interpretation and enforcement of such
laws and regulations are subject to change as a result of economic, political and other factors, and any such changes or changes
in tax accounting principles could increase our effective worldwide income tax rate and have a material adverse effect on our net
earnings and financial condition. We routinely review and update our corporate structure and intercompany arrangements, including
transfer pricing policies, consistent with applicable laws and regulations, to align with our evolving business operations and provide
global tax efficiencies across the numerous jurisdictions, such as the United States, India and the United Kingdom, in which we
operate. Failure to successfully adapt our corporate structure and intercompany arrangements to align with our evolving business
operations and achieve global tax efficiencies may increase our worldwide effective tax rate and have a material adverse effect
on our earnings and financial condition.
The following are several examples of changes in tax laws that may impact us:
• The Tax Reform Act was enacted in December 2017 and made a number of significant changes to the corporate
tax regime in the United States. The U.S. Treasury department continues to issue proposed and final regulations which
modify relevant aspects of the new tax regime.
•
In December 2019, the Government of India enacted the India Tax Law effective retroactively to April 1, 2019
that enables Indian companies to elect to be taxed at a lower income tax rate of 25.17% as compared to the current rate
of 34.94%. Once a company elects into the lower income tax rate, a company may not benefit from any tax holidays
associated with SEZs and certain other tax incentives, including MAT carryforwards, and may not reverse its election.
As of December 31, 2019, we had deferred income tax assets related to the MAT carryforwards of approximately $176
million. See Note 11 to our consolidated financial statements. Our current intent is to elect into the new tax regime once
our MAT carryforwards are fully or substantially utilized. Our intent is based on a number of current assumptions and
financial projections, and if our intent were to change and we were to opt into the new tax regime at an earlier time, the
write-off of any remaining MAT deferred tax assets may materially increase our provision for income taxes and effective
income tax rate and decrease our earnings per share, while the loss of the benefit of the MAT carryforwards may increase
our cash tax payments.
• The OECD has been working on a Base Erosion and Profit Shifting project and is expected to continue to issue
guidelines and proposals that may change numerous long-standing tax principles. The changes recommended by the
OECD have been or are being adopted by many of the countries in which we do business and could lead to disagreements
among jurisdictions over the proper allocation of profits among them. The OECD has also undertaken a new project
focused on “Addressing the Tax Challenges of the Digitalization of the Economy.” This project may impact multinational
businesses by implementing a global model for minimum taxation. Similarly, the European Commission and
various jurisdictions have introduced proposals to or passed laws that impose a separate tax on specified digital services.
These recent and potential future tax law changes create uncertainty and may materially adversely impact our provision
for income taxes.
Our worldwide effective income tax rate may increase as a result of these recent developments, changes in interpretations
and assumptions made, additional guidance that may be issued and ongoing and future actions the Company has or may take with
respect to our corporate structure and intercompany arrangements.
Additionally, we are subject from time to time to tax audits, investigations and proceedings. Tax authorities have disagreed,
and may in the future disagree, with our judgments, and are taking increasingly aggressive positions, including with respect to
our intercompany transactions. For example, we are currently involved in an ongoing dispute with the ITD in which the ITD
asserts that we owe additional taxes for two transactions by which CTS India repurchased shares from its shareholders, as more
fully described in Note 11 to the consolidated financial statements. Adverse outcomes in any such audits, investigations or
proceedings could increase our tax exposure and cause us to incur increased expense, which could materially adversely affect our
results of operations and financial condition.
Our business subjects us to considerable potential exposure to litigation and legal claims and could be materially
adversely affected if we incur legal liability.
We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time in
the conduct of our business. Our business is subject to the risk of litigation involving current and former employees, clients, alliance
partners, subcontractors, suppliers, competitors, shareholders, government agencies or others through private actions, class actions,
whistleblower claims, administrative proceedings, regulatory actions or other litigation. While we maintain insurance for certain
potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions
as well as caps on amounts recoverable.
Our client engagements expose us to significant potential legal liability and litigation expense if we fail to meet our contractual
obligations or otherwise breach obligations to third parties or if our subcontractors breach or dispute the terms of our agreements
with them and impede our ability to meet our obligations to our clients. For example, third parties could claim that we or our
clients, whom we typically contractually agree to indemnify with respect to the services and solutions we provide, infringe upon
their intellectual property rights. Any such claims of intellectual property infringement could harm our reputation, cause us to
incur substantial costs in defending ourselves, expose us to considerable legal liability or prevent us from offering some services
or solutions in the future. We may have to engage in legal action to protect our own intellectual property rights, and enforcing our
rights may require considerable time, money and oversight, and existing laws in the various countries in which we provide services
or solutions may offer only limited protection.
We also face considerable potential legal liability from a variety of other sources. Our acquisition activities have in the past
and may in the future be subject to litigation or other claims, including claims from professionals, clients, stockholders, or other
third parties. We have also been the subject of a number of putative securities class action complaints and putative shareholder
derivative complaints relating to the matters that were the subject of our now concluded internal investigation into potential
violations of the FCPA and other applicable laws, and may be subject to such legal actions for these or other matters in the future.
See "Part I, Item 3. Legal Proceedings" for more information. We establish reserves for these and other matters when a loss is
considered probable and the amount can be reasonably estimated; however, the estimation of legal reserves and possible losses
involves significant judgment and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation,
12
13
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Table of Contents
and the actual losses arising from particular matters may exceed our estimates and materially adversely affect our results of
operations.
Our earnings may be adversely affected if we change our intent not to repatriate Indian accumulated undistributed
earnings.
A significant portion of our accumulated earnings are held and ongoing earnings are derived from our operations in India.
We consider our Indian accumulated undistributed earnings to be indefinitely reinvested in India. See Note 11 to our consolidated
financial statements. While we have no plans to do so, we may change our intent not to repatriate such earnings. Factors that may
lead us to change our intent, include, but are not limited to, changes in cash estimates, capital requirements outside of India,
discretionary transactions, changes to our shareholder capital return plan and legislative developments in India and other
jurisdictions. For example, the Budget, as presented by the India Finance Minister on February 1, 2020, contains a number of
proposed provisions related to tax, including a replacement of the dividend distribution tax, which is due from the dividend payer,
with a tax payable by the shareholder receiving the dividend. This measure is proposed to be effective for the India financial year
starting April 1, 2020. We are in the process of reviewing the various tax provisions outlined in the Budget, and will finalize our
assessment once the Budget proposals are passed into law by the Parliament of India. A change in our intent not to repatriate Indian
accumulated undistributed earnings would result in a material increase to our provision for income taxes and a decrease in our net
income and earnings per share in the period such decision is made.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We have major sales and marketing offices, innovation labs, and digital design and consulting centers in major business
markets, including New York, London, Paris, Melbourne, Singapore, and Sao Paulo, among others, which are used to deliver
services to our clients across all four of our business segments. We lease 0.1 million square feet of office space for our worldwide
headquarters in Teaneck, New Jersey in the United States. In total, we have offices and operations in more than 79 cities in
37 countries around the world.
We utilize a global delivery model with delivery centers worldwide, including in-country, regional and global delivery centers.
We have over 27 million square feet of owned and leased facilities for our delivery centers. Our largest delivery center presence
is in India: Chennai (10 million square feet); Pune (4 million square feet); Kolkata (3 million square feet); Hyderabad (3 million
square feet); and Bangalore (2 million square feet). Our India delivery centers represent approximately 80% of our total delivery
centers on a square-foot basis. We also have a significant number of delivery centers in other countries, including the United States,
Philippines, Canada, Mexico and countries throughout Europe.
We believe our current facilities are adequate to support our operations in the immediate future, and that we will be able to
obtain suitable additional facilities on commercially reasonable terms as needed.
Item 3. Legal Proceedings
See Note 15 to our consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
Our Class A common stock trades on the Nasdaq under the symbol “CTSH”. As of December 31, 2019, the approximate
number of holders of record of our Class A common stock was 119 and the approximate number of beneficial holders of our
of Equity Securities
Class A common stock was 302,700.
Cash Dividends
During 2019, we paid quarterly cash dividends of $0.20 per share. In February 2020, our Board of Directors approved a
10% or $0.02 increase to our quarterly cash dividends and the Company's declaration of a $0.22 per share dividend with a record
date of February 18, 2020 and a payment date of February 28, 2020. We intend to continue to pay quarterly cash dividends during
2020 in accordance with our capital return plan. Our ability and decisions to pay future dividends depend on a variety of factors,
including our cash flow generated from operations, the amount and location of our cash and investment balances, our net income,
our overall liquidity position, potential alternative uses of cash, such as acquisitions, and anticipated future economic conditions
and financial results.
Issuer Purchases of Equity Securities
Our stock repurchase program, as amended by our Board of Directors in February 2020, allows for the repurchase of up to
$7.5 billion, excluding fees and expenses, of our Class A common stock through open market purchases, including under a trading
plan adopted pursuant to Rule 10b5-1 of the Exchange Act or in private transactions, including through ASR agreements entered
into with financial institutions, in accordance with applicable federal securities laws. The timing of repurchases and the exact
number of shares to be purchased are determined by management, in its discretion, or pursuant to a Rule 10b5-1 trading plan, and
will depend upon market conditions and other factors.
During the three months ended December 31, 2019, we repurchased $150 million of our Class A common stock under our
stock repurchase program. The following table sets out the stock repurchase activity under our stock repurchase program during
the fourth quarter of 2019 and the approximate dollar value of shares that may yet be purchased under the program as of December
31, 2019.
Month
October 1, 2019 - October 31, 2019
Open market purchases
November 1, 2019 - November 30, 2019
Open market purchases
December 1, 2019 - December 31, 2019
Open market purchases
Total
Total Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of Shares
that May Yet Be
Purchased under the
Plans or Programs
(in millions)
2,481,713
$
60.44
2,481,713
$
—
—
—
—
—
—
2,481,713
$
60.44
2,481,713
369
369
369
We regularly purchase shares in connection with our stock-based compensation plans as shares of our Class A common stock
are tendered by employees for payment of applicable statutory tax withholdings. For the three months ended December 31, 2019,
we purchased 192,182 shares at an aggregate cost of $13 million in connection with employee tax withholding obligations.
14
15
Table of Contents
operations.
earnings.
A significant portion of our accumulated earnings are held and ongoing earnings are derived from our operations in India.
We consider our Indian accumulated undistributed earnings to be indefinitely reinvested in India. See Note 11 to our consolidated
financial statements. While we have no plans to do so, we may change our intent not to repatriate such earnings. Factors that may
lead us to change our intent, include, but are not limited to, changes in cash estimates, capital requirements outside of India,
discretionary transactions, changes to our shareholder capital return plan and legislative developments in India and other
jurisdictions. For example, the Budget, as presented by the India Finance Minister on February 1, 2020, contains a number of
proposed provisions related to tax, including a replacement of the dividend distribution tax, which is due from the dividend payer,
with a tax payable by the shareholder receiving the dividend. This measure is proposed to be effective for the India financial year
starting April 1, 2020. We are in the process of reviewing the various tax provisions outlined in the Budget, and will finalize our
assessment once the Budget proposals are passed into law by the Parliament of India. A change in our intent not to repatriate Indian
accumulated undistributed earnings would result in a material increase to our provision for income taxes and a decrease in our net
income and earnings per share in the period such decision is made.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We have major sales and marketing offices, innovation labs, and digital design and consulting centers in major business
markets, including New York, London, Paris, Melbourne, Singapore, and Sao Paulo, among others, which are used to deliver
services to our clients across all four of our business segments. We lease 0.1 million square feet of office space for our worldwide
headquarters in Teaneck, New Jersey in the United States. In total, we have offices and operations in more than 79 cities in
37 countries around the world.
We utilize a global delivery model with delivery centers worldwide, including in-country, regional and global delivery centers.
We have over 27 million square feet of owned and leased facilities for our delivery centers. Our largest delivery center presence
is in India: Chennai (10 million square feet); Pune (4 million square feet); Kolkata (3 million square feet); Hyderabad (3 million
square feet); and Bangalore (2 million square feet). Our India delivery centers represent approximately 80% of our total delivery
centers on a square-foot basis. We also have a significant number of delivery centers in other countries, including the United States,
Philippines, Canada, Mexico and countries throughout Europe.
We believe our current facilities are adequate to support our operations in the immediate future, and that we will be able to
obtain suitable additional facilities on commercially reasonable terms as needed.
Item 3. Legal Proceedings
See Note 15 to our consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
and the actual losses arising from particular matters may exceed our estimates and materially adversely affect our results of
PART II
Table of Contents
Our earnings may be adversely affected if we change our intent not to repatriate Indian accumulated undistributed
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Our Class A common stock trades on the Nasdaq under the symbol “CTSH”. As of December 31, 2019, the approximate
number of holders of record of our Class A common stock was 119 and the approximate number of beneficial holders of our
Class A common stock was 302,700.
Cash Dividends
During 2019, we paid quarterly cash dividends of $0.20 per share. In February 2020, our Board of Directors approved a
10% or $0.02 increase to our quarterly cash dividends and the Company's declaration of a $0.22 per share dividend with a record
date of February 18, 2020 and a payment date of February 28, 2020. We intend to continue to pay quarterly cash dividends during
2020 in accordance with our capital return plan. Our ability and decisions to pay future dividends depend on a variety of factors,
including our cash flow generated from operations, the amount and location of our cash and investment balances, our net income,
our overall liquidity position, potential alternative uses of cash, such as acquisitions, and anticipated future economic conditions
and financial results.
Issuer Purchases of Equity Securities
Our stock repurchase program, as amended by our Board of Directors in February 2020, allows for the repurchase of up to
$7.5 billion, excluding fees and expenses, of our Class A common stock through open market purchases, including under a trading
plan adopted pursuant to Rule 10b5-1 of the Exchange Act or in private transactions, including through ASR agreements entered
into with financial institutions, in accordance with applicable federal securities laws. The timing of repurchases and the exact
number of shares to be purchased are determined by management, in its discretion, or pursuant to a Rule 10b5-1 trading plan, and
will depend upon market conditions and other factors.
During the three months ended December 31, 2019, we repurchased $150 million of our Class A common stock under our
stock repurchase program. The following table sets out the stock repurchase activity under our stock repurchase program during
the fourth quarter of 2019 and the approximate dollar value of shares that may yet be purchased under the program as of December
31, 2019.
Month
October 1, 2019 - October 31, 2019
Open market purchases
November 1, 2019 - November 30, 2019
Open market purchases
December 1, 2019 - December 31, 2019
Open market purchases
Total
Total Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of Shares
that May Yet Be
Purchased under the
Plans or Programs
(in millions)
2,481,713
$
60.44
2,481,713
$
—
—
—
—
2,481,713
$
—
60.44
—
2,481,713
369
369
369
We regularly purchase shares in connection with our stock-based compensation plans as shares of our Class A common stock
are tendered by employees for payment of applicable statutory tax withholdings. For the three months ended December 31, 2019,
we purchased 192,182 shares at an aggregate cost of $13 million in connection with employee tax withholding obligations.
14
15
Table of Contents
Performance Graph
The following graph compares the cumulative total stockholder return on our Class A common stock with the cumulative total
return on the S&P 500 Index, Nasdaq-100 Index and a Peer Group Index (capitalization weighted) for the period beginning
December 31, 2014 and ending on the last day of our last completed fiscal year. The stock performance shown on the graph below
is not indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)
Among Cognizant, the S&P 500 Index, the Nasdaq-100 Index
And a Peer Group Index(3) (Capitalization Weighted)
Company / Index
Cognizant Technology Solutions Corp
S&P 500 Index
Nasdaq-100 Index
Peer Group
Base
Period
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
$
100
100
100
100
$ 113.98
101.38
108.43
117.45
$ 106.40
113.51
114.81
122.99
$ 135.74
138.29
150.99
155.96
$ 122.62
132.23
149.42
150.97
$ 121.31
173.86
206.15
198.40
(1) Graph assumes $100 invested on December 31, 2014 in our Class A common stock, the S&P 500 Index, the Nasdaq-100
Index, and the Peer Group Index (capitalization weighted).
(2) Cumulative total return assumes reinvestment of dividends.
(3) We have constructed a Peer Group Index of other information technology consulting firms. Our peer group consists of
Accenture plc., DXC Technology, EPAM Systems Inc., ExlService Holdings Inc., Genpact Limited, Infosys Ltd., Wipro
Ltd. and WNS (Holdings) Limited.
16
17
Table of Contents
Item 6. Selected Financial Data
The following table sets forth our selected consolidated historical financial data as of the dates and for the periods indicated.
Our selected consolidated financial data set forth below as of December 31, 2019 and 2018 and for each of the years ended
December 31, 2019, 2018 and 2017 have been derived from the consolidated financial statements included elsewhere herein. Our
selected consolidated financial data set forth below as of December 31, 2017, 2016 and 2015 and for each of the years ended
December 31, 2016 and 2015 are derived from our consolidated financial statements not included elsewhere herein. Our selected
consolidated financial information for 2019 and 2018 should be read in conjunction with the consolidated financial statements
and the accompanying notes and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,
which are included elsewhere in this Annual Report on Form 10-K.
For the year ended December 31:
Revenues
Income from operations
Net income(2)
Basic earnings per share(2)
Diluted earnings per share(2)
Cash dividends declared per common share
Weighted average number of common shares
outstanding-Basic
Weighted average number of common shares
outstanding-Diluted
Cash, cash equivalents and short-term investments(3)
As of December 31:
Working capital(3)(4)
Total assets(3)(4)(5)
Total debt
Stockholders’ equity
2019(1)
2018(1)
2017
2016
2015
(in millions, except per share data)
$
16,783
$
16,125
$
14,810
$
13,487
$
12,416
$
$
$
$
$
$
$
$
2,453
1,842
3.30
3.29
0.80
559
560
3,424
4,628
16,204
738
11,022
$
$
$
$
2,801
2,101
3.61
3.60
0.80
582
584
4,511
5,900
15,846
745
11,424
$
$
$
$
2,481
1,504
2.54
2.53
0.45
593
595
5,056
6,272
15,221
873
10,669
2,289
1,553
2.56
2.55
$
$
— $
607
610
2,142
1,624
2.67
2.65
—
609
613
$
5,169
6,182
14,262
878
10,728
4,949
5,195
13,061
1,283
9,278
(1)
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting
periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts
are not adjusted and continue to be reported in accordance with our historical accounting policies.
(2)
In March 2016, the FASB issued an update related to stock compensation. The update simplified the accounting for excess
tax benefits and deficiencies related to employee stock-based payment transactions. We adopted this standard
prospectively on January 1, 2017. For the year ended December 31, 2019, the net excess tax benefit on stock-based
compensation awards in our income tax provision was immaterial. For the years ended December 31, 2018 and 2017,
we recognized net excess tax benefits on stock-based compensation awards in our income tax provision in the amount
$20 million, or $0.03 per share, and $40 million, or $0.07 per share, respectively. In prior periods, such net excess tax
(3)
Includes $414 million and $423 million in restricted time deposits as of December 31, 2019 and 2018, respectively. See
benefits were recorded in additional paid in capital.
Note 11 to our consolidated financial statements.
(4)
On January 1, 2019, we adopted the New Lease Standard using the effective date method applied to all lease contracts
existing as of January 1, 2019. Results for reporting periods beginning on January 1, 2019 are presented under the New
Lease Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historical
accounting policies. See Note 7 to our consolidated financial statements.
(5)
In 2019, we changed our policy with regard to the presentation of certain amounts due to customers, such as discounts
and rebates. See Note 1 to our consolidated financial statements. Balances for 2019 and 2018 reflect the new presentation
while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting
policies.
Table of Contents
Performance Graph
The following graph compares the cumulative total stockholder return on our Class A common stock with the cumulative total
return on the S&P 500 Index, Nasdaq-100 Index and a Peer Group Index (capitalization weighted) for the period beginning
December 31, 2014 and ending on the last day of our last completed fiscal year. The stock performance shown on the graph below
is not indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)
Among Cognizant, the S&P 500 Index, the Nasdaq-100 Index
And a Peer Group Index(3) (Capitalization Weighted)
Cognizant Technology Solutions Corp
$
$ 113.98
$ 106.40
$ 135.74
$ 122.62
$ 121.31
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
101.38
108.43
117.45
113.51
114.81
122.99
138.29
150.99
155.96
132.23
149.42
150.97
173.86
206.15
198.40
Company / Index
S&P 500 Index
Nasdaq-100 Index
Peer Group
(1) Graph assumes $100 invested on December 31, 2014 in our Class A common stock, the S&P 500 Index, the Nasdaq-100
Index, and the Peer Group Index (capitalization weighted).
(2) Cumulative total return assumes reinvestment of dividends.
(3) We have constructed a Peer Group Index of other information technology consulting firms. Our peer group consists of
Accenture plc., DXC Technology, EPAM Systems Inc., ExlService Holdings Inc., Genpact Limited, Infosys Ltd., Wipro
Ltd. and WNS (Holdings) Limited.
Base
Period
12/31/14
100
100
100
100
16
Table of Contents
Item 6. Selected Financial Data
The following table sets forth our selected consolidated historical financial data as of the dates and for the periods indicated.
Our selected consolidated financial data set forth below as of December 31, 2019 and 2018 and for each of the years ended
December 31, 2019, 2018 and 2017 have been derived from the consolidated financial statements included elsewhere herein. Our
selected consolidated financial data set forth below as of December 31, 2017, 2016 and 2015 and for each of the years ended
December 31, 2016 and 2015 are derived from our consolidated financial statements not included elsewhere herein. Our selected
consolidated financial information for 2019 and 2018 should be read in conjunction with the consolidated financial statements
and the accompanying notes and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,
which are included elsewhere in this Annual Report on Form 10-K.
For the year ended December 31:
Revenues
Income from operations
Net income(2)
Basic earnings per share(2)
Diluted earnings per share(2)
Cash dividends declared per common share
Weighted average number of common shares
outstanding-Basic
Weighted average number of common shares
outstanding-Diluted
As of December 31:
Cash, cash equivalents and short-term investments(3)
Working capital(3)(4)
Total assets(3)(4)(5)
Total debt
Stockholders’ equity
2019(1)
2018(1)
2017
2016
2015
(in millions, except per share data)
$
$
$
$
$
$
$
$
$
$
16,783
2,453
1,842
3.30
3.29
0.80
559
560
3,424
4,628
16,204
738
11,022
$
$
$
$
$
16,125
2,801
2,101
3.61
3.60
0.80
582
584
4,511
5,900
15,846
745
11,424
$
$
$
$
$
14,810
2,481
1,504
2.54
2.53
0.45
593
595
5,056
6,272
15,221
873
10,669
$
13,487
2,289
1,553
12,416
2,142
1,624
2.56
2.55
$
$
— $
607
610
2.67
2.65
—
609
613
$
5,169
6,182
14,262
878
10,728
4,949
5,195
13,061
1,283
9,278
(1)
(2)
(3)
(4)
(5)
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting
periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts
are not adjusted and continue to be reported in accordance with our historical accounting policies.
In March 2016, the FASB issued an update related to stock compensation. The update simplified the accounting for excess
tax benefits and deficiencies related to employee stock-based payment transactions. We adopted this standard
prospectively on January 1, 2017. For the year ended December 31, 2019, the net excess tax benefit on stock-based
compensation awards in our income tax provision was immaterial. For the years ended December 31, 2018 and 2017,
we recognized net excess tax benefits on stock-based compensation awards in our income tax provision in the amount
$20 million, or $0.03 per share, and $40 million, or $0.07 per share, respectively. In prior periods, such net excess tax
benefits were recorded in additional paid in capital.
Includes $414 million and $423 million in restricted time deposits as of December 31, 2019 and 2018, respectively. See
Note 11 to our consolidated financial statements.
On January 1, 2019, we adopted the New Lease Standard using the effective date method applied to all lease contracts
existing as of January 1, 2019. Results for reporting periods beginning on January 1, 2019 are presented under the New
Lease Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historical
accounting policies. See Note 7 to our consolidated financial statements.
In 2019, we changed our policy with regard to the presentation of certain amounts due to customers, such as discounts
and rebates. See Note 1 to our consolidated financial statements. Balances for 2019 and 2018 reflect the new presentation
while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting
policies.
17
Table of Contents
Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2019 Financial Results
Executive Summary
The following table sets forth a summary of our financial results for the years ended December 31, 2019 and 2018:
Cognizant is one of the world’s leading professional services companies, transforming clients’ business, operating and
technology models for the digital era. Our services include digital services and solutions, consulting, application development,
systems integration, application testing, application maintenance, infrastructure services and business process services. Digital
services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming data-enabled,
customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an integrated global
delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery
centers.
In 2019, we initiated the execution of a multi-year plan aimed at accelerating revenue growth. As part of our 2020 Fit for
Growth Plan, we have refined our strategic focus and launched a series of measures designed to improve our operational and
commercial models and implement cost reductions.
We are aligning our strategic posture with our clients' needs to become more data-enabled, customer-centric and differentiated
businesses. We are planning to invest significantly in technology, sales and marketing, talent re-skilling, acquisitions and
partnerships to further sharpen our strategic positioning in key digital areas - IoT, AI, digital engineering and cloud, while working
to maintain and optimize our core portfolio of services through efficiency, tooling and automation, delivery optimization, protection
of renewals, industry alignment and geographic expansion. To support our strategy, we are increasing our investment in sales and
marketing professionals to help us expand existing accounts and acquire new ones, and amplify our brand's stature in the
marketplace. In addition, in January 2020, we introduced a new, more variable sales compensation structure that rewards our teams
for selling the entire portfolio of our services and offerings. Further, we have improved the alignment of our sales professionals
and client support personnel with our client accounts, based on the size and scope of the existing relationship as well as the potential
for account expansion and growth.
The refinement of our strategic posture also highlighted that certain content-related work is not in line with our strategic
vision for the Company. This work is largely focused on determining whether certain content violates client standards - and can
involve objectionable materials. As part of our 2020 Fit for Growth Plan, we intend to exit this work over the course of the next
year while our other content-related work will continue. We anticipate that this decision may negatively impact our relationship
with the affected clients and estimate that we may lose revenues of $225 million to $255 million on an annualized basis within
our Communications, Media and Technology segment in North America. We anticipate revenues will ramp down over the next
one to two years and the impact on 2020 revenues is expected to be between $180 million and $200 million. In the meantime, we
will comply with our contractual obligations and determine the best mutual path forward with the small number of affected clients.
The 2020 Fit for Growth Plan also involves certain measures, which commenced in the fourth quarter of 2019, to simplify
our organizational model and optimize our cost structure in order to partially fund the investments required to execute on our
strategy and advance our growth agenda. In 2019, we incurred $48 million of employee separation, retention and facility exit costs
under this plan, including $5 million of costs related to our exit from certain content-related services. See Note 4 to our consolidated
financial statements for additional information. We expect to incur additional charges in the range of $100 million to $150 million
in 2020, primarily related to severance and facility exit costs, under our 2020 Fit for Growth Plan. The optimization measures
under this plan are expected to generate an annualized gross savings run rate, before anticipated investments, in the range of
approximately $500 million to $550 million. The cost savings realized in 2020 is expected to be lower than the annualized run
rate.
Revenues
Income from operations
Net income
Diluted earnings per share
Other Financial Information1
Adjusted Income From Operations
Adjusted Diluted EPS
2019
2018
$
%
(Dollars in millions, except per share data)
Increase / (Decrease)
$
16,783
$
16,125
$
2,453
1,842
3.29
2,787
3.99
2,801
2,101
3.60
2,920
4.02
658
(348)
(259)
(0.31)
(133)
(0.03)
4.1
(12.4)
(12.3)
(8.6)
(4.6)
(0.7)
During the year ended December 31, 2019, revenues increased by $658 million as compared to the year ended December
31, 2018, representing growth of 4.1%, or 5.2% on a constant currency basis1. Revenues from clients added during 2019, including
those related to acquisitions, were $234 million.
The following charts set forth revenues and revenue growth by business segment and geography for the year ended
December 31, 2019:
Dollars in millions
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Dollars in millions
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Financial Services
Increase / (Decrease)
Healthcare
Increase / (Decrease)
Revenues
$
%
CC %1
Revenues
$
%
CC %1
$ 4,137
(25)
(0.6)
(0.6)
$ 4,147
(107)
(2.5)
(2.5)
484
728
1,212
520
$ 5,869
3
62
65
(16)
24
0.6
9.3
5.7
(3.0)
0.4
4.0
14.3
10.0
—
1.6
Increase / (Decrease)
Revenues
$ 2,678
380
453
833
259
$
281
22
13
35
39
$ 3,770
355
%
11.7
6.1
3.0
4.4
17.7
10.4
CC %1
11.7
10.9
8.8
9.8
22.4
12.0
130
341
471
77
$ 4,695
Revenues
$ 1,764
319
169
488
197
$ 2,449
110
39
71
24
27
284
(25)
(18)
(43)
11
252
42.9
26.3
30.5
45.3
0.6
19.2
(7.3)
(9.6)
(8.1)
5.9
11.5
46.8
30.7
34.8
45.5
1.0
19.2
(3.1)
(4.5)
(3.6)
12.6
13.1
Increase / (Decrease)
$
%
CC %1
Products and Resources
Communications, Media and Technology
Financial Services: Revenues in our Financial Services segment increased in our Europe region primarily due to Samlink revenues,
while decreasing in our North America and Rest of World regions as certain banking clients continue to transition the support of
some of their legacy systems and operations in-house or to captives.
1
Constant currency revenue growth, Adjusted Income From Operations and Adjusted Diluted EPS are not measurements
of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information
and reconciliations to the most directly comparable GAAP financial measures, as applicable.
18
19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2019 Financial Results
The following table sets forth a summary of our financial results for the years ended December 31, 2019 and 2018:
Table of Contents
Table of Contents
Executive Summary
Cognizant is one of the world’s leading professional services companies, transforming clients’ business, operating and
technology models for the digital era. Our services include digital services and solutions, consulting, application development,
systems integration, application testing, application maintenance, infrastructure services and business process services. Digital
services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming data-enabled,
customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an integrated global
delivery model that employs client service and delivery teams based at client locations and dedicated global and regional delivery
centers.
In 2019, we initiated the execution of a multi-year plan aimed at accelerating revenue growth. As part of our 2020 Fit for
Growth Plan, we have refined our strategic focus and launched a series of measures designed to improve our operational and
commercial models and implement cost reductions.
We are aligning our strategic posture with our clients' needs to become more data-enabled, customer-centric and differentiated
businesses. We are planning to invest significantly in technology, sales and marketing, talent re-skilling, acquisitions and
partnerships to further sharpen our strategic positioning in key digital areas - IoT, AI, digital engineering and cloud, while working
to maintain and optimize our core portfolio of services through efficiency, tooling and automation, delivery optimization, protection
of renewals, industry alignment and geographic expansion. To support our strategy, we are increasing our investment in sales and
marketing professionals to help us expand existing accounts and acquire new ones, and amplify our brand's stature in the
marketplace. In addition, in January 2020, we introduced a new, more variable sales compensation structure that rewards our teams
for selling the entire portfolio of our services and offerings. Further, we have improved the alignment of our sales professionals
and client support personnel with our client accounts, based on the size and scope of the existing relationship as well as the potential
for account expansion and growth.
The refinement of our strategic posture also highlighted that certain content-related work is not in line with our strategic
vision for the Company. This work is largely focused on determining whether certain content violates client standards - and can
involve objectionable materials. As part of our 2020 Fit for Growth Plan, we intend to exit this work over the course of the next
year while our other content-related work will continue. We anticipate that this decision may negatively impact our relationship
with the affected clients and estimate that we may lose revenues of $225 million to $255 million on an annualized basis within
our Communications, Media and Technology segment in North America. We anticipate revenues will ramp down over the next
one to two years and the impact on 2020 revenues is expected to be between $180 million and $200 million. In the meantime, we
will comply with our contractual obligations and determine the best mutual path forward with the small number of affected clients.
The 2020 Fit for Growth Plan also involves certain measures, which commenced in the fourth quarter of 2019, to simplify
our organizational model and optimize our cost structure in order to partially fund the investments required to execute on our
strategy and advance our growth agenda. In 2019, we incurred $48 million of employee separation, retention and facility exit costs
under this plan, including $5 million of costs related to our exit from certain content-related services. See Note 4 to our consolidated
financial statements for additional information. We expect to incur additional charges in the range of $100 million to $150 million
in 2020, primarily related to severance and facility exit costs, under our 2020 Fit for Growth Plan. The optimization measures
under this plan are expected to generate an annualized gross savings run rate, before anticipated investments, in the range of
approximately $500 million to $550 million. The cost savings realized in 2020 is expected to be lower than the annualized run
rate.
Revenues
Income from operations
Net income
Diluted earnings per share
Other Financial Information1
Adjusted Income From Operations
Adjusted Diluted EPS
2019
2018
Increase / (Decrease)
%
$
(Dollars in millions, except per share data)
$
$
16,783
2,453
1,842
3.29
2,787
3.99
$
16,125
2,801
2,101
3.60
2,920
4.02
658
(348)
(259)
(0.31)
(133)
(0.03)
4.1
(12.4)
(12.3)
(8.6)
(4.6)
(0.7)
During the year ended December 31, 2019, revenues increased by $658 million as compared to the year ended December
31, 2018, representing growth of 4.1%, or 5.2% on a constant currency basis1. Revenues from clients added during 2019, including
those related to acquisitions, were $234 million.
The following charts set forth revenues and revenue growth by business segment and geography for the year ended
December 31, 2019:
Dollars in millions
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Dollars in millions
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Financial Services
Increase / (Decrease)
Healthcare
Increase / (Decrease)
Revenues
$
%
CC %1
Revenues
$
%
CC %1
$ 4,137
(25)
484
728
1,212
520
$ 5,869
3
62
65
(16)
24
(0.6)
0.6
9.3
5.7
(3.0)
0.4
(0.6)
4.0
14.3
10.0
—
1.6
$ 4,147
130
341
471
77
$ 4,695
(107)
39
71
110
24
27
(2.5)
42.9
26.3
30.5
45.3
0.6
(2.5)
46.8
30.7
34.8
45.5
1.0
Products and Resources
Communications, Media and Technology
Increase / (Decrease)
Increase / (Decrease)
Revenues
$ 2,678
380
453
833
259
$ 3,770
$
281
22
13
35
39
355
%
11.7
6.1
3.0
4.4
17.7
10.4
CC %1
11.7
10.9
8.8
9.8
22.4
12.0
Revenues
$ 1,764
319
169
488
197
$ 2,449
$
284
(25)
(18)
(43)
11
252
%
19.2
(7.3)
(9.6)
(8.1)
5.9
11.5
CC %1
19.2
(3.1)
(4.5)
(3.6)
12.6
13.1
Financial Services: Revenues in our Financial Services segment increased in our Europe region primarily due to Samlink revenues,
while decreasing in our North America and Rest of World regions as certain banking clients continue to transition the support of
some of their legacy systems and operations in-house or to captives.
1
Constant currency revenue growth, Adjusted Income From Operations and Adjusted Diluted EPS are not measurements
of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” for more information
and reconciliations to the most directly comparable GAAP financial measures, as applicable.
18
19
Table of Contents
Healthcare: Revenues from our Healthcare segment increased in our Europe and Rest of World regions, primarily due to revenues
from our life sciences clients, including revenues from our acquisition of Zenith. Revenues in our North America region were
negatively impacted by mergers within the healthcare industry, the establishment of an offshore captive by a large client, the
Customer Dispute and a ramp down of a client relationship in which we were a subcontractor to a third party for the purpose of
delivering healthcare-related systems implementation services to local government, partially offset by growth among our life
sciences clients in this region. Revenue growth among our life sciences clients was driven by demand for our digital operations
services and solutions.
Products and Resources: Revenue growth in our Products and Resources segment was primarily driven by our clients' adoption
and integration of digital technologies and revenues from our recently completed acquisitions.
Communications, Media and Technology: Revenue growth in our Communications, Media and Technology segment was strongest
in our North America region and was primarily driven by the demand from our technology clients for digital content services and
solutions and revenues from our recently completed acquisitions. As previously noted, our decision to exit certain content-related
services will affect future revenue growth in this segment.
In 2017, we began a realignment program with the objective of improving our client focus, our cost structure and the efficiency
and effectiveness of our delivery while continuing to drive revenue growth. Under our realignment program, in 2019, we incurred
$22 million of Executive Transition Costs, $64 million in employee separation costs, $45 million in employee retention costs and
$38 million in third party realignment costs. We anticipate that the employee separations completed as part of our realignment
program will reduce our compensation expense by approximately $140 million on an annualized basis. We expect to incur $17
million of additional realignment charges related to our retention program in the first half of 2020.
On a combined basis with our 2020 Fit for Growth Plan described above, during the year ended December 31, 2019, we
incurred $217 million in restructuring charges reported in the caption "Restructuring charges" in our consolidated statements of
operations.
Our operating margin and Adjusted Operating Margin2 decreased to 14.6% and 16.6%, respectively, for the year ended
December 31, 2019 from 17.4% and 18.1%, respectively for the year ended December 31, 2018. The decreases in our operating
margin and Adjusted Operating Margin2 were due to an increase in costs related to our delivery personnel (including employees
and subcontractors) outpacing revenue growth, the dilutive impact of our recently completed acquisitions, contract renegotiations
with recently merged Healthcare clients and the Customer Dispute, partially offset by the benefit of lower incentive-based
compensation accrual rates. Our 2019 GAAP operating margin was additionally negatively impacted by the incremental accrual
related to the India Defined Contribution Obligation as described in Note 15 and higher restructuring charges while our 2018
GAAP operating margin was negatively impacted by the initial funding of the Cognizant U.S. Foundation.
During the year ended December 31, 2019, we returned $2,609 million to our stockholders through $2,156 million in share
repurchases and $453 million in dividend payments. Our shares outstanding decreased to 548 million as of December 31, 2019
from 577 million as of December 31, 2018. We review our capital return plan on an on-going basis, considering our financial
performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities,
the economic outlook, regulatory changes and other relevant factors. As these factors may change over time, the actual amounts
expended on stock repurchase activity, dividends and acquisitions, if any, during any particular period cannot be predicted and
may fluctuate from time to time.
Other Matters
We accrued $117 million in 2019 related to the India Defined Contribution Obligation as described in Note 15 to our
consolidated financial statements. It is possible that the Indian government will review the matter and there is a substantial question
as to whether the Indian government will apply the Supreme Court’s ruling on a retroactive basis. As such, the ultimate amount
of our obligation may be materially different from the amount accrued.
We are involved in an ongoing dispute with the ITD described in Note 11 to our consolidated financial statements. The dispute
with the ITD is currently pending and no final decision has been reached.
2
Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-
GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial
measure.
Table of Contents
2020 Business Outlook
In 2020, we expect growing demand from our clients for digital services as they invest to transform into data-enabled,
customer-centric and differentiated businesses. As our clients continue their efforts to optimize the cost of supporting their legacy
systems and operations, our core portfolio of services may be subject to pricing pressure and lower demand as clients look to
transition certain work in-house or to new or existing captives.
Our clients will likely continue to contend with industry-specific changes driven by evolving digital technologies, uncertainty
in the regulatory environment, industry consolidation and convergence as well as international trade policies and other
macroeconomic factors, which could affect their demand for our services. Client demand may also be impacted by uncertainty
related to the potential economic and regulatory effects of the United Kingdom's exit from the European Union. Additionally,
revenue from our technology clients will be affected by our strategic decision to exit certain content-related work under our 2020
Fit for Growth Plan.
financial statements.
We expect our 2020 financial results to be impacted by the initial cost optimization measures executed in 2019 as part of our
2020 Fit for Growth Plan, and the expected execution of additional measures under this plan in 2020. In addition, our 2020 results
may be impacted by uncertainty regarding regulatory changes, including potential regulatory changes with respect to immigration
and taxes as well as costs related to the potential resolution of legal and regulatory matters discussed in Note 15 to our consolidated
During 2020, we intend to continue to invest in our digital capabilities, our talent base and new service offerings across
industries and geographies, while increasing our investment in sales and marketing professionals to help us expand existing accounts
and acquire new ones. We will continue to pursue strategic acquisitions that we believe add new technologies or platforms that
complement our existing services, improve our overall service delivery capabilities or expand our geographic presence.
Additionally, we will continue to focus on maintaining and optimizing our core portfolio of services through efficiency, tooling
and automation, delivery optimization, protection of renewals, industry alignment and geographic expansion. Finally, through the
execution of our 2020 Fit for Growth Plan and other initiatives, we will focus on operating discipline in order to appropriately
manage our cost structure.
Business Segments
Our reportable segments are:
• Financial Services, which consists of our banking and insurance operating segments;
• Healthcare, which consists of our healthcare and life sciences operating segments;
• Products and Resources, which consists of our retail and consumer goods; manufacturing, logistics, energy, and utilities;
and travel and hospitality operating segments;
technology operating segment.
• Communications, Media and Technology, which includes our communications and media operating segment and our
The services we provide are distributed among a number of clients in each of our business segments. A loss of a significant
client or a few significant clients in a particular segment could materially reduce revenues for that segment. The services we
provide to our larger clients are often critical to their operations and a termination of our services would typically require an
extended transition period with gradually declining revenues. Nevertheless, the volume of work performed for specific clients
may vary significantly from year to year.
In 2019, we made certain changes to the internal measurement of segment operating profits. See Note 19 to our consolidated
financial statements for additional information relating to this change and on our business segments.
20
21
Table of Contents
Healthcare: Revenues from our Healthcare segment increased in our Europe and Rest of World regions, primarily due to revenues
from our life sciences clients, including revenues from our acquisition of Zenith. Revenues in our North America region were
negatively impacted by mergers within the healthcare industry, the establishment of an offshore captive by a large client, the
Customer Dispute and a ramp down of a client relationship in which we were a subcontractor to a third party for the purpose of
delivering healthcare-related systems implementation services to local government, partially offset by growth among our life
sciences clients in this region. Revenue growth among our life sciences clients was driven by demand for our digital operations
services and solutions.
Products and Resources: Revenue growth in our Products and Resources segment was primarily driven by our clients' adoption
and integration of digital technologies and revenues from our recently completed acquisitions.
Communications, Media and Technology: Revenue growth in our Communications, Media and Technology segment was strongest
in our North America region and was primarily driven by the demand from our technology clients for digital content services and
solutions and revenues from our recently completed acquisitions. As previously noted, our decision to exit certain content-related
services will affect future revenue growth in this segment.
In 2017, we began a realignment program with the objective of improving our client focus, our cost structure and the efficiency
and effectiveness of our delivery while continuing to drive revenue growth. Under our realignment program, in 2019, we incurred
$22 million of Executive Transition Costs, $64 million in employee separation costs, $45 million in employee retention costs and
$38 million in third party realignment costs. We anticipate that the employee separations completed as part of our realignment
program will reduce our compensation expense by approximately $140 million on an annualized basis. We expect to incur $17
million of additional realignment charges related to our retention program in the first half of 2020.
On a combined basis with our 2020 Fit for Growth Plan described above, during the year ended December 31, 2019, we
incurred $217 million in restructuring charges reported in the caption "Restructuring charges" in our consolidated statements of
operations.
Our operating margin and Adjusted Operating Margin2 decreased to 14.6% and 16.6%, respectively, for the year ended
December 31, 2019 from 17.4% and 18.1%, respectively for the year ended December 31, 2018. The decreases in our operating
margin and Adjusted Operating Margin2 were due to an increase in costs related to our delivery personnel (including employees
and subcontractors) outpacing revenue growth, the dilutive impact of our recently completed acquisitions, contract renegotiations
with recently merged Healthcare clients and the Customer Dispute, partially offset by the benefit of lower incentive-based
compensation accrual rates. Our 2019 GAAP operating margin was additionally negatively impacted by the incremental accrual
related to the India Defined Contribution Obligation as described in Note 15 and higher restructuring charges while our 2018
GAAP operating margin was negatively impacted by the initial funding of the Cognizant U.S. Foundation.
During the year ended December 31, 2019, we returned $2,609 million to our stockholders through $2,156 million in share
repurchases and $453 million in dividend payments. Our shares outstanding decreased to 548 million as of December 31, 2019
from 577 million as of December 31, 2018. We review our capital return plan on an on-going basis, considering our financial
performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities,
the economic outlook, regulatory changes and other relevant factors. As these factors may change over time, the actual amounts
expended on stock repurchase activity, dividends and acquisitions, if any, during any particular period cannot be predicted and
may fluctuate from time to time.
Other Matters
We accrued $117 million in 2019 related to the India Defined Contribution Obligation as described in Note 15 to our
consolidated financial statements. It is possible that the Indian government will review the matter and there is a substantial question
as to whether the Indian government will apply the Supreme Court’s ruling on a retroactive basis. As such, the ultimate amount
of our obligation may be materially different from the amount accrued.
We are involved in an ongoing dispute with the ITD described in Note 11 to our consolidated financial statements. The dispute
with the ITD is currently pending and no final decision has been reached.
2
Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-
GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial
measure.
20
Table of Contents
2020 Business Outlook
In 2020, we expect growing demand from our clients for digital services as they invest to transform into data-enabled,
customer-centric and differentiated businesses. As our clients continue their efforts to optimize the cost of supporting their legacy
systems and operations, our core portfolio of services may be subject to pricing pressure and lower demand as clients look to
transition certain work in-house or to new or existing captives.
Our clients will likely continue to contend with industry-specific changes driven by evolving digital technologies, uncertainty
in the regulatory environment, industry consolidation and convergence as well as international trade policies and other
macroeconomic factors, which could affect their demand for our services. Client demand may also be impacted by uncertainty
related to the potential economic and regulatory effects of the United Kingdom's exit from the European Union. Additionally,
revenue from our technology clients will be affected by our strategic decision to exit certain content-related work under our 2020
Fit for Growth Plan.
We expect our 2020 financial results to be impacted by the initial cost optimization measures executed in 2019 as part of our
2020 Fit for Growth Plan, and the expected execution of additional measures under this plan in 2020. In addition, our 2020 results
may be impacted by uncertainty regarding regulatory changes, including potential regulatory changes with respect to immigration
and taxes as well as costs related to the potential resolution of legal and regulatory matters discussed in Note 15 to our consolidated
financial statements.
During 2020, we intend to continue to invest in our digital capabilities, our talent base and new service offerings across
industries and geographies, while increasing our investment in sales and marketing professionals to help us expand existing accounts
and acquire new ones. We will continue to pursue strategic acquisitions that we believe add new technologies or platforms that
complement our existing services, improve our overall service delivery capabilities or expand our geographic presence.
Additionally, we will continue to focus on maintaining and optimizing our core portfolio of services through efficiency, tooling
and automation, delivery optimization, protection of renewals, industry alignment and geographic expansion. Finally, through the
execution of our 2020 Fit for Growth Plan and other initiatives, we will focus on operating discipline in order to appropriately
manage our cost structure.
Business Segments
Our reportable segments are:
• Financial Services, which consists of our banking and insurance operating segments;
• Healthcare, which consists of our healthcare and life sciences operating segments;
• Products and Resources, which consists of our retail and consumer goods; manufacturing, logistics, energy, and utilities;
and travel and hospitality operating segments;
• Communications, Media and Technology, which includes our communications and media operating segment and our
technology operating segment.
The services we provide are distributed among a number of clients in each of our business segments. A loss of a significant
client or a few significant clients in a particular segment could materially reduce revenues for that segment. The services we
provide to our larger clients are often critical to their operations and a termination of our services would typically require an
extended transition period with gradually declining revenues. Nevertheless, the volume of work performed for specific clients
may vary significantly from year to year.
In 2019, we made certain changes to the internal measurement of segment operating profits. See Note 19 to our consolidated
financial statements for additional information relating to this change and on our business segments.
21
Table of Contents
Results of Operations
For a discussion of our results of operations for the year ended December 31, 2017, including a year-to-year comparison
between 2018 and 2017, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report Form 10-K for the year ended December 31, 2018.
The Year Ended December 31, 2019 Compared to The Year Ended December 31, 2018
The following table sets forth certain financial data for the years ended December 31:
% of
% of
Increase / Decrease
2019
Revenues
2018
Revenues
$
%
Communications, Media and Technology
(Dollars in millions, except per share data)
$ 16,783
100.0
$ 16,125
100.0
$
Revenues
Cost of revenues(1)
Selling, general and administrative expenses(1)
Restructuring charges
Depreciation and amortization expense
Income from operations
Other income (expense), net
Income before provision for income taxes
Provision for income taxes
Income (loss) from equity method investment
Net income
Diluted EPS
Other Financial Information 3
Adjusted Income From Operations and Adjusted
Operating Margin
Adjusted Diluted EPS
10,634
2,972
217
507
2,453
90
2,543
(643)
(58)
1,842
3.29
2,787
3.99
$
$
$
$
63.4
17.7
1.3
3.0
14.6
15.2
11.0
16.6
9,838
3,007
19
460
2,801
(4)
2,797
(698)
2
2,101
3.60
2,920
4.02
$
$
$
$
61.0
18.6
0.1
2.9
17.4
17.3
13.0
18.1
658
796
(35)
198
47
(348)
94
(254)
55
(60)
(259)
$
$ (0.31)
4.1
8.1
(1.2)
*
10.2
(12.4)
*
(9.1)
(7.9)
*
(12.3)
(8.6)
(133)
$ (0.03)
(4.6)
(0.7)
(1)
*
Exclusive of depreciation and amortization expense.
Not meaningful
Revenues - Overall
During 2019, revenues increased by $658 million as compared to 2018, representing growth of 4.1%, or 5.2% on a constant
currency basis3. Revenues from clients added during 2019, including those related to acquisitions, were $234 million. Growth was
driven by our clients' adoption and integration of digital technologies, demand for our digital operations services and solutions as
well as revenues from our recently completed acquisitions. This was partially offset by pricing pressure within our core portfolio
of services as our clients continue their efforts to optimize the cost of supporting their legacy systems and operations.
Revenues from our top clients as a percentage of total revenues were as follows:
Top five clients
Top ten clients
For the years ended December 31,
2019
2018
7.9%
14.6%
8.6%
15.4%
3
Constant currency revenue growth, Adjusted Income from Operations, Adjusted Operating Margin and Adjusted Diluted
EPS are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial
Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as
applicable.
22
23
Table of Contents
Revenues - Reportable Business Segments
Revenues by reportable business segment were as follows:
Financial Services
Healthcare
Products and Resources
Total revenues
Financial Services
2019
2018
$
%
CC%4
Increase / (Decrease)
(Dollars in millions)
$
5,869
$
5,845
$
4,695
3,770
2,449
4,668
3,415
2,197
$
16,783
$
16,125
$
24
27
355
252
658
0.4
0.6
10.4
11.5
4.1
1.6
1.0
12.0
13.1
5.2
Revenues from our Financial Services segment grew 0.4%, or 1.6% on a constant currency basis4 , in 2019. Revenues among
our insurance clients increased by $41 million as compared to a decrease of $17 million from our banking clients. Revenues from
clients added during 2019, including those related to Samlink, were $90 million. Demand in this segment was driven by our clients'
need to be compliant with significant regulatory requirements and adaptable to regulatory change, and their adoption and integration
of digital technologies, including customer experience enhancement, robotic process automation, analytics and AI in areas such
as digital lending, fraud detection and next generation payments. Demand from certain banking clients has been and may continue
to be negatively affected as they transition the support of some of their legacy systems and operations in-house or to captives.
Healthcare
Revenues from our Healthcare segment grew 0.6%, or 1.0% on a constant currency basis4, in 2019. Revenues in this segment
increased by $241 million among our life science clients compared to a decrease of $214 million from our healthcare clients.
Revenue growth among our life sciences clients was driven by revenues from Zenith and demand for our digital operations services
and solutions. Revenues from our healthcare clients were negatively impacted by the mergers within the segment, the establishment
of an offshore captive by a large client, the Customer Dispute and a ramp down of a client relationship in which we were a
subcontractor to a third party for the purpose of delivering healthcare-related systems implementation services to local government,
partially offset by revenues from Bolder, which we acquired in the second quarter of 2018. Revenues from clients added during
2019, including those related to acquisitions, were $36 million.
Demand in this segment was driven by emerging industry trends, including enhanced compliance, integrated health
management, claims investigative services and heightened focus on patient experience, as well as services that drive operational
improvements in areas such as claims processing, enrollment, membership and billing. Demand was also created by the adoption
and integration of digital technologies such as AI to shape personalized care plans and predictive data analytics to improve patient
outcomes. Demand from our healthcare clients may continue to be affected by uncertainty in the regulatory environment and
industry-specific trends, including industry consolidation and convergence. Demand among our life sciences clients may be affected
by industry consolidation. We believe that, in the long term, the healthcare industry continues to present a significant growth
opportunity due to factors that are transforming the industry, including the changing regulatory environment, increasing focus on
medical costs and the consumerization of healthcare.
Products and Resources
Revenues from our Products and Resources segment grew 10.4%, or 12.0% on a constant currency basis4, in 2019. Revenue
growth was strongest among our retail and consumer goods clients, where revenue increased by $187 million. Revenues from our
manufacturing, logistics, energy and utilities clients increased by $119 million while revenue from our travel and hospitality clients
increased by $49 million. Revenues from clients added during 2019, including those related to acquisitions, were $69 million.
Demand in this segment was driven by our clients’ focus on improving the efficiency of their operations, the enablement and
integration of mobile platforms to support sales and other omni-channel commerce initiatives, and their adoption and integration
of digital technologies, such as the application of intelligent systems to manage supply chain and enhance overall customer
experiences.
4
Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP.
See “Non-GAAP Financial Measures” for more information.
Table of Contents
Results of Operations
For a discussion of our results of operations for the year ended December 31, 2017, including a year-to-year comparison
between 2018 and 2017, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report Form 10-K for the year ended December 31, 2018.
The Year Ended December 31, 2019 Compared to The Year Ended December 31, 2018
The following table sets forth certain financial data for the years ended December 31:
% of
% of
Increase / Decrease
2019
Revenues
2018
Revenues
$
%
(Dollars in millions, except per share data)
$ 16,783
100.0
$ 16,125
100.0
$
Income before provision for income taxes
2,543
15.2
Revenues
Cost of revenues(1)
Selling, general and administrative expenses(1)
Restructuring charges
Depreciation and amortization expense
Income from operations
Other income (expense), net
Provision for income taxes
Income (loss) from equity method investment
Net income
Diluted EPS
Other Financial Information 3
Adjusted Income From Operations and Adjusted
Operating Margin
Adjusted Diluted EPS
10,634
2,972
217
507
2,453
90
(643)
(58)
1,842
3.29
2,787
3.99
$
$
$
$
63.4
17.7
1.3
3.0
14.6
11.0
16.6
$
$
$
$
61.0
18.6
0.1
2.9
17.4
17.3
9,838
3,007
19
460
2,801
(4)
2,797
(698)
2
2,101
3.60
13.0
$
(259)
(12.3)
$ (0.31)
(8.6)
2,920
4.02
18.1
(133)
$ (0.03)
(4.6)
(0.7)
658
796
(35)
198
47
94
(254)
55
(60)
4.1
8.1
(1.2)
10.2
(9.1)
(7.9)
*
*
*
(348)
(12.4)
Exclusive of depreciation and amortization expense.
(1)
*
Not meaningful
Revenues - Overall
During 2019, revenues increased by $658 million as compared to 2018, representing growth of 4.1%, or 5.2% on a constant
currency basis3. Revenues from clients added during 2019, including those related to acquisitions, were $234 million. Growth was
driven by our clients' adoption and integration of digital technologies, demand for our digital operations services and solutions as
well as revenues from our recently completed acquisitions. This was partially offset by pricing pressure within our core portfolio
of services as our clients continue their efforts to optimize the cost of supporting their legacy systems and operations.
Revenues from our top clients as a percentage of total revenues were as follows:
Top five clients
Top ten clients
For the years ended December 31,
2019
2018
7.9%
14.6%
8.6%
15.4%
3
Constant currency revenue growth, Adjusted Income from Operations, Adjusted Operating Margin and Adjusted Diluted
EPS are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial
Measures” for more information and reconciliations to the most directly comparable GAAP financial measures, as
applicable.
22
Table of Contents
Revenues - Reportable Business Segments
Revenues by reportable business segment were as follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total revenues
Financial Services
2019
2018
$
%
CC%4
Increase / (Decrease)
(Dollars in millions)
$
5,869
$
5,845
$
4,695
3,770
2,449
4,668
3,415
2,197
$
16,783
$
16,125
$
24
27
355
252
658
0.4
0.6
10.4
11.5
4.1
1.6
1.0
12.0
13.1
5.2
Revenues from our Financial Services segment grew 0.4%, or 1.6% on a constant currency basis4 , in 2019. Revenues among
our insurance clients increased by $41 million as compared to a decrease of $17 million from our banking clients. Revenues from
clients added during 2019, including those related to Samlink, were $90 million. Demand in this segment was driven by our clients'
need to be compliant with significant regulatory requirements and adaptable to regulatory change, and their adoption and integration
of digital technologies, including customer experience enhancement, robotic process automation, analytics and AI in areas such
as digital lending, fraud detection and next generation payments. Demand from certain banking clients has been and may continue
to be negatively affected as they transition the support of some of their legacy systems and operations in-house or to captives.
Healthcare
Revenues from our Healthcare segment grew 0.6%, or 1.0% on a constant currency basis4, in 2019. Revenues in this segment
increased by $241 million among our life science clients compared to a decrease of $214 million from our healthcare clients.
Revenue growth among our life sciences clients was driven by revenues from Zenith and demand for our digital operations services
and solutions. Revenues from our healthcare clients were negatively impacted by the mergers within the segment, the establishment
of an offshore captive by a large client, the Customer Dispute and a ramp down of a client relationship in which we were a
subcontractor to a third party for the purpose of delivering healthcare-related systems implementation services to local government,
partially offset by revenues from Bolder, which we acquired in the second quarter of 2018. Revenues from clients added during
2019, including those related to acquisitions, were $36 million.
Demand in this segment was driven by emerging industry trends, including enhanced compliance, integrated health
management, claims investigative services and heightened focus on patient experience, as well as services that drive operational
improvements in areas such as claims processing, enrollment, membership and billing. Demand was also created by the adoption
and integration of digital technologies such as AI to shape personalized care plans and predictive data analytics to improve patient
outcomes. Demand from our healthcare clients may continue to be affected by uncertainty in the regulatory environment and
industry-specific trends, including industry consolidation and convergence. Demand among our life sciences clients may be affected
by industry consolidation. We believe that, in the long term, the healthcare industry continues to present a significant growth
opportunity due to factors that are transforming the industry, including the changing regulatory environment, increasing focus on
medical costs and the consumerization of healthcare.
Products and Resources
Revenues from our Products and Resources segment grew 10.4%, or 12.0% on a constant currency basis4, in 2019. Revenue
growth was strongest among our retail and consumer goods clients, where revenue increased by $187 million. Revenues from our
manufacturing, logistics, energy and utilities clients increased by $119 million while revenue from our travel and hospitality clients
increased by $49 million. Revenues from clients added during 2019, including those related to acquisitions, were $69 million.
Demand in this segment was driven by our clients’ focus on improving the efficiency of their operations, the enablement and
integration of mobile platforms to support sales and other omni-channel commerce initiatives, and their adoption and integration
of digital technologies, such as the application of intelligent systems to manage supply chain and enhance overall customer
experiences.
4
Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP.
See “Non-GAAP Financial Measures” for more information.
23
Table of Contents
Communications, Media and Technology
Table of Contents
SG&A Expenses
Revenues from our Communications, Media and Technology segment grew 11.5%, or 13.1% on a constant currency basis5
in 2019. Growth was stronger among our technology clients where revenues increased $209 million as compared to an increase
of $43 million for our communications and media clients. Revenues from clients added during 2019, including those related to
acquisitions were $39 million. Demand in this segment is driven by our clients’ needs to create differentiated user experiences,
transition to agile development methodologies, enhance their networks, manage their digital content and adopt and integrate digital
technologies, such as cloud, interactive and IoT. In 2020, revenues within this segment will be affected by our strategic decision
to exit certain content-related services. We anticipate that this decision may negatively impact our relationship with the affected
clients and estimate that we may lose revenues of $225 million to $255 million on an annualized basis. We anticipate revenues
will ramp down over the next one to two years and the impact on 2020 revenues is expected to be between $180 million and $200
million. Additionally, demand among our technology clients may be affected by uncertainty in the regulatory environment while
significant merger and acquisition activity may impact our clients in the communications and media industry.
Revenues - Geographic Locations
Revenues by geographic market, as determined by client location, were as follows:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total revenues
2019
2018
$
%
CC %5
Increase / (Decrease)
(Dollars in millions)
$
12,726
$
12,293
$
1,313
1,691
3,004
1,053
1,274
1,563
2,837
995
$
16,783
$
16,125
$
433
39
128
167
58
658
3.5
3.1
8.2
5.9
5.8
4.1
3.6%
7.1%
13.3%
10.5%
9.8%
5.2%
North America continues to be our largest market, representing 75.8% of total 2019 revenues and 65.8% of total revenue
growth in 2019. Revenue growth in our North America region was driven by the demand for digital content services and solutions
by clients in our Communications, Media and Technology segment, the adoption and integration of digital technologies by clients
in our Products and Resources segment and revenues from recently completed acquisitions, partially offset by lower revenue in
our Healthcare segment as described above. In 2020, revenues in our North America region will be affected by our strategic
decision to exit certain content-related services in our Communications, Media and Technology segment. Revenue growth in our
Continental Europe and the United Kingdom regions was driven by our life science clients and includes revenues related to our
recently completed acquisitions. Revenue growth in our Rest of World region was driven by strength in our Products and Resources
and Healthcare segments. Revenue growth in our North America and Rest of World regions was negatively affected as certain
banking clients in these regions transition the support of some of their legacy systems and operations in-house or to captives. We
believe that there are opportunities for growth across all of our geographic markets.
Cost of Revenues (Exclusive of Depreciation and Amortization Expense)
SG&A expenses consist primarily of salaries, incentive-based compensation, stock-based compensation expense, employee
benefits, immigration, travel, marketing, communications, management, finance, administrative and occupancy costs. SG&A
expenses decreased by 1.2% during 2019 as compared to 2018, decreasing as a percentage of revenues to 17.7% in 2019 as
compared to 18.6% in 2018. The decrease, as a percentage of revenues, was due primarily to a decrease in compensation costs,
partially offset by costs related to our recently completed acquisitions. Additionally, in 2019 we recorded the incremental accrual
related to the India Defined Contribution Obligation as described in Note 15 to our consolidated financial statements. In 2018, we
recorded a $100 million charge related to the initial funding of the Cognizant U.S. Foundation.
Our restructuring charges consist of our 2020 Fit for Growth Plan, which was announced in the fourth quarter of 2019, and
our realignment program. Restructuring charges were $217 million or 1.3%, as a percentage of revenues during 2019, as compared
to $19 million or 0.1%, as a percentage of revenues in 2018. For further detail on our restructuring charges see Note 4 to our
Restructuring Charges
consolidated financial statements.
Operating Margin - Overall
Our operating margin and Adjusted Operating Margin6 decreased to 14.6% and 16.6%, respectively in 2019 from 17.4% and
18.1%, respectively, during 2018. The decreases in our operating margin and Adjusted Operating Margin6 were due to an increase
in costs related to our delivery personnel (including employees and subcontractors) outpacing revenue growth, the dilutive impact
of our recently completed acquisitions, contract renegotiations with recently merged Healthcare clients and the Customer Dispute,
partially offset by the impact of lower incentive-based compensation accrual rates. Our 2019 GAAP operating margin was
additionally negatively impacted by the incremental accrual related to the India Defined Contribution Obligation as described in
Note 15 to our consolidated financial statements and higher realignment charges while our 2018 GAAP operating margin was
negatively impacted by the initial funding of the Cognizant U.S. Foundation.
Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar
positively impacted our operating margin by approximately 53 basis points or 0.53 percentage points in 2019, while in 2018 the
depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 89 basis points
or 0.89 percentage points. Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have
the effect of moving our operating margin by approximately 18 basis points or 0.18 percentage points.
We enter into foreign exchange forward contracts to hedge certain Indian rupee denominated payments in India. These
hedges are intended to mitigate the volatility of the changes in the exchange rate between the U.S. dollar and the Indian rupee.
During the year ended December 31, 2019, the settlement of cash flow hedges had an immaterial impact on our operating margin
as compared to a positive impact of approximately 44 basis points or 0.44 percentage points in 2018.
Our most significant costs are the salaries and related benefits for our employees. These costs are affected by the impact of
inflation. In certain regions, competition for professionals with the advanced technical skills necessary to perform our services
has caused wages to increase at a rate greater than the general rate of inflation.
We finished the year with approximately 292,500 employees, which is an increase of approximately 10,900 over the prior
year end. For the three months ended December 31, 2019, annualized turnover, including both voluntary and involuntary, was
approximately 20.8%. Turnover for the years ended December 31, 2019 and 2018, including both voluntary and involuntary, was
Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense,
approximately 21.7% and 20.8%, respectively. Attrition is weighted more towards the junior members of our staff.
employee benefits, project-related immigration and travel for technical personnel, subcontracting and equipment costs relating
to revenues. Our cost of revenues increased by 8.1% during 2019 as compared to 2018, increasing as a percentage of revenues
to 63.4% during the 2019 period compared to 61.0% in 2018. The increase in cost of revenues, as a percentage of revenues,
was due primarily to an increase in costs related to our delivery personnel (including employees and subcontractors) as
headcount growth outpaced revenue growth, partially offset by lower incentive-based compensation accrual rates in 2019.
5
Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP.
See “Non-GAAP Financial Measures” for more information.
measure.
6
Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-
GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial
24
25
Table of Contents
Communications, Media and Technology
Table of Contents
SG&A Expenses
Revenues from our Communications, Media and Technology segment grew 11.5%, or 13.1% on a constant currency basis5
in 2019. Growth was stronger among our technology clients where revenues increased $209 million as compared to an increase
of $43 million for our communications and media clients. Revenues from clients added during 2019, including those related to
acquisitions were $39 million. Demand in this segment is driven by our clients’ needs to create differentiated user experiences,
transition to agile development methodologies, enhance their networks, manage their digital content and adopt and integrate digital
technologies, such as cloud, interactive and IoT. In 2020, revenues within this segment will be affected by our strategic decision
to exit certain content-related services. We anticipate that this decision may negatively impact our relationship with the affected
clients and estimate that we may lose revenues of $225 million to $255 million on an annualized basis. We anticipate revenues
will ramp down over the next one to two years and the impact on 2020 revenues is expected to be between $180 million and $200
million. Additionally, demand among our technology clients may be affected by uncertainty in the regulatory environment while
significant merger and acquisition activity may impact our clients in the communications and media industry.
Revenues - Geographic Locations
Revenues by geographic market, as determined by client location, were as follows:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total revenues
2019
2018
$
%
CC %5
Increase / (Decrease)
(Dollars in millions)
$
12,726
$
12,293
$
1,313
1,691
3,004
1,053
1,274
1,563
2,837
995
$
16,783
$
16,125
$
433
39
128
167
58
658
3.5
3.1
8.2
5.9
5.8
4.1
3.6%
7.1%
13.3%
10.5%
9.8%
5.2%
North America continues to be our largest market, representing 75.8% of total 2019 revenues and 65.8% of total revenue
growth in 2019. Revenue growth in our North America region was driven by the demand for digital content services and solutions
by clients in our Communications, Media and Technology segment, the adoption and integration of digital technologies by clients
in our Products and Resources segment and revenues from recently completed acquisitions, partially offset by lower revenue in
our Healthcare segment as described above. In 2020, revenues in our North America region will be affected by our strategic
decision to exit certain content-related services in our Communications, Media and Technology segment. Revenue growth in our
Continental Europe and the United Kingdom regions was driven by our life science clients and includes revenues related to our
recently completed acquisitions. Revenue growth in our Rest of World region was driven by strength in our Products and Resources
and Healthcare segments. Revenue growth in our North America and Rest of World regions was negatively affected as certain
banking clients in these regions transition the support of some of their legacy systems and operations in-house or to captives. We
believe that there are opportunities for growth across all of our geographic markets.
Cost of Revenues (Exclusive of Depreciation and Amortization Expense)
Our cost of revenues consists primarily of salaries, incentive-based compensation, stock-based compensation expense,
employee benefits, project-related immigration and travel for technical personnel, subcontracting and equipment costs relating
to revenues. Our cost of revenues increased by 8.1% during 2019 as compared to 2018, increasing as a percentage of revenues
to 63.4% during the 2019 period compared to 61.0% in 2018. The increase in cost of revenues, as a percentage of revenues,
was due primarily to an increase in costs related to our delivery personnel (including employees and subcontractors) as
headcount growth outpaced revenue growth, partially offset by lower incentive-based compensation accrual rates in 2019.
SG&A expenses consist primarily of salaries, incentive-based compensation, stock-based compensation expense, employee
benefits, immigration, travel, marketing, communications, management, finance, administrative and occupancy costs. SG&A
expenses decreased by 1.2% during 2019 as compared to 2018, decreasing as a percentage of revenues to 17.7% in 2019 as
compared to 18.6% in 2018. The decrease, as a percentage of revenues, was due primarily to a decrease in compensation costs,
partially offset by costs related to our recently completed acquisitions. Additionally, in 2019 we recorded the incremental accrual
related to the India Defined Contribution Obligation as described in Note 15 to our consolidated financial statements. In 2018, we
recorded a $100 million charge related to the initial funding of the Cognizant U.S. Foundation.
Restructuring Charges
Our restructuring charges consist of our 2020 Fit for Growth Plan, which was announced in the fourth quarter of 2019, and
our realignment program. Restructuring charges were $217 million or 1.3%, as a percentage of revenues during 2019, as compared
to $19 million or 0.1%, as a percentage of revenues in 2018. For further detail on our restructuring charges see Note 4 to our
consolidated financial statements.
Operating Margin - Overall
Our operating margin and Adjusted Operating Margin6 decreased to 14.6% and 16.6%, respectively in 2019 from 17.4% and
18.1%, respectively, during 2018. The decreases in our operating margin and Adjusted Operating Margin6 were due to an increase
in costs related to our delivery personnel (including employees and subcontractors) outpacing revenue growth, the dilutive impact
of our recently completed acquisitions, contract renegotiations with recently merged Healthcare clients and the Customer Dispute,
partially offset by the impact of lower incentive-based compensation accrual rates. Our 2019 GAAP operating margin was
additionally negatively impacted by the incremental accrual related to the India Defined Contribution Obligation as described in
Note 15 to our consolidated financial statements and higher realignment charges while our 2018 GAAP operating margin was
negatively impacted by the initial funding of the Cognizant U.S. Foundation.
Excluding the impact of applicable designated cash flow hedges, the depreciation of the Indian rupee against the U.S. dollar
positively impacted our operating margin by approximately 53 basis points or 0.53 percentage points in 2019, while in 2018 the
depreciation of the Indian rupee against the U.S. dollar positively impacted our operating margin by approximately 89 basis points
or 0.89 percentage points. Each additional 1.0% change in exchange rate between the Indian rupee and the U.S. dollar will have
the effect of moving our operating margin by approximately 18 basis points or 0.18 percentage points.
We enter into foreign exchange forward contracts to hedge certain Indian rupee denominated payments in India. These
hedges are intended to mitigate the volatility of the changes in the exchange rate between the U.S. dollar and the Indian rupee.
During the year ended December 31, 2019, the settlement of cash flow hedges had an immaterial impact on our operating margin
as compared to a positive impact of approximately 44 basis points or 0.44 percentage points in 2018.
Our most significant costs are the salaries and related benefits for our employees. These costs are affected by the impact of
inflation. In certain regions, competition for professionals with the advanced technical skills necessary to perform our services
has caused wages to increase at a rate greater than the general rate of inflation.
We finished the year with approximately 292,500 employees, which is an increase of approximately 10,900 over the prior
year end. For the three months ended December 31, 2019, annualized turnover, including both voluntary and involuntary, was
approximately 20.8%. Turnover for the years ended December 31, 2019 and 2018, including both voluntary and involuntary, was
approximately 21.7% and 20.8%, respectively. Attrition is weighted more towards the junior members of our staff.
5
Constant currency revenue growth is not a measurement of financial performance prepared in accordance with GAAP.
See “Non-GAAP Financial Measures” for more information.
6
Adjusted Operating Margin is not a measurement of financial performance prepared in accordance with GAAP. See “Non-
GAAP Financial Measures” for more information and a reconciliation to the most directly comparable GAAP financial
measure.
24
25
Table of Contents
Segment Operating Profit and Margin
Segment operating profit and margin were as follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total segment operating profit and margin
Less: unallocated costs
Income from operations
2019
Operating
Margin %
2018
Operating
Margin %
Increase /
(Decrease)
$
$
1,605
1,261
1,028
732
4,626
2,173
2,453
(Dollars in millions)
$
27.3
26.9
27.3
29.9
27.6
14.6
$
1,713
1,416
1,023
692
4,844
2,043
2,801
$
29.3
30.3
30.0
31.5
30.0
17.4
$
(108)
(155)
5
40
(218)
130
(348)
Across all of our operating segments, operating margins decreased as costs related to our delivery personnel (including
employees and subcontractors) outpaced revenue growth. Additionally, operating margins in Healthcare were negatively affected
by mergers among several of our healthcare clients, the Customer Dispute and the impairment of certain capitalized costs related
to a large volume-based contract.
Certain SG&A expenses, the excess or shortfall of incentive compensation for commercial and delivery personnel as
compared to target, costs related to our 2020 Fit for Growth Plan and realignment program, a portion of depreciation and amortization
and the impact of the settlements of our cash flow hedges are not allocated to individual segments in internal management reports
used by the chief operating decision maker. Accordingly, such expenses are excluded from segment operating profit and are
separately disclosed above as “unallocated costs” and adjusted against our total income from operations. The increase in unallocated
costs during 2019 compared to 2018 is primarily due to higher realignment charges incurred in 2019 and the India Defined
Contribution Obligation recorded in 2019, partially offset by a shortfall of incentive-based compensation as compared to target
in 2019 and the initial funding of the Cognizant U.S. Foundation recorded in 2018.
Other Income (Expense), Net
Total other income (expense), net consists primarily of foreign currency exchange gains and losses, interest income and
interest expense. The following table sets forth total other income (expense), net for the years ended December 31:
Foreign currency exchange (losses)
Gains on foreign exchange forward contracts not designated as hedging
instruments
Foreign currency exchange gains (losses), net
Interest income
Interest expense
Other, net
Total other income (expense), net
2019
2018
(in millions)
Increase /
Decrease
$
(73)
$
(183)
$
110
8
(65)
176
(26)
5
90
31
(152)
177
(27)
(2)
(4)
$
$
(23)
87
(1)
1
7
94
$
The foreign currency exchange gains and losses in all the years presented were primarily attributable to the remeasurement
of the Indian rupee denominated net monetary assets and liabilities in our U.S. dollar functional currency India subsidiaries and,
to a lesser extent, the remeasurement of other net monetary assets and liabilities denominated in currencies other than the functional
currencies of our subsidiaries. The gains and losses on foreign exchange forward contracts not designated as hedging instruments
relate to the realized and unrealized gains and losses on foreign exchange forward contracts entered into to partially offset foreign
currency exposure to the Euro and Indian rupee and other non-U.S. dollar denominated net monetary assets and liabilities. As of
December 31, 2019, the notional value of our undesignated hedges was $702 million.
Table of Contents
Provision for Income Taxes
for additional information.
Income (loss) from equity method investments
Note 5 to our consolidated financial statements.
Net Income
The provision for income taxes was $643 million in 2019 and $698 million in 2018. The effective income tax rate remained
relatively flat at 25.3% in 2019 as compared to 25.0% in 2018. In the fourth quarter of 2019, we recorded a one-time net income
tax expense of $21 million as a result of the enactment of the India Tax Law. See Note 11 to our consolidated financial statements
In 2019, we recorded an impairment charge of $57 million on one of our equity method investments as further described in
Net income was $1,842 million in 2019 and $2,101 million in 2018. Net income as a percentage of revenues decreased to
11.0% in 2019 from 13.0% in 2018. The decrease in net income is primarily due to a decrease in income from operations, partially
offset by lower foreign exchange losses as compared to 2018.
Non-GAAP Financial Measures
Portions of our disclosure include non-GAAP financial measures. These non-GAAP financial measures are not based on
any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies.
In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance
with GAAP. The reconciliations of our non-GAAP financial measures to the corresponding GAAP measures, set forth below,
should be carefully evaluated.
Our non-GAAP financial measures, Adjusted Operating Margin, Adjusted Income From Operations and Adjusted Diluted
EPS exclude unusual items. Additionally, Adjusted Diluted EPS excludes net non-operating foreign currency exchange gains or
losses and the tax impact of all the applicable adjustments. The income tax impact of each item is calculated by applying the
statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Constant currency revenue growth is
defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against
the comparative period's reported revenues.
We believe providing investors with an operating view consistent with how we manage the Company provides enhanced
transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP
and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to
determine portions of the compensation for our executive officers and for making comparisons of our operating results to those
of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures excluding certain costs provides a
meaningful supplemental measure for investors to evaluate our financial performance. We believe that the presentation of our non-
GAAP financial measures (Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant
currency revenue growth) along with reconciliations to the most comparable GAAP measure, as applicable, can provide useful
supplemental information to our management and investors regarding financial and business trends relating to our financial
condition and results of operations.
A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that
non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance
with GAAP and may exclude costs that are recurring such as our net non-operating foreign currency exchange gains or losses. In
addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these
non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information
regarding the GAAP amounts excluded from our non-GAAP financial measures to allow investors to evaluate such non-GAAP
financial measures.
26
27
Table of Contents
Segment Operating Profit and Margin
Segment operating profit and margin were as follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total segment operating profit and margin
Less: unallocated costs
Income from operations
2019
Operating
Margin %
2018
Operating
Margin %
Increase /
(Decrease)
(Dollars in millions)
$
$
$
$
1,605
1,261
1,028
732
4,626
2,173
2,453
27.3
26.9
27.3
29.9
27.6
1,713
1,416
1,023
692
4,844
2,043
2,801
29.3
30.3
30.0
31.5
30.0
14.6
$
17.4
$
(108)
(155)
5
40
(218)
130
(348)
Across all of our operating segments, operating margins decreased as costs related to our delivery personnel (including
employees and subcontractors) outpaced revenue growth. Additionally, operating margins in Healthcare were negatively affected
by mergers among several of our healthcare clients, the Customer Dispute and the impairment of certain capitalized costs related
to a large volume-based contract.
Certain SG&A expenses, the excess or shortfall of incentive compensation for commercial and delivery personnel as
compared to target, costs related to our 2020 Fit for Growth Plan and realignment program, a portion of depreciation and amortization
and the impact of the settlements of our cash flow hedges are not allocated to individual segments in internal management reports
used by the chief operating decision maker. Accordingly, such expenses are excluded from segment operating profit and are
separately disclosed above as “unallocated costs” and adjusted against our total income from operations. The increase in unallocated
costs during 2019 compared to 2018 is primarily due to higher realignment charges incurred in 2019 and the India Defined
Contribution Obligation recorded in 2019, partially offset by a shortfall of incentive-based compensation as compared to target
in 2019 and the initial funding of the Cognizant U.S. Foundation recorded in 2018.
Other Income (Expense), Net
Total other income (expense), net consists primarily of foreign currency exchange gains and losses, interest income and
interest expense. The following table sets forth total other income (expense), net for the years ended December 31:
Foreign currency exchange (losses)
Gains on foreign exchange forward contracts not designated as hedging
Foreign currency exchange gains (losses), net
instruments
Interest income
Interest expense
Other, net
2019
2018
(in millions)
Increase /
Decrease
$
(73)
$
(183)
$
110
8
(65)
176
(26)
5
90
31
(152)
177
(27)
(2)
(4)
(23)
87
(1)
1
7
94
Total other income (expense), net
$
$
$
The foreign currency exchange gains and losses in all the years presented were primarily attributable to the remeasurement
of the Indian rupee denominated net monetary assets and liabilities in our U.S. dollar functional currency India subsidiaries and,
to a lesser extent, the remeasurement of other net monetary assets and liabilities denominated in currencies other than the functional
currencies of our subsidiaries. The gains and losses on foreign exchange forward contracts not designated as hedging instruments
relate to the realized and unrealized gains and losses on foreign exchange forward contracts entered into to partially offset foreign
currency exposure to the Euro and Indian rupee and other non-U.S. dollar denominated net monetary assets and liabilities. As of
December 31, 2019, the notional value of our undesignated hedges was $702 million.
Table of Contents
Provision for Income Taxes
The provision for income taxes was $643 million in 2019 and $698 million in 2018. The effective income tax rate remained
relatively flat at 25.3% in 2019 as compared to 25.0% in 2018. In the fourth quarter of 2019, we recorded a one-time net income
tax expense of $21 million as a result of the enactment of the India Tax Law. See Note 11 to our consolidated financial statements
for additional information.
Income (loss) from equity method investments
In 2019, we recorded an impairment charge of $57 million on one of our equity method investments as further described in
Note 5 to our consolidated financial statements.
Net Income
Net income was $1,842 million in 2019 and $2,101 million in 2018. Net income as a percentage of revenues decreased to
11.0% in 2019 from 13.0% in 2018. The decrease in net income is primarily due to a decrease in income from operations, partially
offset by lower foreign exchange losses as compared to 2018.
Non-GAAP Financial Measures
Portions of our disclosure include non-GAAP financial measures. These non-GAAP financial measures are not based on
any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies.
In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance
with GAAP. The reconciliations of our non-GAAP financial measures to the corresponding GAAP measures, set forth below,
should be carefully evaluated.
Our non-GAAP financial measures, Adjusted Operating Margin, Adjusted Income From Operations and Adjusted Diluted
EPS exclude unusual items. Additionally, Adjusted Diluted EPS excludes net non-operating foreign currency exchange gains or
losses and the tax impact of all the applicable adjustments. The income tax impact of each item is calculated by applying the
statutory rate and local tax regulations in the jurisdiction in which the item was incurred. Constant currency revenue growth is
defined as revenues for a given period restated at the comparative period’s foreign currency exchange rates measured against
the comparative period's reported revenues.
We believe providing investors with an operating view consistent with how we manage the Company provides enhanced
transparency into our operating results. For our internal management reporting and budgeting purposes, we use various GAAP
and non-GAAP financial measures for financial and operational decision-making, to evaluate period-to-period comparisons, to
determine portions of the compensation for our executive officers and for making comparisons of our operating results to those
of our competitors. Therefore, it is our belief that the use of non-GAAP financial measures excluding certain costs provides a
meaningful supplemental measure for investors to evaluate our financial performance. We believe that the presentation of our non-
GAAP financial measures (Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Diluted EPS and constant
currency revenue growth) along with reconciliations to the most comparable GAAP measure, as applicable, can provide useful
supplemental information to our management and investors regarding financial and business trends relating to our financial
condition and results of operations.
A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that
non-GAAP financial measures do not reflect all of the amounts associated with our operating results as determined in accordance
with GAAP and may exclude costs that are recurring such as our net non-operating foreign currency exchange gains or losses. In
addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the usefulness of these
non-GAAP financial measures as a comparative tool. We compensate for these limitations by providing specific information
regarding the GAAP amounts excluded from our non-GAAP financial measures to allow investors to evaluate such non-GAAP
financial measures.
26
27
Table of Contents
Table of Contents
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure
(8)
In 2019, we recorded a one-time net income tax expense of $21 million as a result of the enactment of a new tax law in
for the years ended December 31:
2019
% of
Revenues
2018
% of
Revenues
(Dollars in millions, except per share data)
GAAP income from operations and operating margin
Realignment charges (1)
Incremental accrual related to the India Defined Contribution
Obligation (2)
2020 Fit for Growth Plan restructuring charges (3)
Initial funding of Cognizant U.S. Foundation (4)
Adjusted Income From Operations and Adjusted Operating Margin
GAAP diluted EPS
Effect of above adjustments, pre-tax
Effect of non-operating foreign currency exchange losses (gains),
pre-tax (5)
Tax effect of above adjustments (6)
Effect of the equity method investment impairment (7)
Effect of the India Tax Law (8)
Effect of net incremental income tax expense related to the Tax
Reform Act (9)
Adjusted Diluted EPS
$
$
$
2,453
169
117
48
—
2,787
3.29
0.60
0.11
(0.15)
0.10
0.04
—
3.99
14.6%
1.0
0.7
0.3
—
16.6
$
$
$
2,801
19
—
—
100
2,920
3.60
0.20
0.26
(0.03)
—
—
(0.01)
4.02
17.4%
0.1
—
—
0.6
18.1
(1)
(2)
(3)
(4)
(5)
As part of our realignment program, during the year ended December 31, 2019, we incurred Executive Transition Costs,
employee separation costs, employee retention costs and third party realignment costs. See Note 4 to our consolidated
financial statements for additional information.
In 2019, we recorded an accrual of $117 million related to the India Defined Contribution Obligation as further described
in Note 15 to our consolidated financial statements.
During 2019, we incurred certain employee separation, employee retention and facility exit costs under our 2020 Fit for
Growth Plan. See Note 4 to our consolidated financial statements for additional information.
In 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation. This cost is reported in "Selling,
general and administrative expenses" in our consolidated statement of operations.
Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange
forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency
exchange gains (losses), net" in our consolidated statements of operations.
(6)
Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income:
For the years ended December 31,
2019
2018
(in millions)
Non-GAAP income tax benefit (expense) related to:
Realignment charges
$
Foreign currency exchange gains and losses
2020 Fit for Growth Plan restructuring charges
Incremental accrual related to the India Defined Contribution
Obligation
Initial funding of Cognizant U.S. Foundation
$
43
(1)
13
31
—
5
(12)
—
—
28
The effective income tax rate related to each of our non-GAAP adjustments varies depending on the jurisdictions in which
such income and expenses are generated and the statutory rates applicable in those jurisdictions.
(7)
In 2019, we recorded an impairment charge of $57 million on one of our equity investments as further described in Note
5 to our consolidated financial statements.
India. See Note 11 to our consolidated financial statements for additional information.
(9)
In 2018, we finalized our calculation of the one-time net income tax expense related to the enactment of the Tax Reform
Act and recognized a $5 million income tax benefit, which reduced our provision for income taxes.
Liquidity and Capital Resources
Our cash generated from operations has historically been our primary source of liquidity to fund operations and investments
to grow our business. In addition, as of December 31, 2019, we had cash, cash equivalents and short-term investments of $3,424
million, of which $414 million was restricted and not available for use as a result of our ongoing dispute with the ITD as described
in Note 11 to our consolidated financial statements. Additionally, as of December 31, 2019, we had available capacity under our
credit facilities of approximately $1,932 million.
The following table provides a summary of our cash flows for the years ended December 31:
2019
2018
(in millions)
Increase /
Decrease
$
$
2,592
$
2,499
1,588
(2,569)
(1,627)
(1,693)
(93)
3,215
(876)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Operating activities
accounts receivable in 2019.
Investing activities
Financing activities
The decrease in cash generated from operating activities for 2019 compared to 2018 was primarily due to the decrease in
income from operations and an increase in the cash taxes paid during 2019, partially offset by improved collections of trade
We monitor turnover, aging and the collection of trade accounts receivable by client. Our DSO calculation includes trade
accounts receivable, net of allowance for doubtful accounts, and contract assets, reduced by the uncollected portion of our deferred
revenue. DSO was 73 days as of December 31, 2019 and 74 days as of December 31, 2018. As further described in Note 1 to our
consolidated financial statements, during the fourth quarter of 2019, we changed our policy with regard to the presentation of
certain amounts due to customers, such as discounts and rebates. This change in policy had the effect of reducing our DSO by two
days and one day as of December 31, 2019 and December 31, 2018, respectively.
Net cash provided by investing activities in 2019 was driven by net sales of investments partially offset by payments for
acquisitions and outflows for capital expenditures. Net cash used in investing activities in 2018 is related to payments for
acquisitions, outflows for capital expenditures and net purchases of investments.
The increase in cash used in financing activities in 2019 compared to 2018 is primarily attributable to higher repurchases of
common stock in 2019, including our $600 million 2019 ASR agreement.
We have a Credit Agreement providing for a $750 million Term Loan and a $1,750 million unsecured revolving credit facility,
which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly principal
payments on the Term Loan. See Note 10 to our consolidated financial statements. We believe that we currently meet all conditions
set forth in the Credit Agreement to borrow thereunder, and we are not aware of any conditions that would prevent us from
borrowing part or all of the remaining available capacity under the revolving credit facility as of December 31, 2019 and through
the date of this filing.
In September 2019, our India subsidiary entered into a 13 billion Indian rupee ($182 million at the December 31, 2019
exchange rate) working capital facility, which requires us to repay any balances drawn down within 90 days from the date of
disbursement. As of December 31, 2019, there was no balance outstanding under the working capital facility.
During 2019, we returned $2,609 million to our stockholders through $2,156 million in share repurchases under our stock
repurchase program and $453 million in dividend payments funded primarily with the proceeds from the liquidation of our available-
for-sale investment portfolio and operating cash flows. Our shares outstanding decreased to 548 million as of December 31, 2019
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The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure
for the years ended December 31:
2019
% of
Revenues
2018
% of
Revenues
(Dollars in millions, except per share data)
(8)
(9)
In 2019, we recorded a one-time net income tax expense of $21 million as a result of the enactment of a new tax law in
India. See Note 11 to our consolidated financial statements for additional information.
In 2018, we finalized our calculation of the one-time net income tax expense related to the enactment of the Tax Reform
Act and recognized a $5 million income tax benefit, which reduced our provision for income taxes.
GAAP income from operations and operating margin
$
2,453
14.6%
$
2,801
17.4%
Liquidity and Capital Resources
Realignment charges (1)
Obligation (2)
Incremental accrual related to the India Defined Contribution
2020 Fit for Growth Plan restructuring charges (3)
Initial funding of Cognizant U.S. Foundation (4)
1.0
0.7
0.3
—
Our cash generated from operations has historically been our primary source of liquidity to fund operations and investments
to grow our business. In addition, as of December 31, 2019, we had cash, cash equivalents and short-term investments of $3,424
million, of which $414 million was restricted and not available for use as a result of our ongoing dispute with the ITD as described
in Note 11 to our consolidated financial statements. Additionally, as of December 31, 2019, we had available capacity under our
credit facilities of approximately $1,932 million.
Adjusted Income From Operations and Adjusted Operating Margin
2,787
16.6
The following table provides a summary of our cash flows for the years ended December 31:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Operating activities
2019
2018
(in millions)
Increase /
Decrease
$
$
2,499
1,588
(2,569)
$
2,592
(1,627)
(1,693)
(93)
3,215
(876)
The decrease in cash generated from operating activities for 2019 compared to 2018 was primarily due to the decrease in
income from operations and an increase in the cash taxes paid during 2019, partially offset by improved collections of trade
accounts receivable in 2019.
We monitor turnover, aging and the collection of trade accounts receivable by client. Our DSO calculation includes trade
accounts receivable, net of allowance for doubtful accounts, and contract assets, reduced by the uncollected portion of our deferred
revenue. DSO was 73 days as of December 31, 2019 and 74 days as of December 31, 2018. As further described in Note 1 to our
consolidated financial statements, during the fourth quarter of 2019, we changed our policy with regard to the presentation of
certain amounts due to customers, such as discounts and rebates. This change in policy had the effect of reducing our DSO by two
days and one day as of December 31, 2019 and December 31, 2018, respectively.
(4)
In 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation. This cost is reported in "Selling,
Investing activities
Net cash provided by investing activities in 2019 was driven by net sales of investments partially offset by payments for
acquisitions and outflows for capital expenditures. Net cash used in investing activities in 2018 is related to payments for
acquisitions, outflows for capital expenditures and net purchases of investments.
Financing activities
The increase in cash used in financing activities in 2019 compared to 2018 is primarily attributable to higher repurchases of
common stock in 2019, including our $600 million 2019 ASR agreement.
We have a Credit Agreement providing for a $750 million Term Loan and a $1,750 million unsecured revolving credit facility,
which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly principal
payments on the Term Loan. See Note 10 to our consolidated financial statements. We believe that we currently meet all conditions
set forth in the Credit Agreement to borrow thereunder, and we are not aware of any conditions that would prevent us from
borrowing part or all of the remaining available capacity under the revolving credit facility as of December 31, 2019 and through
the date of this filing.
In September 2019, our India subsidiary entered into a 13 billion Indian rupee ($182 million at the December 31, 2019
exchange rate) working capital facility, which requires us to repay any balances drawn down within 90 days from the date of
disbursement. As of December 31, 2019, there was no balance outstanding under the working capital facility.
During 2019, we returned $2,609 million to our stockholders through $2,156 million in share repurchases under our stock
repurchase program and $453 million in dividend payments funded primarily with the proceeds from the liquidation of our available-
for-sale investment portfolio and operating cash flows. Our shares outstanding decreased to 548 million as of December 31, 2019
28
29
GAAP diluted EPS
Effect of above adjustments, pre-tax
Effect of non-operating foreign currency exchange losses (gains),
pre-tax (5)
Tax effect of above adjustments (6)
Effect of the equity method investment impairment (7)
Effect of the India Tax Law (8)
Effect of net incremental income tax expense related to the Tax
Reform Act (9)
Adjusted Diluted EPS
169
117
48
—
3.29
0.60
0.11
(0.15)
0.10
0.04
—
3.99
$
$
0.1
—
—
0.6
18.1
19
—
—
100
2,920
3.60
0.20
0.26
(0.03)
—
—
$
(0.01)
4.02
$
(1)
As part of our realignment program, during the year ended December 31, 2019, we incurred Executive Transition Costs,
employee separation costs, employee retention costs and third party realignment costs. See Note 4 to our consolidated
(2)
In 2019, we recorded an accrual of $117 million related to the India Defined Contribution Obligation as further described
financial statements for additional information.
in Note 15 to our consolidated financial statements.
(3)
During 2019, we incurred certain employee separation, employee retention and facility exit costs under our 2020 Fit for
Growth Plan. See Note 4 to our consolidated financial statements for additional information.
general and administrative expenses" in our consolidated statement of operations.
(5)
Non-operating foreign currency exchange gains and losses, inclusive of gains and losses on related foreign exchange
forward contracts not designated as hedging instruments for accounting purposes, are reported in "Foreign currency
exchange gains (losses), net" in our consolidated statements of operations.
(6)
Presented below are the tax impacts of each of our non-GAAP adjustments to pre-tax income:
Non-GAAP income tax benefit (expense) related to:
Realignment charges
$
$
Foreign currency exchange gains and losses
2020 Fit for Growth Plan restructuring charges
Incremental accrual related to the India Defined Contribution
Obligation
Initial funding of Cognizant U.S. Foundation
For the years ended December 31,
2019
2018
(in millions)
43
(1)
13
31
—
5
(12)
—
—
28
The effective income tax rate related to each of our non-GAAP adjustments varies depending on the jurisdictions in which
such income and expenses are generated and the statutory rates applicable in those jurisdictions.
(7)
In 2019, we recorded an impairment charge of $57 million on one of our equity investments as further described in Note
5 to our consolidated financial statements.
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from 577 million as of December 31, 2018. In February 2020, our Board of Directors approved a 10% or $0.02 increase to our
quarterly cash dividends and increased our stock repurchase program authorization from $5.5 billion to $7.5 billion, excluding
fees and expenses. We review our capital return plan on an on-going basis, considering our financial performance and liquidity
position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook,
regulatory changes and other relevant factors. As these factors may change over time, the actual amounts expended on stock
repurchase activity, dividends, and acquisitions, if any, during any particular period cannot be predicted and may fluctuate from
time to time.
Other Liquidity and Capital Resources Information
We seek to ensure that our worldwide cash is available in the locations in which it is needed. As part of our ongoing liquidity
assessments, we regularly monitor the mix of our domestic and international cash flows and cash balances. As of December 31,
2019, the amount of our cash, cash equivalents and short-term investments held outside the United States was $3,097 million, of
which $2,414 million was in India. As further described in Note 11 to our consolidated financial statements, certain short-term
investment balances in India totaling $414 million as of December 31, 2019, were restricted in connection with our dispute with
the ITD. The affected balances may continue to remain restricted and unavailable for our use while the dispute is ongoing.
We evaluate on an ongoing basis what portion of the non-U.S. cash, cash equivalents and short-term investments held outside
India is needed locally to execute our strategic plans and what amount is available for repatriation back to the United States. We
consider our earnings in India to be indefinitely reinvested, which is consistent with our ongoing strategy to expand our Indian
operations, including through infrastructure investments. However, future events may occur, such as material changes in cash
estimates, discretionary transactions, including corporate restructurings, and changes in applicable laws, that may lead us to
repatriate the undistributed Indian earnings. As of December 31, 2019, the amount of unrepatriated Indian earnings was
approximately $5,242 million. If all of our accumulated unrepatriated Indian earnings were to be repatriated, based on our current
interpretation of India tax law, we estimate that we would incur an additional income tax expense of approximately $1,101 million.
This estimate is subject to change based on tax legislation developments in India and other jurisdictions as well as judicial and
interpretive developments of applicable tax laws.
On February 1, 2020, the India Finance Minister presented the Budget, which contains a number of proposed provisions
related to tax, including a replacement of the dividend distribution tax, which is due from the dividend payer, with a tax payable
by the shareholder receiving the dividend. If enacted, these provisions would significantly reduce the tax rate applicable to any
cash we were to repatriate from India. These provisions are proposed to be effective for the India financial year starting April 1,
2020. We are in the process of reviewing the various tax provisions outlined in the Budget, and will finalize our assessment once
the Budget proposals are passed into law by the Parliament of India.
We expect our operating cash flow, cash and investment balances (excluding the $414 million of India restricted assets),
together with our available capacity under our revolving credit facilities to be sufficient to meet our operating requirements, in
India and globally, for the next twelve months. Our ability to expand and grow our business in accordance with current plans,
make acquisitions and form joint ventures, meet our long-term capital requirements beyond a twelve-month period and execute
our capital return plan will depend on many factors, including the rate, if any, at which our cash flow increases, our ability and
willingness to pay for acquisitions and joint ventures with capital stock and the availability of public and private debt and equity
financing. We cannot be certain that additional financing, if required, will be available on terms and conditions acceptable to us,
if at all.
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Commitments
Commitments and Contingencies
Long-term debt obligations(1)
Interest on long-term debt(2)
Finance lease obligations
Operating lease obligations
Other purchase commitments(3)
Tax Reform Act transition tax(4)
Total
As of December 31, 2019, we had the following obligations and commitments to make future payments under contractual
obligations and commercial commitments:
Payments due by period
Total
Less than
1 year
1-3 years
3-5 years
(in millions)
More than
5 years
$
741
$
$
$
627
$
69
27
1,134
233
528
38
19
11
249
125
50
76
36
15
384
101
101
713
14
228
1
7
220
—
—
—
273
—
157
430
$
2,732
$
492
$
$
1,097
$
(1) Consists of scheduled repayments of our Term Loan.
(2)
Interest on the Term Loan was calculated at interest rates in effect as of December 31, 2019.
(3) Other purchase commitments include, among other things, communications and information technology obligations, as
well as other obligations in the ordinary course of business that we cannot cancel or where we would be required to pay a
termination fee in the event of cancellation.
(4)
The Tax Reform Act transition tax on undistributed foreign earnings is payable in installments through the year 2026.
As of December 31, 2019, we had $152 million of unrecognized income tax benefits. This represents the income tax benefits
associated with certain income tax positions on our U.S. and non-U.S. tax returns that have not been recognized on our financial
statements due to uncertainty regarding their resolution. The resolution of these income tax positions with the relevant taxing
authorities is at various stages, and therefore we are unable to make a reliable estimate of the eventual cash flows by period that
may be required to settle these matters.
Contingencies
Off-Balance Sheet Arrangements
resources.
Critical Accounting Estimates
See Note 15 to our consolidated financial statements for additional information.
Other than our foreign exchange forward contracts, there were no off-balance sheet transactions, arrangements or other
relationships with unconsolidated entities or other persons in 2019 and 2018 that have, or are reasonably likely to have, a current
or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
Management’s discussion and analysis of our financial condition and results of operations is based on our accompanying
consolidated financial statements that have been prepared in accordance with GAAP. We base our estimates on historical experience,
current trends and on various other assumptions that are believed to be relevant at the time our consolidated financial statements
are prepared. We evaluate our estimates on a continuous basis. However, the actual amounts may differ from the estimates used
in the preparation of our consolidated financial statements.
We believe the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported
consolidated financial statements as they require the most difficult, subjective or complex judgments, resulting from the need to
make estimates about the effect of matters that are inherently uncertain. Changes to these estimates could have a material adverse
effect on our results of operations and financial condition. Our significant accounting policies are described in Note 1 to our
consolidated financial statements.
30
31
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from 577 million as of December 31, 2018. In February 2020, our Board of Directors approved a 10% or $0.02 increase to our
quarterly cash dividends and increased our stock repurchase program authorization from $5.5 billion to $7.5 billion, excluding
fees and expenses. We review our capital return plan on an on-going basis, considering our financial performance and liquidity
position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook,
regulatory changes and other relevant factors. As these factors may change over time, the actual amounts expended on stock
repurchase activity, dividends, and acquisitions, if any, during any particular period cannot be predicted and may fluctuate from
time to time.
Other Liquidity and Capital Resources Information
We seek to ensure that our worldwide cash is available in the locations in which it is needed. As part of our ongoing liquidity
assessments, we regularly monitor the mix of our domestic and international cash flows and cash balances. As of December 31,
2019, the amount of our cash, cash equivalents and short-term investments held outside the United States was $3,097 million, of
which $2,414 million was in India. As further described in Note 11 to our consolidated financial statements, certain short-term
investment balances in India totaling $414 million as of December 31, 2019, were restricted in connection with our dispute with
the ITD. The affected balances may continue to remain restricted and unavailable for our use while the dispute is ongoing.
We evaluate on an ongoing basis what portion of the non-U.S. cash, cash equivalents and short-term investments held outside
India is needed locally to execute our strategic plans and what amount is available for repatriation back to the United States. We
consider our earnings in India to be indefinitely reinvested, which is consistent with our ongoing strategy to expand our Indian
operations, including through infrastructure investments. However, future events may occur, such as material changes in cash
estimates, discretionary transactions, including corporate restructurings, and changes in applicable laws, that may lead us to
repatriate the undistributed Indian earnings. As of December 31, 2019, the amount of unrepatriated Indian earnings was
approximately $5,242 million. If all of our accumulated unrepatriated Indian earnings were to be repatriated, based on our current
interpretation of India tax law, we estimate that we would incur an additional income tax expense of approximately $1,101 million.
This estimate is subject to change based on tax legislation developments in India and other jurisdictions as well as judicial and
interpretive developments of applicable tax laws.
On February 1, 2020, the India Finance Minister presented the Budget, which contains a number of proposed provisions
related to tax, including a replacement of the dividend distribution tax, which is due from the dividend payer, with a tax payable
by the shareholder receiving the dividend. If enacted, these provisions would significantly reduce the tax rate applicable to any
cash we were to repatriate from India. These provisions are proposed to be effective for the India financial year starting April 1,
2020. We are in the process of reviewing the various tax provisions outlined in the Budget, and will finalize our assessment once
the Budget proposals are passed into law by the Parliament of India.
We expect our operating cash flow, cash and investment balances (excluding the $414 million of India restricted assets),
together with our available capacity under our revolving credit facilities to be sufficient to meet our operating requirements, in
India and globally, for the next twelve months. Our ability to expand and grow our business in accordance with current plans,
make acquisitions and form joint ventures, meet our long-term capital requirements beyond a twelve-month period and execute
our capital return plan will depend on many factors, including the rate, if any, at which our cash flow increases, our ability and
willingness to pay for acquisitions and joint ventures with capital stock and the availability of public and private debt and equity
financing. We cannot be certain that additional financing, if required, will be available on terms and conditions acceptable to us,
if at all.
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Commitments and Contingencies
Commitments
As of December 31, 2019, we had the following obligations and commitments to make future payments under contractual
obligations and commercial commitments:
Long-term debt obligations(1)
Interest on long-term debt(2)
Finance lease obligations
Operating lease obligations
Other purchase commitments(3)
Tax Reform Act transition tax(4)
Total
Payments due by period
Total
Less than
1 year
1-3 years
3-5 years
(in millions)
More than
5 years
$
741
$
69
27
1,134
233
528
2,732
$
$
38
19
11
249
125
50
492
$
$
76
36
15
384
101
101
713
$
627
$
14
1
228
7
220
1,097
$
$
—
—
—
273
—
157
430
Interest on the Term Loan was calculated at interest rates in effect as of December 31, 2019.
(1) Consists of scheduled repayments of our Term Loan.
(2)
(3) Other purchase commitments include, among other things, communications and information technology obligations, as
well as other obligations in the ordinary course of business that we cannot cancel or where we would be required to pay a
termination fee in the event of cancellation.
The Tax Reform Act transition tax on undistributed foreign earnings is payable in installments through the year 2026.
(4)
As of December 31, 2019, we had $152 million of unrecognized income tax benefits. This represents the income tax benefits
associated with certain income tax positions on our U.S. and non-U.S. tax returns that have not been recognized on our financial
statements due to uncertainty regarding their resolution. The resolution of these income tax positions with the relevant taxing
authorities is at various stages, and therefore we are unable to make a reliable estimate of the eventual cash flows by period that
may be required to settle these matters.
Contingencies
See Note 15 to our consolidated financial statements for additional information.
Off-Balance Sheet Arrangements
Other than our foreign exchange forward contracts, there were no off-balance sheet transactions, arrangements or other
relationships with unconsolidated entities or other persons in 2019 and 2018 that have, or are reasonably likely to have, a current
or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources.
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our accompanying
consolidated financial statements that have been prepared in accordance with GAAP. We base our estimates on historical experience,
current trends and on various other assumptions that are believed to be relevant at the time our consolidated financial statements
are prepared. We evaluate our estimates on a continuous basis. However, the actual amounts may differ from the estimates used
in the preparation of our consolidated financial statements.
We believe the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported
consolidated financial statements as they require the most difficult, subjective or complex judgments, resulting from the need to
make estimates about the effect of matters that are inherently uncertain. Changes to these estimates could have a material adverse
effect on our results of operations and financial condition. Our significant accounting policies are described in Note 1 to our
consolidated financial statements.
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31
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Revenue Recognition. Revenues related to fixed-price contracts for application development and systems integration services,
consulting or other technology services are recognized as the service is performed using the cost to cost method, under which the
total value of revenues is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total
expected labor costs. Revenues related to fixed-price application maintenance, testing and business process services are recognized
using the cost to cost method, if the right to invoice is not representative of the value being delivered. The cost to cost method
requires estimation of future costs, which is updated as the project progresses to reflect the latest available information. Such
estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected
in the financial reporting period in which the change in estimate becomes known. Net changes in estimates of such future costs
and contract losses were immaterial to the consolidated results of operations for the periods presented.
Income Taxes. Determining the consolidated provision for income tax expense, deferred income tax assets (and related
valuation allowance, if any) and liabilities requires significant judgment. We are required to calculate and provide for income taxes
in each of the jurisdictions where we operate. Changes in the geographic mix of income before taxes or estimated level of annual
pre-tax income can affect our overall effective income tax rate. In addition, transactions between our affiliated entities are arranged
in accordance with applicable transfer pricing laws, regulations and relevant guidelines. As a result, and due to the interpretive
nature of certain aspects of these laws and guidelines, we have pending applications for APAs before the taxing authorities in some
of our most significant jurisdictions. It could take years for the relevant taxing authorities to negotiate and conclude these
applications. The consolidated provision for income taxes may change period to period based on changes in facts and circumstances,
such as settlements of income tax audits or finalization of our applications for APAs.
Our provision for income taxes also includes the impact of reserves established for uncertain income tax positions, as well
as the related interest, which may require us to apply judgment to complex issues and may require an extended period of time to
resolve. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final
outcome of these matters will not differ from our recorded amounts. We adjust these reserves in light of changing facts and
circumstances, such as the closing of a tax audit. To the extent that the final outcome of these matters differs from the amounts
recorded, such differences will impact the provision for income taxes in the period in which such determination is made.
Business Combinations, Goodwill and Intangible Assets. Goodwill and intangible assets, including indefinite-lived intangible
assets, arise from the accounting for business combinations. We account for business combinations using the acquisition method
which requires us to estimate the fair value of identifiable assets acquired, liabilities assumed, including any contingent
consideration, and any noncontrolling interest in the acquiree to properly allocate purchase price to the individual assets acquired
and liabilities assumed. The allocation of the purchase price utilizes significant estimates in determining the fair values of identifiable
assets acquired and liabilities assumed, especially with respect to intangible assets. The significant estimates and assumptions
include the timing and amount of forecasted revenues and cash flows, anticipated growth rates, client attrition rates, the discount
rate reflecting the risk inherent in future cash flows and the determination of useful lives for finite-lived assets.
We exercise judgment to allocate goodwill to the reporting units expected to benefit from each business combination.
Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These
events or circumstances could include a significant change in the business climate, regulatory environment, established business
plans, operating performance indicators or competition. Evaluation of goodwill for impairment requires judgment, including the
identification of reporting units, assignment of assets, liabilities and goodwill to reporting units and determination of the fair value
of each reporting unit.
We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash
flow analysis, and a market approach, using market multiples. Under the income approach, we estimate projected future cash
flows, the timing of such cash flows and long-term growth rates, and determine the appropriate discount rate that reflects the risk
inherent in the projected future cash flows. The discount rate used is based on our weighted-average cost of capital and may be
adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s
ability to execute on the projected future cash flows. Under the market approach, we estimate fair value based on market multiples
of revenues and earnings derived from comparable publicly-traded companies with characteristics similar to the reporting unit.
The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market
conditions and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value
for each reporting unit.
We also evaluate indefinite-lived intangible assets for impairment at least annually, or as circumstances warrant. Our 2019
qualitative assessment included the review of relevant macroeconomic factors and entity-specific qualitative factors to determine
if it was more-likely-than-not that the fair value of our indefinite-lived intangible assets was below carrying value.
Based on our most recent evaluation of goodwill and indefinite-lived intangible assets performed during the fourth quarter
of 2019, we concluded that the goodwill and indefinite-lived intangible asset balances in each of our reporting units were not at
risk of impairment. As of December 31, 2019, our goodwill and indefinite-lived intangible asset balances were $3,979 million
and $72 million, respectively.
We review our finite-lived assets, including our finite-lived intangible assets, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset group may not be recoverable. We recognize an impairment loss
when the sum of the undiscounted expected future cash flows is less than the carrying amount of such asset groups. The impairment
loss is determined as the amount by which the carrying amount of the asset group exceeds its fair value. Assessing the fair value
of asset groups involves significant estimates and assumptions including estimation of future cash flows, the timing of such cash
flows and discount rates reflecting the risk inherent in future cash flows.
Contingencies. Loss contingencies are recorded as liabilities when a loss is considered probable and the amount can be
reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but
instead disclose the nature and amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made.
Significant judgment is required in the determination of whether an exposure is considered probable and reasonably estimable.
Our judgments are subjective and based on the information available from the status of the legal or regulatory proceedings, the
merits of our defenses and consultation with in-house and outside legal counsel. As additional information becomes available, we
reassess any potential liability related to any pending litigation and may revise our estimates. Such revisions in estimates of any
potential liabilities could have a material impact on our results of operations and financial position.
Recently Adopted and New Accounting Pronouncements
See Note 1 to our consolidated financial statements for additional information.
Forward Looking Statements
The statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking statements
(within the meaning of Section 21E of the Exchange Act) that involve risks and uncertainties. Such forward-looking statements
may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,”
“would,” “plan,” “intend,” “estimate,” “predict,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. From time to time,
we or our representatives have made or may make forward-looking statements, orally or in writing.
Such forward-looking statements may be included in various filings made by us with the SEC, in press releases or in oral
statements made by or with the approval of one of our authorized executive officers. These forward-looking statements, such as
statements regarding our anticipated future revenues or operating margin, earnings, capital expenditures, anticipated effective
income tax rate and income tax expense, liquidity, access to capital, capital return plan, investment strategies, cost management,
realignment program, 2020 Fit for Growth Plan, plans and objectives, including those related to our digital practice areas, investment
in our business, potential acquisitions, industry trends, client behaviors and trends, the outcome of regulatory and litigation matters,
the incremental accrual related to the India Defined Contribution Obligation and other statements regarding matters that are not
historical facts, are based on our current expectations, estimates and projections, management’s beliefs and certain assumptions
made by management, many of which, by their nature, are inherently uncertain and beyond our control. Actual results, performance,
achievements and outcomes could differ materially from the results expressed in, or anticipated or implied by, these forward-
looking statements. There are a number of important factors that could cause our results to differ materially from those indicated
by such forward-looking statements, including:
economic and political conditions globally and in particular in the markets in which our clients and operations are
concentrated;
our ability to attract, train and retain skilled professionals, including highly skilled technical personnel to satisfy client
demand and senior management to lead our business globally;
challenges related to growing our business organically as well as inorganically through acquisitions, and our ability to
achieve our targeted growth rates;
our ability to achieve our profitability and capital return goals;
our ability to successfully implement our 2020 Fit for Growth Plan and achieve the anticipated benefits from the plan;
our ability to meet specified service levels or milestones required by certain of our contracts;
intense and evolving competition and significant technological advances that our service offerings must keep pace
with in the rapidly changing markets we compete in;
•
•
•
•
•
•
•
32
33
Table of Contents
Table of Contents
Revenue Recognition. Revenues related to fixed-price contracts for application development and systems integration services,
consulting or other technology services are recognized as the service is performed using the cost to cost method, under which the
total value of revenues is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total
expected labor costs. Revenues related to fixed-price application maintenance, testing and business process services are recognized
using the cost to cost method, if the right to invoice is not representative of the value being delivered. The cost to cost method
requires estimation of future costs, which is updated as the project progresses to reflect the latest available information. Such
estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision in estimates is reflected
in the financial reporting period in which the change in estimate becomes known. Net changes in estimates of such future costs
and contract losses were immaterial to the consolidated results of operations for the periods presented.
Income Taxes. Determining the consolidated provision for income tax expense, deferred income tax assets (and related
valuation allowance, if any) and liabilities requires significant judgment. We are required to calculate and provide for income taxes
in each of the jurisdictions where we operate. Changes in the geographic mix of income before taxes or estimated level of annual
pre-tax income can affect our overall effective income tax rate. In addition, transactions between our affiliated entities are arranged
in accordance with applicable transfer pricing laws, regulations and relevant guidelines. As a result, and due to the interpretive
nature of certain aspects of these laws and guidelines, we have pending applications for APAs before the taxing authorities in some
of our most significant jurisdictions. It could take years for the relevant taxing authorities to negotiate and conclude these
applications. The consolidated provision for income taxes may change period to period based on changes in facts and circumstances,
such as settlements of income tax audits or finalization of our applications for APAs.
Our provision for income taxes also includes the impact of reserves established for uncertain income tax positions, as well
as the related interest, which may require us to apply judgment to complex issues and may require an extended period of time to
resolve. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final
outcome of these matters will not differ from our recorded amounts. We adjust these reserves in light of changing facts and
circumstances, such as the closing of a tax audit. To the extent that the final outcome of these matters differs from the amounts
recorded, such differences will impact the provision for income taxes in the period in which such determination is made.
Business Combinations, Goodwill and Intangible Assets. Goodwill and intangible assets, including indefinite-lived intangible
assets, arise from the accounting for business combinations. We account for business combinations using the acquisition method
which requires us to estimate the fair value of identifiable assets acquired, liabilities assumed, including any contingent
consideration, and any noncontrolling interest in the acquiree to properly allocate purchase price to the individual assets acquired
and liabilities assumed. The allocation of the purchase price utilizes significant estimates in determining the fair values of identifiable
assets acquired and liabilities assumed, especially with respect to intangible assets. The significant estimates and assumptions
include the timing and amount of forecasted revenues and cash flows, anticipated growth rates, client attrition rates, the discount
rate reflecting the risk inherent in future cash flows and the determination of useful lives for finite-lived assets.
We exercise judgment to allocate goodwill to the reporting units expected to benefit from each business combination.
Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These
events or circumstances could include a significant change in the business climate, regulatory environment, established business
plans, operating performance indicators or competition. Evaluation of goodwill for impairment requires judgment, including the
identification of reporting units, assignment of assets, liabilities and goodwill to reporting units and determination of the fair value
of each reporting unit.
We estimate the fair value of our reporting units using a combination of an income approach, utilizing a discounted cash
flow analysis, and a market approach, using market multiples. Under the income approach, we estimate projected future cash
flows, the timing of such cash flows and long-term growth rates, and determine the appropriate discount rate that reflects the risk
inherent in the projected future cash flows. The discount rate used is based on our weighted-average cost of capital and may be
adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s
ability to execute on the projected future cash flows. Under the market approach, we estimate fair value based on market multiples
of revenues and earnings derived from comparable publicly-traded companies with characteristics similar to the reporting unit.
The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market
conditions and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value
for each reporting unit.
We also evaluate indefinite-lived intangible assets for impairment at least annually, or as circumstances warrant. Our 2019
qualitative assessment included the review of relevant macroeconomic factors and entity-specific qualitative factors to determine
if it was more-likely-than-not that the fair value of our indefinite-lived intangible assets was below carrying value.
Based on our most recent evaluation of goodwill and indefinite-lived intangible assets performed during the fourth quarter
of 2019, we concluded that the goodwill and indefinite-lived intangible asset balances in each of our reporting units were not at
risk of impairment. As of December 31, 2019, our goodwill and indefinite-lived intangible asset balances were $3,979 million
and $72 million, respectively.
We review our finite-lived assets, including our finite-lived intangible assets, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset group may not be recoverable. We recognize an impairment loss
when the sum of the undiscounted expected future cash flows is less than the carrying amount of such asset groups. The impairment
loss is determined as the amount by which the carrying amount of the asset group exceeds its fair value. Assessing the fair value
of asset groups involves significant estimates and assumptions including estimation of future cash flows, the timing of such cash
flows and discount rates reflecting the risk inherent in future cash flows.
Contingencies. Loss contingencies are recorded as liabilities when a loss is considered probable and the amount can be
reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but
instead disclose the nature and amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made.
Significant judgment is required in the determination of whether an exposure is considered probable and reasonably estimable.
Our judgments are subjective and based on the information available from the status of the legal or regulatory proceedings, the
merits of our defenses and consultation with in-house and outside legal counsel. As additional information becomes available, we
reassess any potential liability related to any pending litigation and may revise our estimates. Such revisions in estimates of any
potential liabilities could have a material impact on our results of operations and financial position.
Recently Adopted and New Accounting Pronouncements
See Note 1 to our consolidated financial statements for additional information.
Forward Looking Statements
The statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking statements
(within the meaning of Section 21E of the Exchange Act) that involve risks and uncertainties. Such forward-looking statements
may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,”
“would,” “plan,” “intend,” “estimate,” “predict,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. From time to time,
we or our representatives have made or may make forward-looking statements, orally or in writing.
Such forward-looking statements may be included in various filings made by us with the SEC, in press releases or in oral
statements made by or with the approval of one of our authorized executive officers. These forward-looking statements, such as
statements regarding our anticipated future revenues or operating margin, earnings, capital expenditures, anticipated effective
income tax rate and income tax expense, liquidity, access to capital, capital return plan, investment strategies, cost management,
realignment program, 2020 Fit for Growth Plan, plans and objectives, including those related to our digital practice areas, investment
in our business, potential acquisitions, industry trends, client behaviors and trends, the outcome of regulatory and litigation matters,
the incremental accrual related to the India Defined Contribution Obligation and other statements regarding matters that are not
historical facts, are based on our current expectations, estimates and projections, management’s beliefs and certain assumptions
made by management, many of which, by their nature, are inherently uncertain and beyond our control. Actual results, performance,
achievements and outcomes could differ materially from the results expressed in, or anticipated or implied by, these forward-
looking statements. There are a number of important factors that could cause our results to differ materially from those indicated
by such forward-looking statements, including:
•
•
•
•
•
•
•
economic and political conditions globally and in particular in the markets in which our clients and operations are
concentrated;
our ability to attract, train and retain skilled professionals, including highly skilled technical personnel to satisfy client
demand and senior management to lead our business globally;
challenges related to growing our business organically as well as inorganically through acquisitions, and our ability to
achieve our targeted growth rates;
our ability to achieve our profitability and capital return goals;
our ability to successfully implement our 2020 Fit for Growth Plan and achieve the anticipated benefits from the plan;
our ability to meet specified service levels or milestones required by certain of our contracts;
intense and evolving competition and significant technological advances that our service offerings must keep pace
with in the rapidly changing markets we compete in;
32
33
Table of Contents
•
•
•
•
•
•
•
•
•
legal, reputational and financial risks if we fail to protect client and/or Cognizant data from security breaches or
cyberattacks;
the effectiveness of our business continuity and disaster recovery plans and the potential that our global delivery capacity
could be impacted;
restrictions on visas, in particular in the United States, United Kingdom and European Union, or immigration more
generally, which may affect our ability to compete for and provide services to our clients;
risks related to anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing,
both of which could impair our ability to serve our clients;
risks related to complying with the numerous and evolving legal and regulatory requirements to which we are subject
in the many jurisdictions in which we operate;
potential changes in tax laws, or in their interpretation or enforcement, failure by us to adapt our corporate structure
and intercompany arrangements to achieve global tax efficiencies or adverse outcomes of tax audits, investigations or
proceedings;
potential exposure to litigation and legal claims in the conduct of our business;
potential significant expense that would occur if we change our intent not to repatriate Indian accumulated
undistributed earnings; and
the factors set forth in Part I, in the section entitled “Item 1A. Risk Factors” in this report.
You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including
this report in the sections titled “Part I, Item 1. Business,” “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under
applicable securities laws.
Table of Contents
Glossary
Defined Term
Definition
Adjusted Diluted EPS
Adjusted diluted earnings per share
Artificial Intelligence
Advanced Pricing Agreements
Accounting Standards Codification
Accelerated Stock Repurchase
Accounting Standards Update
Advanced Technology Group, Inc.
Bolder Healthcare Solutions
Brilliant Service Co., Ltd.
Union Budget of India for 2020-2021
Constant Currency
Cloud Computing Arrangement
Contino Holdings Inc.
Madras High Court
Consumer Price Index
AI
APAs
ASC
ASR
ASU
ATG
Bolder
Brilliant
Budget
CC
CCA
Contino
Court
CPI
DOJ
DSO
EPS
EU
FASB
FCPA
GAAP
Goodwin
HR
IP
ISDA
IoT
IT
ITD
MAT
Mustache
Nasdaq
Netcentric
Credit Agreement
Credit agreement with a commercial bank syndicate dated November 5, 2018
Our principal operating subsidiary in India
An ongoing dispute with a healthcare client related to a large volume-based contract
CTS India
Customer Dispute
Division Bench
DevOps
Division Bench of the Madras High Court
Agile relationship between development and IT operations
United States Department of Justice
Days Sales Outstanding
Earnings Per Share
European Union
Exchange Act
Securities Exchange Act of 1934, as amended
Executive Transition Costs
Costs associated with our CEO transition and the departure of our President
India Defined Contribution
Obligation
India Tax Law
Certain statutory defined contribution obligations of employees and employers in India
New tax regime enacted by the Government of India effective April 1, 2019
Financial Accounting Standards Board
Foreign Corrupt Practices Act
Generally Accepted Accounting Principles
Goodwin Procter LLP
Human Resources
Intellectual Property
International Swaps and Derivatives Association
Internet of Things
Information Technology
Indian Income Tax Department
Minimum Alternative Tax
Mustache, LLC
Nasdaq Global Select Market
Netcentric AG
34
35
New Revenue Standard
ASC Topic 606 "Revenue from Contracts with Customers"
Table of Contents
cyberattacks;
could be impacted;
•
•
•
•
•
•
•
•
•
legal, reputational and financial risks if we fail to protect client and/or Cognizant data from security breaches or
the effectiveness of our business continuity and disaster recovery plans and the potential that our global delivery capacity
restrictions on visas, in particular in the United States, United Kingdom and European Union, or immigration more
generally, which may affect our ability to compete for and provide services to our clients;
risks related to anti-outsourcing legislation, if adopted, and negative perceptions associated with offshore outsourcing,
both of which could impair our ability to serve our clients;
risks related to complying with the numerous and evolving legal and regulatory requirements to which we are subject
in the many jurisdictions in which we operate;
potential changes in tax laws, or in their interpretation or enforcement, failure by us to adapt our corporate structure
and intercompany arrangements to achieve global tax efficiencies or adverse outcomes of tax audits, investigations or
proceedings;
potential exposure to litigation and legal claims in the conduct of our business;
potential significant expense that would occur if we change our intent not to repatriate Indian accumulated
undistributed earnings; and
the factors set forth in Part I, in the section entitled “Item 1A. Risk Factors” in this report.
You are advised to consult any further disclosures we make on related subjects in the reports we file with the SEC, including
this report in the sections titled “Part I, Item 1. Business,” “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under
applicable securities laws.
Table of Contents
Glossary
Defined Term
Definition
Adjusted Diluted EPS
Adjusted diluted earnings per share
AI
APAs
ASC
ASR
ASU
ATG
Bolder
Brilliant
Budget
CC
CCA
Contino
Court
CPI
Artificial Intelligence
Advanced Pricing Agreements
Accounting Standards Codification
Accelerated Stock Repurchase
Accounting Standards Update
Advanced Technology Group, Inc.
Bolder Healthcare Solutions
Brilliant Service Co., Ltd.
Union Budget of India for 2020-2021
Constant Currency
Cloud Computing Arrangement
Contino Holdings Inc.
Madras High Court
Consumer Price Index
Credit Agreement
Credit agreement with a commercial bank syndicate dated November 5, 2018
CTS India
Customer Dispute
Division Bench
DevOps
DOJ
DSO
EPS
EU
Our principal operating subsidiary in India
An ongoing dispute with a healthcare client related to a large volume-based contract
Division Bench of the Madras High Court
Agile relationship between development and IT operations
United States Department of Justice
Days Sales Outstanding
Earnings Per Share
European Union
Exchange Act
Securities Exchange Act of 1934, as amended
Executive Transition Costs
Costs associated with our CEO transition and the departure of our President
FASB
FCPA
GAAP
Goodwin
HR
Financial Accounting Standards Board
Foreign Corrupt Practices Act
Generally Accepted Accounting Principles
Goodwin Procter LLP
Human Resources
India Defined Contribution
Obligation
Certain statutory defined contribution obligations of employees and employers in India
India Tax Law
New tax regime enacted by the Government of India effective April 1, 2019
IP
ISDA
IoT
IT
ITD
MAT
Mustache
Nasdaq
Netcentric
Intellectual Property
International Swaps and Derivatives Association
Internet of Things
Information Technology
Indian Income Tax Department
Minimum Alternative Tax
Mustache, LLC
Nasdaq Global Select Market
Netcentric AG
New Revenue Standard
ASC Topic 606 "Revenue from Contracts with Customers"
34
35
Table of Contents
New Lease Standard
ASC Topic 842 “Leases”
OECD
PSU
Organization for Economic Co-operation and Development
Performance Stock Units
Purchase Plan
Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase Plan, as amended
ROU
RSU
SaaSfocus
Samlink
SEC
SEZs
SLP
Softvision
Tax Reform Act
Term Loan
TMG
Top Tier
Zenith
Zone
Right of Use
Restricted Stock Units
SaaSforce Consulting Private Limited
Oy Samlink Ab
United States Securities and Exchange Commission
Special Economic Zones
Special Leave Petition
Softvision, LLC
Tax Cuts and Jobs Act
Unsecured term loan
TMG Health, Inc.
Top Tier Consulting
Zenith Technologies Limited
Zone Limited
2009 Incentive Plan
2017 Incentive Plan
Cognizant Technology Solutions Corporation Amended and Restated 2009 Incentive
Compensation Plan
Cognizant Technology Solutions Corporation 2017 Incentive Award Plan
Table of Contents
Foreign Currency Risk
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to foreign currency exchange rate risk in the ordinary course of doing business as we transact or hold a
portion of our funds in foreign currencies, particularly the Indian rupee. Additionally, the United Kingdom's exit from the European
Union and its effect on the British pound may subject us to increased volatility in foreign currency exchange rate movements.
Accordingly, we periodically evaluate the need for hedging strategies, including the use of derivative financial instruments, to
mitigate the effect of foreign currency exchange rate fluctuations and expect to continue to use such instruments in the future to
reduce foreign currency exposure to appreciation or depreciation in the value of certain foreign currencies. All hedging transactions
are authorized and executed pursuant to regularly reviewed policies and procedures.
Revenues from our clients in the United Kingdom, Continental Europe and Rest of World represented 7.8%, 10.1% and
6.3%, respectively, of our 2019 revenues, and are typically denominated in currencies other than the U.S. dollar. Accordingly, our
operating results may be affected by fluctuations in the exchange rates, primarily the British pound and the Euro, as compared to
the U.S. dollar.
A significant portion of our costs in India are denominated in the Indian rupee, representing approximately 20.7% of our
global operating costs during 2019, and are subject to foreign currency exchange rate fluctuations. These foreign currency exchange
rate fluctuations have an impact on our results of operations.
We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of certain Indian
rupee denominated payments in India. These U.S. dollar / Indian rupee hedges are intended to partially offset the impact of
movement of exchange rates on future operating costs. As of December 31, 2019, the notional value and weighted average contract
rates of these contracts were as follows:
2020
2021
Total
Notional Value
(in millions)
Weighted Average
Contract Rate (Indian
rupee to U.S. dollar)
$
$
1,505
883
2,388
74.1
76.5
75.0
As of December 31, 2019, the net unrealized gain on our outstanding foreign exchange forward contracts designated as cash
flow hedges was $31 million. Based upon a sensitivity analysis at December 31, 2019, which estimates the fair value of the
contracts based upon market exchange rate fluctuations, a 10.0% change in the foreign currency exchange rate against the U.S.
dollar with all other variables held constant would have resulted in a change in the fair value of our foreign exchange forward
contracts designated as cash flow hedges of approximately $232 million.
A portion of our balance sheet is exposed to foreign currency exchange rate fluctuations, which may result in non-operating
foreign currency exchange gains or losses upon remeasurement. In 2019, we reported foreign currency exchange losses, exclusive
of hedging gains, of approximately $73 million, which were primarily attributed to the remeasurement of net monetary assets and
liabilities denominated in currencies other than the functional currencies of our subsidiaries. As of December 31, 2019, we had
$2,414 million in cash, cash equivalents and short-term investments denominated in Indian rupees. Based upon a sensitivity
analysis, a 10.0% change in the Indian rupee exchange rate against the U.S. dollar, with all other variables held constant, would
have resulted in a change in the U.S. dollar reported value of these balances and a corresponding non-operating foreign currency
exchange gain or loss of approximately $244 million.
We use foreign exchange forward contracts to provide an economic hedge against balance sheet exposure to certain monetary
assets and liabilities denominated in currencies other than the functional currency of the subsidiary. We entered into a series of
foreign exchange forward contracts scheduled to mature in 2020. At December 31, 2019, the notional value of these outstanding
contracts was $702 million and the net unrealized gain was $2 million. Based upon a sensitivity analysis of our foreign exchange
forward contracts at December 31, 2019, which estimates the fair value of the contracts based upon market exchange rate
fluctuations, a 10.0% change in the foreign currency exchange rate against the U.S. dollar with all other variables held constant
would have resulted in a change in the fair value of approximately $18 million.
36
37
Purchase Plan
Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase Plan, as amended
OECD
PSU
ROU
RSU
SaaSfocus
Samlink
SEC
SEZs
SLP
Softvision
Tax Reform Act
Term Loan
TMG
Top Tier
Zenith
Zone
2009 Incentive Plan
2017 Incentive Plan
SaaSforce Consulting Private Limited
Oy Samlink Ab
United States Securities and Exchange Commission
Performance Stock Units
Right of Use
Restricted Stock Units
Special Economic Zones
Special Leave Petition
Softvision, LLC
Tax Cuts and Jobs Act
Unsecured term loan
TMG Health, Inc.
Top Tier Consulting
Zenith Technologies Limited
Zone Limited
Compensation Plan
Cognizant Technology Solutions Corporation Amended and Restated 2009 Incentive
Cognizant Technology Solutions Corporation 2017 Incentive Award Plan
Table of Contents
Table of Contents
New Lease Standard
ASC Topic 842 “Leases”
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Organization for Economic Co-operation and Development
Foreign Currency Risk
We are exposed to foreign currency exchange rate risk in the ordinary course of doing business as we transact or hold a
portion of our funds in foreign currencies, particularly the Indian rupee. Additionally, the United Kingdom's exit from the European
Union and its effect on the British pound may subject us to increased volatility in foreign currency exchange rate movements.
Accordingly, we periodically evaluate the need for hedging strategies, including the use of derivative financial instruments, to
mitigate the effect of foreign currency exchange rate fluctuations and expect to continue to use such instruments in the future to
reduce foreign currency exposure to appreciation or depreciation in the value of certain foreign currencies. All hedging transactions
are authorized and executed pursuant to regularly reviewed policies and procedures.
Revenues from our clients in the United Kingdom, Continental Europe and Rest of World represented 7.8%, 10.1% and
6.3%, respectively, of our 2019 revenues, and are typically denominated in currencies other than the U.S. dollar. Accordingly, our
operating results may be affected by fluctuations in the exchange rates, primarily the British pound and the Euro, as compared to
the U.S. dollar.
A significant portion of our costs in India are denominated in the Indian rupee, representing approximately 20.7% of our
global operating costs during 2019, and are subject to foreign currency exchange rate fluctuations. These foreign currency exchange
rate fluctuations have an impact on our results of operations.
We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of certain Indian
rupee denominated payments in India. These U.S. dollar / Indian rupee hedges are intended to partially offset the impact of
movement of exchange rates on future operating costs. As of December 31, 2019, the notional value and weighted average contract
rates of these contracts were as follows:
2020
2021
Total
Notional Value
(in millions)
Weighted Average
Contract Rate (Indian
rupee to U.S. dollar)
$
$
1,505
883
2,388
74.1
76.5
75.0
As of December 31, 2019, the net unrealized gain on our outstanding foreign exchange forward contracts designated as cash
flow hedges was $31 million. Based upon a sensitivity analysis at December 31, 2019, which estimates the fair value of the
contracts based upon market exchange rate fluctuations, a 10.0% change in the foreign currency exchange rate against the U.S.
dollar with all other variables held constant would have resulted in a change in the fair value of our foreign exchange forward
contracts designated as cash flow hedges of approximately $232 million.
A portion of our balance sheet is exposed to foreign currency exchange rate fluctuations, which may result in non-operating
foreign currency exchange gains or losses upon remeasurement. In 2019, we reported foreign currency exchange losses, exclusive
of hedging gains, of approximately $73 million, which were primarily attributed to the remeasurement of net monetary assets and
liabilities denominated in currencies other than the functional currencies of our subsidiaries. As of December 31, 2019, we had
$2,414 million in cash, cash equivalents and short-term investments denominated in Indian rupees. Based upon a sensitivity
analysis, a 10.0% change in the Indian rupee exchange rate against the U.S. dollar, with all other variables held constant, would
have resulted in a change in the U.S. dollar reported value of these balances and a corresponding non-operating foreign currency
exchange gain or loss of approximately $244 million.
We use foreign exchange forward contracts to provide an economic hedge against balance sheet exposure to certain monetary
assets and liabilities denominated in currencies other than the functional currency of the subsidiary. We entered into a series of
foreign exchange forward contracts scheduled to mature in 2020. At December 31, 2019, the notional value of these outstanding
contracts was $702 million and the net unrealized gain was $2 million. Based upon a sensitivity analysis of our foreign exchange
forward contracts at December 31, 2019, which estimates the fair value of the contracts based upon market exchange rate
fluctuations, a 10.0% change in the foreign currency exchange rate against the U.S. dollar with all other variables held constant
would have resulted in a change in the fair value of approximately $18 million.
36
37
Table of Contents
The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with
the Company’s independent registered public accounting firm and representatives of management to review accounting, financial
reporting, internal control and audit matters, as well as the nature and extent of the audit effort.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended
and is a process designed by, or under the supervision of, our chief executive and chief financial officers and effected by our Board
of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of our management and directors; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2019. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on its evaluation, our management has concluded that, as of December 31, 2019, our internal control over financial
reporting was effective. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the financial
statements included in this annual report, has issued an attestation report on our internal control over financial reporting, as stated
•
•
of our assets;
in their report which is included on page F-2.
Inherent Limitations of Internal Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B. Other Information
None.
Table of Contents
Interest Rate Risk
We have a Credit Agreement providing for a $750 million unsecured Term Loan and a $1,750 million unsecured revolving
credit facility, which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly
principal payments on the Term Loan.
The Credit Agreement requires interest to be paid, at our option, at either the ABR or the Eurocurrency Rate (each as defined
in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable
Margin is 0.875% with respect to Eurocurrency Rate loans and 0.00% with respect to ABR loans. Subsequently, the Applicable
Margin with respect to Eurocurrency Rate loans may range from 0.75% to 1.125%, depending on our public debt ratings (or, if
we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of
indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement). Under the Credit Agreement,
we are required to pay commitment fees on the unused portion of the revolving credit facility, which vary based on our public
debt ratings (or, if we have not received public debt ratings, on the Leverage Ratio). Thus, our debt exposes us to market risk from
changes in interest rates. We performed a sensitivity analysis to determine the effect of interest rate fluctuations on our interest
expense. A 10.0% change in interest rates, with all other variables held constant, would have an immaterial effect on our reported
interest expense.
In addition, our held-to-maturity investment securities are subject to market risk from changes in interest rates. As of
December 31, 2019, the fair market value of our held-to-maturity portfolio was $287 million. As of December 31, 2019, a 10%
change in interest rates, with all other variables held constant, would have an immaterial effect on the fair market value of our
held-to-maturity investment securities. We typically invest in highly rated securities and our policy generally limits the amount
of credit exposure to any one issuer. Our investment policy requires investments to be investment grade with the objective of
minimizing the potential risk of principal loss.
Information provided by the sensitivity analysis of foreign currency risk and interest rate risk does not necessarily represent
the actual changes that would occur under normal market conditions.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A
list of the financial statements filed herewith is found in Part IV, “Item 15. Exhibits, Financial Statements and Financial
Statement Schedule.”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our chief executive officer and our chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of December 31, 2019. Based on this evaluation, our chief executive officer
and our chief financial officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934, as amended) that occurred during the fiscal quarter ended December 31, 2019 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Responsibility for Financial Statements
Our management is responsible for the integrity and objectivity of all information presented in this annual report. The
consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States
of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated
financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the
Company’s financial position and results of operations.
38
39
Table of Contents
The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with
the Company’s independent registered public accounting firm and representatives of management to review accounting, financial
reporting, internal control and audit matters, as well as the nature and extent of the audit effort.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended
and is a process designed by, or under the supervision of, our chief executive and chief financial officers and effected by our Board
of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2019. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on its evaluation, our management has concluded that, as of December 31, 2019, our internal control over financial
reporting was effective. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the financial
statements included in this annual report, has issued an attestation report on our internal control over financial reporting, as stated
in their report which is included on page F-2.
Inherent Limitations of Internal Controls
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Item 9B. Other Information
None.
Table of Contents
Interest Rate Risk
We have a Credit Agreement providing for a $750 million unsecured Term Loan and a $1,750 million unsecured revolving
credit facility, which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly
principal payments on the Term Loan.
The Credit Agreement requires interest to be paid, at our option, at either the ABR or the Eurocurrency Rate (each as defined
in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable
Margin is 0.875% with respect to Eurocurrency Rate loans and 0.00% with respect to ABR loans. Subsequently, the Applicable
Margin with respect to Eurocurrency Rate loans may range from 0.75% to 1.125%, depending on our public debt ratings (or, if
we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of
indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement). Under the Credit Agreement,
we are required to pay commitment fees on the unused portion of the revolving credit facility, which vary based on our public
debt ratings (or, if we have not received public debt ratings, on the Leverage Ratio). Thus, our debt exposes us to market risk from
changes in interest rates. We performed a sensitivity analysis to determine the effect of interest rate fluctuations on our interest
expense. A 10.0% change in interest rates, with all other variables held constant, would have an immaterial effect on our reported
interest expense.
In addition, our held-to-maturity investment securities are subject to market risk from changes in interest rates. As of
December 31, 2019, the fair market value of our held-to-maturity portfolio was $287 million. As of December 31, 2019, a 10%
change in interest rates, with all other variables held constant, would have an immaterial effect on the fair market value of our
held-to-maturity investment securities. We typically invest in highly rated securities and our policy generally limits the amount
of credit exposure to any one issuer. Our investment policy requires investments to be investment grade with the objective of
minimizing the potential risk of principal loss.
Information provided by the sensitivity analysis of foreign currency risk and interest rate risk does not necessarily represent
the actual changes that would occur under normal market conditions.
Item 8. Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A
list of the financial statements filed herewith is found in Part IV, “Item 15. Exhibits, Financial Statements and Financial
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Statement Schedule.”
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our chief executive officer and our chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of December 31, 2019. Based on this evaluation, our chief executive officer
and our chief financial officer concluded that, as of December 31, 2019, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934, as amended) that occurred during the fiscal quarter ended December 31, 2019 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Responsibility for Financial Statements
Our management is responsible for the integrity and objectivity of all information presented in this annual report. The
consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States
of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated
financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the
Company’s financial position and results of operations.
38
39
Table of Contents
Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance
Item 15. Exhibits, Financial Statement Schedules
PART III
PART IV
The information relating to our executive officers in response to this item is contained in part under the caption “Our Executive
Officers” in Part I of this Annual Report on Form 10-K.
We have adopted a written code of ethics, entitled “Core Values and Code of Ethics,” that applies to all of our employees,
including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons
performing similar functions. We make available our code of ethics free of charge through our website which is located at
www.cognizant.com. We intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing
standards concerning any amendments to, or waivers from, any provision of our code of ethics.
(a)
(1) Consolidated Financial Statements.
Reference is made to the Index to Consolidated Financial Statements on Page F-1.
(2) Consolidated Financial Statement Schedule.
Reference is made to the Index to Financial Statement Schedule on Page F-1.
The remaining information required by this item will be included in our definitive proxy statement for the 2020 Annual
Meeting of Stockholders and is incorporated herein by reference to such proxy statement.
Schedules other than as listed above are omitted as not required or inapplicable or because the required information is
provided in the consolidated financial statements, including the notes thereto.
Item 11. Executive Compensation
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Number
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
(3) Exhibits.
EXHIBIT INDEX
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Item 14. Principal Accountant Fees and Services
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
8-K
000-24429
3.1
6/7/2018
8-K
000-24429
3.1
9/20/2018
S-4/A 333-101216
4.2
1/30/2003
Filed
Directors and Officers
10-Q
000-24429
10.1
8/7/2013
10.3†
Form of Amended and Restated Executive
10-K
000-24429
10.3
2/27/2018
3.1
3.2
4.1
4.2
Restated Certificate of Incorporation, dated
June 5, 2018
Amended and Restated Bylaws, as adopted
on September 24, 2018
Specimen Certificate for shares of Class A
common stock
Description of Capital Stock
10.1†
Form of Indemnification Agreement for
10.2†
Form of Amended and Restated Executive
Employment and Non-Disclosure, Non-
Competition, and Invention Assignment
Agreement, between the Company and each
of the following Executive Officers: Brian
Humphries, Karen McLoughlin, Matthew
Friedrich, Becky Schmitt, Dharmendra
Kumar Sinha and Robert Telesmanic
Employment and Non-Disclosure, Non-
Competition, and Invention Assignment
Agreement, between the Company and each
of the following Executive Officers:
Malcolm Frank and Santosh Thomas
Offer Letter, by and between the Company
and Brian Humphries, acknowledged and
agreed November 30, 2018
2004 Employee Stock Purchase Plan (as
amended and restated effective as of
February 27, 2018)
Form of Stock Option Certificate
Cognizant Technology Solutions
Corporation Amended and Restated 2009
Incentive Compensation Plan, effective
March 9, 2015
Form of Cognizant Technology Solutions
Corporation Stock Option Agreement
Form of Cognizant Technology Solutions
Corporation Notice of Grant of Stock
Option
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
10-K
000-24429
10.4
2/26/2013
10-K
000-24429
10.4
2/19/2019
8-K
10-Q
000-24429
000-24429
10.1
10.1
6/7/2018
11/8/2004
10-Q
000-24429
10.1
5/4/2015
8-K
000-24429
10.1
7/6/2009
8-K
000-24429
10.2
7/6/2009
40
41
Table of Contents
Table of Contents
PART III
PART IV
Item 10. Directors, Executive Officers and Corporate Governance
Item 15. Exhibits, Financial Statement Schedules
The information relating to our executive officers in response to this item is contained in part under the caption “Our Executive
Officers” in Part I of this Annual Report on Form 10-K.
We have adopted a written code of ethics, entitled “Core Values and Code of Ethics,” that applies to all of our employees,
including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons
performing similar functions. We make available our code of ethics free of charge through our website which is located at
www.cognizant.com. We intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing
standards concerning any amendments to, or waivers from, any provision of our code of ethics.
(a)
(1) Consolidated Financial Statements.
Reference is made to the Index to Consolidated Financial Statements on Page F-1.
(2) Consolidated Financial Statement Schedule.
Reference is made to the Index to Financial Statement Schedule on Page F-1.
(3) Exhibits.
The remaining information required by this item will be included in our definitive proxy statement for the 2020 Annual
Meeting of Stockholders and is incorporated herein by reference to such proxy statement.
Schedules other than as listed above are omitted as not required or inapplicable or because the required information is
provided in the consolidated financial statements, including the notes thereto.
Item 11. Executive Compensation
EXHIBIT INDEX
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Number
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
Item 14. Principal Accountant Fees and Services
The information required by this item will be included in our definitive proxy statement for the 2020 Annual Meeting of
Stockholders and is incorporated herein by reference to such proxy statement.
3.1
3.2
4.1
4.2
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
Restated Certificate of Incorporation, dated
June 5, 2018
Amended and Restated Bylaws, as adopted
on September 24, 2018
Specimen Certificate for shares of Class A
common stock
Description of Capital Stock
Form of Indemnification Agreement for
Directors and Officers
Form of Amended and Restated Executive
Employment and Non-Disclosure, Non-
Competition, and Invention Assignment
Agreement, between the Company and each
of the following Executive Officers: Brian
Humphries, Karen McLoughlin, Matthew
Friedrich, Becky Schmitt, Dharmendra
Kumar Sinha and Robert Telesmanic
Form of Amended and Restated Executive
Employment and Non-Disclosure, Non-
Competition, and Invention Assignment
Agreement, between the Company and each
of the following Executive Officers:
Malcolm Frank and Santosh Thomas
Offer Letter, by and between the Company
and Brian Humphries, acknowledged and
agreed November 30, 2018
2004 Employee Stock Purchase Plan (as
amended and restated effective as of
February 27, 2018)
Form of Stock Option Certificate
Cognizant Technology Solutions
Corporation Amended and Restated 2009
Incentive Compensation Plan, effective
March 9, 2015
Form of Cognizant Technology Solutions
Corporation Stock Option Agreement
Form of Cognizant Technology Solutions
Corporation Notice of Grant of Stock
Option
8-K
000-24429
3.1
6/7/2018
8-K
000-24429
3.1
9/20/2018
S-4/A 333-101216
4.2
1/30/2003
10-Q
000-24429
10.1
8/7/2013
Filed
10-K
000-24429
10.3
2/27/2018
10-K
000-24429
10.4
2/26/2013
10-K
000-24429
10.4
2/19/2019
8-K
10-Q
000-24429
000-24429
10.1
10.1
6/7/2018
11/8/2004
10-Q
000-24429
10.1
5/4/2015
8-K
000-24429
10.1
7/6/2009
8-K
000-24429
10.2
7/6/2009
40
41
Table of Contents
Number
101.INS
Inline XBRL Instance Document - the
instance document does not appear in the
Interactive Data File because its XBRL tags
are embedded within the Inline XBRL
document.
Document
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension
Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension
Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label
Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension
Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit
101)
(3) of Form 10-K.
Item 16. Form 10-K Summary
None.
Filed
Filed
Filed
Filed
Filed
Filed
Filed
†
A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)
Table of Contents
Number
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
10.19†
10.20†
10.21
10.22
10.23
21.1
23.1
31.1
31.2
32.1
32.2
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
8-K
000-24429
10.3
7/6/2009
8-K
000-24429
10.4
7/6/2009
8-K
000-24429
10.5
7/6/2009
8-K
000-24429
10.6
7/6/2009
8-K
000-24429
10.7
7/6/2009
8-K
000-24429
10.8
7/6/2009
8-K
000-24429
10.1
6/7/2017
10-Q
000-24429
10.2
8/3/2017
10-Q
000-24429
10.3
8/3/2017
10-Q
000-24429
10.4
8/3/2017
10-Q
8-K
000-24429
000-24429
10.5
10.1
8/3/2017
3/14/2017
8-K
000-24429
10.1
11/9/2018
10-K
000-24429
10.27
2/19/2019
Form of Cognizant Technology Solutions
Corporation Restricted Stock Unit Award
Agreement Time-Based Vesting
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Time-Based Vesting
Form of Cognizant Technology Solutions
Corporation Restricted Stock Unit Award
Agreement Performance-Based Vesting
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Performance-Based Vesting
Form of Restricted Stock Unit Award
Agreement Non-Employee Director
Deferred Issuance
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Non-Employee Director
Deferred Issuance
Cognizant Technology Solutions
Corporation 2017 Incentive Award Plan
Form of Restricted Stock Unit Award Grant
Notice
Form of Performance-Based Restricted
Stock Unit Award Grant Notice
Form of Restricted Stock Unit Award Grant
Notice
Form of Stock Option Grant Notice and
Stock Option Agreement
Form of Accelerated Stock Repurchase
Agreement
Credit Agreement, dated as of November 5,
2018, among Cognizant Technology
Solutions Corporation, Cognizant
Worldwide Limited, certain financial
institutions party thereto and JPMorgan
Chase Bank, N.A., as administrative agent.
Offer of Settlement, dated October 11, 2018,
by Cognizant Technology Solutions
Corporation to the U.S. Securities and
Exchange Commission
List of subsidiaries of the Company
Consent of PricewaterhouseCoopers LLP
Certification Pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (Chief Executive
Officer)
Certification Pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (Chief Financial Officer)
Certification Pursuant to 18 U.S.C.
Section 1350 (Chief Executive Officer)
Certification Pursuant to 18 U.S.C.
Section 1350 (Chief Financial Officer)
Filed
Filed
Filed
Filed
Furnished
Furnished
42
43
Table of Contents
Table of Contents
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
Number
101.INS
Exhibit Description
Form
File No.
Exhibit
Date
Filed or Furnished
Herewith
Incorporated by Reference
Inline XBRL Instance Document - the
instance document does not appear in the
Interactive Data File because its XBRL tags
are embedded within the Inline XBRL
document.
101.SCH Inline XBRL Taxonomy Extension Schema
Document
101.CAL Inline XBRL Taxonomy Extension
Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension
Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label
101.PRE
104
Linkbase Document
Inline XBRL Taxonomy Extension
Presentation Linkbase Document
Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit
101)
Filed
Filed
Filed
Filed
Filed
Filed
Filed
†
A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)
(3) of Form 10-K.
Item 16. Form 10-K Summary
None.
42
43
8-K
000-24429
10.3
7/6/2009
8-K
000-24429
10.4
7/6/2009
8-K
000-24429
10.5
7/6/2009
8-K
000-24429
10.6
7/6/2009
8-K
000-24429
10.7
7/6/2009
8-K
000-24429
10.8
7/6/2009
8-K
000-24429
10.1
6/7/2017
10-Q
000-24429
10.2
8/3/2017
10-Q
000-24429
10.3
8/3/2017
10-Q
000-24429
10.4
8/3/2017
10-Q
8-K
000-24429
000-24429
10.5
10.1
8/3/2017
3/14/2017
8-K
000-24429
10.1
11/9/2018
Number
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
Form of Cognizant Technology Solutions
Corporation Restricted Stock Unit Award
Agreement Time-Based Vesting
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Time-Based Vesting
Form of Cognizant Technology Solutions
Corporation Restricted Stock Unit Award
Agreement Performance-Based Vesting
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Performance-Based Vesting
Form of Restricted Stock Unit Award
Agreement Non-Employee Director
Deferred Issuance
Form of Cognizant Technology Solutions
Corporation Notice of Award of Restricted
Stock Units Non-Employee Director
Deferred Issuance
10.16†
Cognizant Technology Solutions
Corporation 2017 Incentive Award Plan
10.17†
Form of Restricted Stock Unit Award Grant
10.18†
Form of Performance-Based Restricted
Stock Unit Award Grant Notice
10.19†
Form of Restricted Stock Unit Award Grant
Notice
Notice
10.20†
Form of Stock Option Grant Notice and
Stock Option Agreement
10.21
10.22
Form of Accelerated Stock Repurchase
Agreement
Credit Agreement, dated as of November 5,
2018, among Cognizant Technology
Solutions Corporation, Cognizant
Worldwide Limited, certain financial
institutions party thereto and JPMorgan
Chase Bank, N.A., as administrative agent.
by Cognizant Technology Solutions
Corporation to the U.S. Securities and
Exchange Commission
List of subsidiaries of the Company
Consent of PricewaterhouseCoopers LLP
Certification Pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (Chief Executive
Officer)
Certification Pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as Adopted
Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (Chief Financial Officer)
Certification Pursuant to 18 U.S.C.
Section 1350 (Chief Executive Officer)
Certification Pursuant to 18 U.S.C.
Section 1350 (Chief Financial Officer)
21.1
23.1
31.1
31.2
32.1
32.2
10.23
Offer of Settlement, dated October 11, 2018,
10-K
000-24429
10.27
2/19/2019
Filed
Filed
Filed
Filed
Furnished
Furnished
Table of Contents
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
By:
/S/ BRIAN HUMPHRIES
Brian Humphries,
Chief Executive Officer
(Principal Executive Officer)
Date:
February 14, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule of Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017
F-47
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-9
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
/s/ ROBERT TELESMANIC
Robert Telesmanic
Controller and Chief Accounting Officer
(Principal Accounting Officer)
/s/ MICHAEL PATSALOS-FOX
Michael Patsalos-Fox
Chairman of the Board and Director
/s/ ZEIN ABDALLA
Zein Abdalla
Director
/s/ MAUREEN BREAKIRON-EVANS
Maureen Breakiron-Evans
Director
/s/ JOHN M. DINEEN
John M. Dineen
/s/ FRANCISCO D'SOUZA
Francisco D'Souza
/s/ JOHN N. FOX, JR.
John N. Fox, Jr.
/s/ JOHN E. KLEIN
John E. Klein
/s/ LEO S. MACKAY, JR.
Leo S. Mackay, Jr.
/s/ JOSEPH M. VELLI
Joseph M. Velli
/s/ SANDRA S. WIJNBERG
Sandra S. Wijnberg
Director
Director
Director
Director
Director
Director
Director
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
44
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Table of Contents
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
By:
/S/ BRIAN HUMPHRIES
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-9
Schedule of Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017
F-47
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
Brian Humphries,
Chief Executive Officer
(Principal Executive Officer)
Date:
February 14, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
/s/ ROBERT TELESMANIC
Robert Telesmanic
Controller and Chief Accounting Officer
(Principal Accounting Officer)
/s/ MICHAEL PATSALOS-FOX
Chairman of the Board and Director
/s/ MAUREEN BREAKIRON-EVANS
Director
Michael Patsalos-Fox
/s/ ZEIN ABDALLA
Zein Abdalla
Maureen Breakiron-Evans
/s/ JOHN M. DINEEN
John M. Dineen
/s/ JOHN N. FOX, JR.
John N. Fox, Jr.
/s/ JOHN E. KLEIN
John E. Klein
Director
Director
Director
Director
/s/ FRANCISCO D'SOUZA
Director
Francisco D'Souza
/s/ LEO S. MACKAY, JR.
Director
Leo S. Mackay, Jr.
/s/ JOSEPH M. VELLI
Joseph M. Velli
/s/ SANDRA S. WIJNBERG
Sandra S. Wijnberg
Director
Director
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
44
F-1
Table of Contents
Table of Contents
Report of Independent Registered Public Accounting Firm
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
To the Board of Directors and Stockholders of Cognizant Technology Solutions Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Cognizant Technology Solutions Corporation
and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations,
of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2019, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as
the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases
in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on
the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Expected Labor Costs to Complete for Certain Fixed-Price Contracts
As described in Notes 1 and 2 to the consolidated financial statements, fixed-price contracts comprised $6 billion of the Company’s
total revenues for the year ended December 31, 2019, which includes performance obligations where control is transferred over
time. For performance obligations where control is transferred over time, revenues are recognized based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the deliverables to be provided. Management recognizes revenues related to fixed-price
contracts for application development and systems integration services, consulting or other technology services as the service is
performed using the cost to cost method, under which the total value of revenues is recognized on the basis of the percentage that
each contract’s total labor cost to date bears to the total expected labor costs. The cost to cost method requires estimation of future
costs, which is updated as the project progresses to reflect the latest available information. Revenues related to fixed-price
application maintenance, testing and business process services are recognized based on management’s right to invoice for services
performed for contracts in which the invoicing is representative of the value being delivered. If management’s invoicing is not
consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described
above.
The principal considerations for our determination that performing procedures relating to expected labor costs to complete for
certain fixed-price contracts is a critical audit matter are the significant judgment used by management in developing total expected
labor costs to complete fixed-price contracts and the high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating audit evidence relating to total expected labor costs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process, including over the development of expected labor costs to complete fixed-price contracts. These
procedures also included, among others, evaluating and testing management’s process for developing total expected labor costs
for a sample of contracts, which included evaluating the reasonableness of the total expected labor cost assumptions used by
management. Evaluating the reasonableness of the assumptions related to the total expected labor costs involved assessing
management’s ability to reasonably develop total expected labor costs by (i) performing a comparison of actual labor costs incurred
with expected labor costs for similar completed projects and (ii) evaluating the timely identification of circumstances that may
warrant a modification to previous labor cost estimates, including actual labor costs in excess of estimates.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 14, 2020
We have served as the Company’s auditor since 1997.
F-2
F-3
Table of Contents
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Cognizant Technology Solutions Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Cognizant Technology Solutions Corporation
and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations,
of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2019, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as
the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
Basis for Opinions
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases
in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on
the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Expected Labor Costs to Complete for Certain Fixed-Price Contracts
As described in Notes 1 and 2 to the consolidated financial statements, fixed-price contracts comprised $6 billion of the Company’s
total revenues for the year ended December 31, 2019, which includes performance obligations where control is transferred over
time. For performance obligations where control is transferred over time, revenues are recognized based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the deliverables to be provided. Management recognizes revenues related to fixed-price
contracts for application development and systems integration services, consulting or other technology services as the service is
performed using the cost to cost method, under which the total value of revenues is recognized on the basis of the percentage that
each contract’s total labor cost to date bears to the total expected labor costs. The cost to cost method requires estimation of future
costs, which is updated as the project progresses to reflect the latest available information. Revenues related to fixed-price
application maintenance, testing and business process services are recognized based on management’s right to invoice for services
performed for contracts in which the invoicing is representative of the value being delivered. If management’s invoicing is not
consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described
above.
The principal considerations for our determination that performing procedures relating to expected labor costs to complete for
certain fixed-price contracts is a critical audit matter are the significant judgment used by management in developing total expected
labor costs to complete fixed-price contracts and the high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating audit evidence relating to total expected labor costs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process, including over the development of expected labor costs to complete fixed-price contracts. These
procedures also included, among others, evaluating and testing management’s process for developing total expected labor costs
for a sample of contracts, which included evaluating the reasonableness of the total expected labor cost assumptions used by
management. Evaluating the reasonableness of the assumptions related to the total expected labor costs involved assessing
management’s ability to reasonably develop total expected labor costs by (i) performing a comparison of actual labor costs incurred
with expected labor costs for similar completed projects and (ii) evaluating the timely identification of circumstances that may
warrant a modification to previous labor cost estimates, including actual labor costs in excess of estimates.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 14, 2020
We have served as the Company’s auditor since 1997.
F-2
F-3
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Table of Contents
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions, except par values)
Current assets:
Assets
Cash and cash equivalents
Short-term investments
Trade accounts receivable, net of allowances of $67 and $78, respectively
Other current assets
Total current assets
Property and equipment, net
Operating lease assets, net
Goodwill
Intangible assets, net
Deferred income tax assets, net
Long-term investments
Other noncurrent assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Deferred revenue
Short-term debt
Operating lease liabilities
Accrued expenses and other current liabilities
Total current liabilities
Deferred revenue, noncurrent
Operating lease liabilities, noncurrent
Deferred income tax liabilities, net
Long-term debt
Long-term income taxes payable
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (See Note 15)
Stockholders’ equity:
Preferred stock, $0.10 par value, 15.0 shares authorized, none issued
Class A common stock, $0.01 par value, 1,000 shares authorized, 548 and 577 shares issued
and outstanding at December 31, 2019 and 2018, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Total liabilities and stockholders’ equity
At December 31,
2019
2018
2,645
779
3,256
931
7,611
1,309
926
3,979
1,041
585
17
736
16,204
239
313
38
202
2,191
2,983
23
745
35
700
478
218
5,182
$
$
$
1,161
3,350
3,190
909
8,610
1,394
—
3,481
1,150
442
80
689
15,846
215
286
9
—
2,200
2,710
62
—
183
736
478
253
4,422
—
—
5
33
11,022
(38)
11,022
16,204
$
6
47
11,485
(114)
11,424
15,846
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Cost of revenues (exclusive of depreciation and amortization expense shown
Revenues
Operating expenses:
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Other income (expense), net:
Interest income
Interest expense
Other, net
Foreign currency exchange gains (losses), net
Total other income (expense), net
Income before provision for income taxes
Provision for income taxes
Income (loss) from equity method investments
Net income
Basic earnings per share
Diluted earnings per share
Year Ended December 31,
2019
2018
2017
$
16,783
$
16,125
$
14,810
10,634
2,972
217
507
2,453
176
(26)
(65)
5
90
2,543
(643)
(58)
1,842
3.30
3.29
559
1
560
9,838
3,007
19
460
2,801
177
(27)
(152)
(2)
(4)
2,797
(698)
2
2,101
3.61
3.60
582
2
584
9,152
2,697
72
408
2,481
133
(23)
67
(3)
174
2,655
(1,153)
2
1,504
2.54
2.53
593
2
595
$
$
$
$
$
$
$
$
$
Weighted average number of common shares outstanding—Basic
Dilutive effect of shares issuable under stock-based compensation plans
Weighted average number of common shares outstanding—Diluted
The accompanying notes are an integral part of the consolidated financial statements.
F-4
F-5
Table of Contents
Table of Contents
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Revenues
Operating expenses:
Cost of revenues (exclusive of depreciation and amortization expense shown
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Other income (expense), net:
Interest income
Interest expense
Foreign currency exchange gains (losses), net
Other, net
Total other income (expense), net
Income before provision for income taxes
Provision for income taxes
Income (loss) from equity method investments
Net income
Basic earnings per share
Diluted earnings per share
Weighted average number of common shares outstanding—Basic
Dilutive effect of shares issuable under stock-based compensation plans
Weighted average number of common shares outstanding—Diluted
Year Ended December 31,
2019
2018
2017
$
16,783
$
16,125
$
14,810
10,634
2,972
217
507
2,453
176
(26)
(65)
5
90
2,543
(643)
(58)
1,842
3.30
3.29
559
1
560
$
$
$
$
$
$
9,838
3,007
19
460
2,801
177
(27)
(152)
(2)
(4)
2,797
(698)
2
2,101
3.61
3.60
582
2
584
$
$
$
9,152
2,697
72
408
2,481
133
(23)
67
(3)
174
2,655
(1,153)
2
1,504
2.54
2.53
593
2
595
The accompanying notes are an integral part of the consolidated financial statements.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions, except par values)
Assets
At December 31,
2019
2018
$
$
Trade accounts receivable, net of allowances of $67 and $78, respectively
Liabilities and Stockholders’ Equity
16,204
15,846
$
$
$
$
Current assets:
Cash and cash equivalents
Short-term investments
Other current assets
Total current assets
Property and equipment, net
Operating lease assets, net
Goodwill
Intangible assets, net
Deferred income tax assets, net
Long-term investments
Other noncurrent assets
Total assets
Current liabilities:
Accounts payable
Deferred revenue
Short-term debt
Operating lease liabilities
Accrued expenses and other current liabilities
Total current liabilities
Deferred revenue, noncurrent
Operating lease liabilities, noncurrent
Deferred income tax liabilities, net
Long-term debt
Long-term income taxes payable
Other noncurrent liabilities
Total liabilities
Commitments and contingencies (See Note 15)
Stockholders’ equity:
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Total liabilities and stockholders’ equity
2,645
779
3,256
931
7,611
1,309
926
3,979
1,041
585
17
736
239
313
38
202
2,191
2,983
23
745
35
700
478
218
1,161
3,350
3,190
909
8,610
1,394
—
3,481
1,150
442
80
689
2,200
2,710
215
286
9
—
62
—
183
736
478
253
5,182
4,422
—
5
33
11,022
(38)
11,022
16,204
$
$
—
6
47
11,485
(114)
11,424
15,846
Preferred stock, $0.10 par value, 15.0 shares authorized, none issued
Class A common stock, $0.01 par value, 1,000 shares authorized, 548 and 577 shares issued
and outstanding at December 31, 2019 and 2018, respectively
The accompanying notes are an integral part of the consolidated financial statements.
F-4
F-5
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Table of Contents
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except per share data)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Change in unrealized gains and losses on cash flow hedges
Change in unrealized losses on available-for-sale investment securities
Other comprehensive income (loss)
Comprehensive income
Year Ended December 31,
2019
2018
2017
$
1,842
$
2,101
$
1,504
39
29
8
76
$
1,918
$
(65)
(118)
—
(183)
1,918
111
76
(3)
184
$
1,688
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Balance, December 31, 2016
608
$
$
358
$
10,478
$
(114) $
10,728
Class A Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.45 per share
Balance, December 31, 2017
Cumulative effect of changes in
accounting principle (1)
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.80 per share
Balance, December 31, 2018
Cumulative effect of changes in
accounting principle (2)
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.80 per share
Balance, December 31, 2019
—
—
9
—
(29)
—
588
(17)
—
577
—
—
6
—
—
—
—
7
—
189
221
(719)
181
267
(450)
—
—
—
49
—
—
—
47
—
—
—
159
217
(390)
—
33
1,504
—
—
—
(1,170)
(268)
10,544
122
2,101
(811)
(471)
11,485
1,842
—
—
—
2
—
—
—
(1,856)
(451)
—
184
—
—
—
—
70
(1)
—
(183)
(114)
—
—
—
—
—
—
76
—
—
—
—
1,504
184
189
221
(1,889)
(268)
10,669
121
2,101
(183)
181
267
(1,261)
(471)
11,424
2
1,842
76
159
217
(2,247)
(451)
(36)
—
548
$
(1)
—
5
$
$
11,022
$
(38) $
11,022
(1)
(2)
Reflects the adoption of the New Revenue Standard as well as ASU 2018-02 "Reclassification of Certain Tax Effects
from Accumulated Other Comprehensive Income" on January 1, 2018.
Reflects the adoption of the New Lease Standard as described in Note 1 and Note 7.
The accompanying notes are an integral part of the consolidated financial statements.
6
—
—
—
—
—
—
6
—
—
—
—
—
—
6
—
—
—
—
—
F-7
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Table of Contents
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except per share data)
Class A Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2016
608
$
$
358
$
10,478
$
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Change in unrealized gains and losses on cash flow hedges
Change in unrealized losses on available-for-sale investment securities
Other comprehensive income (loss)
Comprehensive income
Year Ended December 31,
2019
2018
2017
$
1,842
$
2,101
$
1,504
39
29
8
76
(65)
(118)
—
(183)
111
76
(3)
184
$
1,918
$
1,918
$
1,688
The accompanying notes are an integral part of the consolidated financial statements.
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.45 per share
Balance, December 31, 2017
Cumulative effect of changes in
accounting principle (1)
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.80 per share
Balance, December 31, 2018
Cumulative effect of changes in
accounting principle (2)
Net income
Other comprehensive income (loss)
Common stock issued, stock-based
compensation plans
Stock-based compensation expense
Repurchases of common stock
Dividends declared, $0.80 per share
Balance, December 31, 2019
—
—
9
—
(29)
—
588
—
—
6
—
(17)
—
577
—
—
—
7
—
(36)
—
6
—
—
—
—
—
—
6
—
—
—
—
—
—
6
—
—
—
—
—
(1)
—
—
—
189
221
(719)
—
49
—
—
181
267
(450)
—
47
—
—
—
159
217
(390)
—
1,504
—
—
—
(1,170)
(268)
10,544
122
2,101
—
—
—
(811)
(471)
11,485
2
1,842
—
—
—
(1,856)
(451)
11,022
$
(114) $
—
184
—
—
—
—
70
(1)
—
(183)
—
—
—
—
(114)
—
—
76
—
—
—
—
(38) $
Total
10,728
1,504
184
189
221
(1,889)
(268)
10,669
121
2,101
(183)
181
267
(1,261)
(471)
11,424
2
1,842
76
159
217
(2,247)
(451)
11,022
548
$
5
$
33
$
(1)
(2)
Reflects the adoption of the New Revenue Standard as well as ASU 2018-02 "Reclassification of Certain Tax Effects
from Accumulated Other Comprehensive Income" on January 1, 2018.
Reflects the adoption of the New Lease Standard as described in Note 1 and Note 7.
The accompanying notes are an integral part of the consolidated financial statements.
F-6
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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
2019
Year Ended December 31,
2018
2017
$
1,842
$
2,101
$
1,504
Depreciation and amortization
Deferred income taxes
Stock-based compensation expense
Other
Changes in assets and liabilities:
Trade accounts receivable
Other current and noncurrent assets
Accounts payable
Deferred revenue, current and noncurrent
Other current and noncurrent liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of available-for-sale investment securities
Proceeds from maturity or sale of available-for-sale investment
securities
Purchases of held-to-maturity investment securities
Proceeds from maturity of held-to-maturity investment securities
Purchases of other investments
Proceeds from maturity or sale of other investments
Payments for business combinations, net of cash acquired, and equity
and cost method investments
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans
Repurchases of common stock
Repayment of term loan borrowings and finance lease and earnout
obligations
Net change in notes outstanding under the revolving credit facility
Proceeds from debt modification
Debt issuance costs
Dividends paid
Net cash (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of period
Supplemental information:
Cash paid for income taxes during the year
Cash interest paid during the year
$
$
$
526
(306)
217
119
37
159
8
56
(159)
2,499
(392)
(333)
2,107
(693)
1,498
(483)
501
(617)
1,588
159
(2,247)
(28)
—
—
—
(453)
(2,569)
(34)
1,484
1,161
2,645
870
25
$
$
$
498
8
267
125
(365)
(8)
(4)
(86)
56
2,592
(377)
(1,630)
1,838
(1,363)
1,164
(513)
365
(1,111)
(1,627)
181
(1,261)
(91)
(75)
25
(4)
(468)
(1,693)
(36)
(764)
1,925
1,161
597
21
$
$
$
443
124
221
(71)
(249)
(270)
16
18
671
2,407
(284)
(3,120)
3,404
(1,221)
404
(385)
836
(216)
(582)
189
(1,889)
(95)
75
—
—
(265)
(1,985)
51
(109)
2,034
1,925
587
21
The accompanying notes are an integral part of the consolidated financial statements.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
Note 1 — Business Description and Summary of Significant Accounting Policies
The terms “Cognizant,” “we,” “our,” “us” and “the Company” refer to Cognizant Technology Solutions Corporation and its
subsidiaries unless the context indicates otherwise.
Description of Business. We are one of the world’s leading professional services companies, transforming clients’ business,
operating and technology models for the digital era. Our services include digital services and solutions, consulting, application
development, systems integration, application testing, application maintenance, infrastructure services and business process
services. Digital services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming
data-enabled, customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an
integrated global delivery model that employs client service and delivery teams based at client locations and dedicated global and
regional delivery centers.
in consolidation.
Basis of Presentation, Principles of Consolidation and Use of Estimates. The consolidated financial statements are presented
in accordance with GAAP and reflect the consolidated financial position, results of operations, comprehensive income and cash
flows of our consolidated subsidiaries for all periods presented. All intercompany balances and transactions have been eliminated
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts in the consolidated financial statements and accompanying disclosures. We evaluate our estimates on a continuous basis.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial
statements. We have reclassified certain prior period amounts to conform to current period presentation.
Cash and Cash Equivalents and Investments. Cash and cash equivalents consist of all cash balances, including money market
funds, certificates of deposits and commercial paper that have a maturity, at the date of purchase, of 90 days or less.
We determine the appropriate classification of our investments in marketable securities at the date of purchase and reevaluate
such designation at each balance sheet date. Our held-to-maturity investment securities are financial instruments for which we
have the intent and ability to hold to maturity and we classify these securities with maturities less than one year as short-term
investments. Any held-to-maturity investment securities with maturities beyond one year from the balance sheet date are classified
as noncurrent. Held-to-maturity securities are reported at amortized cost. Interest and amortization of premiums and discounts for
debt securities are included in interest income.
On a quarterly basis, we evaluate our held-to-maturity investments for possible other-than-temporary impairment by
reviewing quantitative and qualitative factors. If we do not intend to sell the security and it is not more likely than not that we will
be required to sell the security before recovery of our amortized cost, we evaluate quantitative and qualitative criteria to determine
whether we expect to recover the amortized cost basis of the security. If we do not expect to recover the entire amortized cost basis
of the security, we consider the security to be other-than-temporarily impaired and we record the difference between the security’s
amortized cost basis and its recoverable amount in earnings and the difference between the security’s recoverable amount and fair
value in other comprehensive income. If the fair value of the security is less than its cost basis and if we intend to sell the security
or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is
also considered other-than-temporarily impaired and we recognize the entire difference between the security’s amortized cost basis
and its fair value in earnings.
Short-term Financial Assets and Liabilities. Cash and certain cash equivalents, trade receivables, accounts payable and other
accrued liabilities are short-term in nature and, accordingly, their carrying values approximate fair value.
Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is
calculated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-
line basis over the shorter of the term of the lease or the estimated useful life of the asset. Deposits paid towards acquisition of
long-lived assets and the cost of assets not put in use before the balance sheet date are disclosed under the caption "Capital work-
in-progress" in Note 6.
Leases. Our lease asset classes primarily consist of operating leases for office space, data centers and equipment. At inception
of a contract, we determine whether a contract contains a lease, and if a lease is identified, whether it is an operating or finance
F-8
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Table of Contents
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net income
activities:
Adjustments to reconcile net income to net cash provided by operating
Year Ended December 31,
2019
2018
2017
$
1,842
$
2,101
$
1,504
Depreciation and amortization
Deferred income taxes
Stock-based compensation expense
Other
Changes in assets and liabilities:
Trade accounts receivable
Other current and noncurrent assets
Accounts payable
Deferred revenue, current and noncurrent
Other current and noncurrent liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Purchases of available-for-sale investment securities
Proceeds from maturity or sale of available-for-sale investment
securities
Purchases of held-to-maturity investment securities
Proceeds from maturity of held-to-maturity investment securities
Purchases of other investments
Proceeds from maturity or sale of other investments
Payments for business combinations, net of cash acquired, and equity
and cost method investments
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Issuance of common stock under stock-based compensation plans
Repurchases of common stock
Repayment of term loan borrowings and finance lease and earnout
obligations
Net change in notes outstanding under the revolving credit facility
Proceeds from debt modification
Debt issuance costs
Dividends paid
Net cash (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of period
Supplemental information:
Cash paid for income taxes during the year
Cash interest paid during the year
526
(306)
217
119
37
159
8
56
(159)
2,499
(392)
(333)
2,107
(693)
1,498
(483)
501
(617)
1,588
159
(2,247)
(28)
—
—
—
(453)
(2,569)
(34)
1,484
1,161
2,645
870
25
498
8
267
125
(365)
(8)
(4)
(86)
56
2,592
(377)
(1,630)
1,838
(1,363)
1,164
(513)
365
(1,111)
(1,627)
181
(1,261)
(91)
(75)
25
(4)
(468)
(1,693)
(36)
(764)
1,925
1,161
597
21
443
124
221
(71)
(249)
(270)
16
18
671
2,407
(284)
(3,120)
3,404
(1,221)
404
(385)
836
(216)
(582)
189
(1,889)
(95)
75
—
—
(265)
(1,985)
51
(109)
2,034
1,925
587
21
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share data)
Note 1 — Business Description and Summary of Significant Accounting Policies
The terms “Cognizant,” “we,” “our,” “us” and “the Company” refer to Cognizant Technology Solutions Corporation and its
subsidiaries unless the context indicates otherwise.
Description of Business. We are one of the world’s leading professional services companies, transforming clients’ business,
operating and technology models for the digital era. Our services include digital services and solutions, consulting, application
development, systems integration, application testing, application maintenance, infrastructure services and business process
services. Digital services have become an increasingly important part of our portfolio, aligning with our clients' focus on becoming
data-enabled, customer-centric and differentiated businesses. We tailor our services and solutions to specific industries with an
integrated global delivery model that employs client service and delivery teams based at client locations and dedicated global and
regional delivery centers.
Basis of Presentation, Principles of Consolidation and Use of Estimates. The consolidated financial statements are presented
in accordance with GAAP and reflect the consolidated financial position, results of operations, comprehensive income and cash
flows of our consolidated subsidiaries for all periods presented. All intercompany balances and transactions have been eliminated
in consolidation.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported
amounts in the consolidated financial statements and accompanying disclosures. We evaluate our estimates on a continuous basis.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances. The actual amounts may vary from the estimates used in the preparation of the accompanying consolidated financial
statements. We have reclassified certain prior period amounts to conform to current period presentation.
Cash and Cash Equivalents and Investments. Cash and cash equivalents consist of all cash balances, including money market
funds, certificates of deposits and commercial paper that have a maturity, at the date of purchase, of 90 days or less.
We determine the appropriate classification of our investments in marketable securities at the date of purchase and reevaluate
such designation at each balance sheet date. Our held-to-maturity investment securities are financial instruments for which we
have the intent and ability to hold to maturity and we classify these securities with maturities less than one year as short-term
investments. Any held-to-maturity investment securities with maturities beyond one year from the balance sheet date are classified
as noncurrent. Held-to-maturity securities are reported at amortized cost. Interest and amortization of premiums and discounts for
debt securities are included in interest income.
On a quarterly basis, we evaluate our held-to-maturity investments for possible other-than-temporary impairment by
reviewing quantitative and qualitative factors. If we do not intend to sell the security and it is not more likely than not that we will
be required to sell the security before recovery of our amortized cost, we evaluate quantitative and qualitative criteria to determine
whether we expect to recover the amortized cost basis of the security. If we do not expect to recover the entire amortized cost basis
of the security, we consider the security to be other-than-temporarily impaired and we record the difference between the security’s
amortized cost basis and its recoverable amount in earnings and the difference between the security’s recoverable amount and fair
value in other comprehensive income. If the fair value of the security is less than its cost basis and if we intend to sell the security
or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, the security is
also considered other-than-temporarily impaired and we recognize the entire difference between the security’s amortized cost basis
and its fair value in earnings.
Short-term Financial Assets and Liabilities. Cash and certain cash equivalents, trade receivables, accounts payable and other
accrued liabilities are short-term in nature and, accordingly, their carrying values approximate fair value.
Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is
calculated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-
line basis over the shorter of the term of the lease or the estimated useful life of the asset. Deposits paid towards acquisition of
long-lived assets and the cost of assets not put in use before the balance sheet date are disclosed under the caption "Capital work-
in-progress" in Note 6.
Leases. Our lease asset classes primarily consist of operating leases for office space, data centers and equipment. At inception
of a contract, we determine whether a contract contains a lease, and if a lease is identified, whether it is an operating or finance
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Table of Contents
lease. In determining whether a contract contains a lease we consider whether (1) we have the right to obtain substantially all of
the economic benefits from the use of the asset throughout the term of the contract, (2) we have the right to direct how and for
what purpose the asset is used throughout the term of the contract and (3) we have the right to operate the asset throughout the
term of the contract without the lessor having the right to change the terms of the contract. Some of our lease agreements contain
both lease and non-lease components that we account for as a single lease component for all of our lease asset classes.
Our ROU lease assets represent our right to use an underlying asset for the lease term and may include any advance lease
payments made and any initial direct costs, and exclude lease incentives. Our lease liabilities represent our obligation to make
lease payments arising from the contractual terms of the lease. ROU lease assets and lease liabilities are recognized at the
commencement of the lease and are calculated using the present value of lease payments over the lease term. Typically, our lease
agreements do not provide sufficient detail to arrive at an implicit interest rate. Therefore, we use our estimated country-specific
incremental borrowing rate based on information available at the commencement date of the lease to calculate the present value
of the lease payments. In estimating our country-specific incremental borrowing rates, we consider market rates of comparable
collateralized borrowings for similar terms. Our lease terms may include the option to extend or terminate the lease before the end
of the contractual lease term. Our ROU lease assets and lease liabilities include these options when it is reasonably certain that
they will be exercised.
A portion of our real estate lease costs is subject to annual changes in the CPI. The changes to the CPI are treated as variable
lease payments and are recognized in the period in which the obligation for those payments is incurred. Other variable lease costs
primarily relate to adjustments for common area maintenance, utilities and property tax. These variable costs are recognized in
the period in which the obligation for those payments is incurred.
Prior to the adoption of the New Lease Standard on January 1, 2019, we were not required to recognize ROU lease assets
and lease liabilities on our consolidated statement of financial position for operating leases. See Note 7 for additional information
on the impact of adoption of this standard.
Internal Use Software. We capitalize certain costs that are incurred to purchase, develop and implement internal-use software
during the application development phase, which primarily include coding, testing and certain data conversion activities. Capitalized
costs are amortized on a straight-line basis over the useful life of the software. Costs incurred in performing planning and post-
implementation activities are expensed as incurred.
Software to be Sold, Leased or Marketed. We capitalize costs incurred after technological feasibility is reached but before
software is available for general release to clients, which primarily include coding and testing activities. Once the product is ready
for general release, capitalized costs are amortized over the useful life of the software.
Business Combinations. We account for business combinations using the acquisition method, which requires the identification
of the acquirer, the determination of the acquisition date and the allocation of the purchase price paid by the acquirer to the
identifiable tangible and intangible assets acquired, the liabilities assumed, including any contingent consideration and any
noncontrolling interest in the acquiree at their acquisition date fair values. Goodwill represents the excess of the purchase price
over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets. Identifiable intangible
assets with finite lives are amortized over their useful lives. Acquisition-related costs are expensed in the periods in which the
costs are incurred. The results of operations of acquired businesses are included in our consolidated financial statements from the
acquisition date.
During the fourth quarter of 2019, the Company adjusted the allocation of the purchase price of certain prior period acquisitions
that included revenue contracts with the sellers of the acquired businesses. As a result, we recorded a balance sheet adjustment to
decrease total assets (primarily impacting intangible assets, goodwill and deferred income taxes) and total liabilities (primarily
impacting deferred revenue) by approximately $70 million each. The impact of the adjustment to our operating results was
immaterial. Management concluded that the adjustment was not material to any previously issued consolidated financial statements
or to the consolidated financial statements as of and for the year ended December 31, 2019.
Equity Method Investments. Equity investments that give us the ability to exercise significant influence, but not control, over
an investee are accounted for using the equity method of accounting and recorded in the caption "Long-term investments" on our
consolidated statements of financial position. Equity method investments are initially recorded at cost. We periodically review the
carrying value of our equity method investments to determine if there has been an other-than-temporary decline in carrying value.
The Company's proportionate share of the net income or loss of the investee is recorded in the caption "Income (loss) from equity
method investments" on our consolidated statements of operations. The investment balance is increased or decreased for cash
contributions or distributions to or from these investees.
Long-lived Assets and Finite-lived Intangible Assets. We review long-lived assets and certain finite-lived identifiable
intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may
which value is delivered to the customer.
F-10
F-11
not be recoverable. We recognize an impairment loss when the sum of undiscounted expected future cash flows is less than the
carrying amount of such asset groups. The impairment loss is determined as the amount by which the carrying amount of the asset
group exceeds its fair value. Intangible assets consist primarily of client relationships and developed technology, which are being
amortized on a straight-line basis over their estimated useful lives.
Goodwill and Indefinite-lived Intangible Assets. We evaluate goodwill and indefinite-lived intangible assets for impairment
at least annually, or as circumstances warrant. Goodwill is evaluated at the reporting unit level by comparing the fair value of the
reporting unit with its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reporting
unit exceeds its fair value. The impairment loss is the amount by which the carrying amount exceeds the reporting unit’s fair value,
limited to the total amount of goodwill allocated to that reporting unit. For indefinite-lived intangible assets, if our annual qualitative
assessment indicates that it is more-likely-than-not that an indefinite-lived intangible asset is impaired, we test the assets for
impairment by comparing the fair value of such assets to their carrying value. If an impairment is indicated, a write down to the
fair value of indefinite-lived intangible asset is recorded.
Stock Repurchase Program. Under the Board of Directors authorized stock repurchase program, the Company is authorized
to repurchase its Class A common stock through open market purchases, including under a trading plan adopted pursuant to Rule
10b5-1 of the Exchange Act, or in private transactions, including through ASR agreements entered into with financial institutions,
in accordance with applicable federal securities laws. We account for the repurchased shares as constructively retired. Shares are
returned to the status of authorized and unissued shares at the time of repurchase or in the periods they are delivered, if repurchased
under an ASR. To reflect share repurchases in the consolidated statements of financial position, we (1) reduce common stock for
the par value of the shares, (2) reduce additional paid-in capital for the amount in excess of par during the period in which the
shares are repurchased and (3) record any residual amount in excess of available additional paid-in capital to retained earnings.
Upfront payments related to ASRs are accounted for as a reduction to stockholders’ equity in the consolidated statements of
financial position in the period the payments are made.
Revenue Recognition. We recognize revenues as we transfer control of deliverables (products, solutions and services) to
our clients in an amount reflecting the consideration to which we expect to be entitled. To recognize revenues, we apply the
following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract,
(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize
revenues when a performance obligation is satisfied. We account for a contract when it has approval and commitment from all
parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability
of consideration is probable. We apply judgment in determining the customer’s ability and intention to pay based on a variety of
factors including the customer’s historical payment experience.
For performance obligations where control is transferred over time, revenues are recognized based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the deliverables to be provided.
Revenues related to fixed-price contracts for application development and systems integration services, consulting or other
technology services are recognized as the service is performed using the cost to cost method, under which the total value of revenues
is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total expected labor costs.
Revenues related to fixed-price application maintenance, testing and business process services are recognized based on our right
to invoice for services performed for contracts in which the invoicing is representative of the value being delivered. If our invoicing
is not consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described
above. The cost to cost method requires estimation of future costs, which is updated as the project progresses to reflect the latest
available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision
in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated
losses on contracts are recognized immediately.
Revenues related to fixed-price hosting and infrastructure services are recognized based on our right to invoice for services
performed for contracts in which the invoicing is representative of the value being delivered. If our invoicing is not consistent
with value delivered, revenues are recognized on a straight-line basis unless revenues are earned and obligations are fulfilled in a
different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful
depiction of performance towards satisfaction of our performance obligations; for example, the cost to cost method is used when
the value of services provided to the customer is best represented by the costs expended to deliver those services.
Revenues related to our time-and-materials, transaction-based or volume-based contracts are recognized over the period the
services are provided either using an output method such as labor hours, or a method that is otherwise consistent with the way in
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lease. In determining whether a contract contains a lease we consider whether (1) we have the right to obtain substantially all of
the economic benefits from the use of the asset throughout the term of the contract, (2) we have the right to direct how and for
what purpose the asset is used throughout the term of the contract and (3) we have the right to operate the asset throughout the
term of the contract without the lessor having the right to change the terms of the contract. Some of our lease agreements contain
both lease and non-lease components that we account for as a single lease component for all of our lease asset classes.
Our ROU lease assets represent our right to use an underlying asset for the lease term and may include any advance lease
payments made and any initial direct costs, and exclude lease incentives. Our lease liabilities represent our obligation to make
lease payments arising from the contractual terms of the lease. ROU lease assets and lease liabilities are recognized at the
commencement of the lease and are calculated using the present value of lease payments over the lease term. Typically, our lease
agreements do not provide sufficient detail to arrive at an implicit interest rate. Therefore, we use our estimated country-specific
incremental borrowing rate based on information available at the commencement date of the lease to calculate the present value
of the lease payments. In estimating our country-specific incremental borrowing rates, we consider market rates of comparable
collateralized borrowings for similar terms. Our lease terms may include the option to extend or terminate the lease before the end
of the contractual lease term. Our ROU lease assets and lease liabilities include these options when it is reasonably certain that
they will be exercised.
A portion of our real estate lease costs is subject to annual changes in the CPI. The changes to the CPI are treated as variable
lease payments and are recognized in the period in which the obligation for those payments is incurred. Other variable lease costs
primarily relate to adjustments for common area maintenance, utilities and property tax. These variable costs are recognized in
the period in which the obligation for those payments is incurred.
Prior to the adoption of the New Lease Standard on January 1, 2019, we were not required to recognize ROU lease assets
and lease liabilities on our consolidated statement of financial position for operating leases. See Note 7 for additional information
on the impact of adoption of this standard.
Internal Use Software. We capitalize certain costs that are incurred to purchase, develop and implement internal-use software
during the application development phase, which primarily include coding, testing and certain data conversion activities. Capitalized
costs are amortized on a straight-line basis over the useful life of the software. Costs incurred in performing planning and post-
implementation activities are expensed as incurred.
Software to be Sold, Leased or Marketed. We capitalize costs incurred after technological feasibility is reached but before
software is available for general release to clients, which primarily include coding and testing activities. Once the product is ready
for general release, capitalized costs are amortized over the useful life of the software.
Business Combinations. We account for business combinations using the acquisition method, which requires the identification
of the acquirer, the determination of the acquisition date and the allocation of the purchase price paid by the acquirer to the
identifiable tangible and intangible assets acquired, the liabilities assumed, including any contingent consideration and any
noncontrolling interest in the acquiree at their acquisition date fair values. Goodwill represents the excess of the purchase price
over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets. Identifiable intangible
assets with finite lives are amortized over their useful lives. Acquisition-related costs are expensed in the periods in which the
costs are incurred. The results of operations of acquired businesses are included in our consolidated financial statements from the
acquisition date.
During the fourth quarter of 2019, the Company adjusted the allocation of the purchase price of certain prior period acquisitions
that included revenue contracts with the sellers of the acquired businesses. As a result, we recorded a balance sheet adjustment to
decrease total assets (primarily impacting intangible assets, goodwill and deferred income taxes) and total liabilities (primarily
impacting deferred revenue) by approximately $70 million each. The impact of the adjustment to our operating results was
immaterial. Management concluded that the adjustment was not material to any previously issued consolidated financial statements
or to the consolidated financial statements as of and for the year ended December 31, 2019.
Equity Method Investments. Equity investments that give us the ability to exercise significant influence, but not control, over
an investee are accounted for using the equity method of accounting and recorded in the caption "Long-term investments" on our
consolidated statements of financial position. Equity method investments are initially recorded at cost. We periodically review the
carrying value of our equity method investments to determine if there has been an other-than-temporary decline in carrying value.
The Company's proportionate share of the net income or loss of the investee is recorded in the caption "Income (loss) from equity
method investments" on our consolidated statements of operations. The investment balance is increased or decreased for cash
contributions or distributions to or from these investees.
Long-lived Assets and Finite-lived Intangible Assets. We review long-lived assets and certain finite-lived identifiable
intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may
not be recoverable. We recognize an impairment loss when the sum of undiscounted expected future cash flows is less than the
carrying amount of such asset groups. The impairment loss is determined as the amount by which the carrying amount of the asset
group exceeds its fair value. Intangible assets consist primarily of client relationships and developed technology, which are being
amortized on a straight-line basis over their estimated useful lives.
Goodwill and Indefinite-lived Intangible Assets. We evaluate goodwill and indefinite-lived intangible assets for impairment
at least annually, or as circumstances warrant. Goodwill is evaluated at the reporting unit level by comparing the fair value of the
reporting unit with its carrying amount including goodwill. An impairment of goodwill exists if the carrying amount of the reporting
unit exceeds its fair value. The impairment loss is the amount by which the carrying amount exceeds the reporting unit’s fair value,
limited to the total amount of goodwill allocated to that reporting unit. For indefinite-lived intangible assets, if our annual qualitative
assessment indicates that it is more-likely-than-not that an indefinite-lived intangible asset is impaired, we test the assets for
impairment by comparing the fair value of such assets to their carrying value. If an impairment is indicated, a write down to the
fair value of indefinite-lived intangible asset is recorded.
Stock Repurchase Program. Under the Board of Directors authorized stock repurchase program, the Company is authorized
to repurchase its Class A common stock through open market purchases, including under a trading plan adopted pursuant to Rule
10b5-1 of the Exchange Act, or in private transactions, including through ASR agreements entered into with financial institutions,
in accordance with applicable federal securities laws. We account for the repurchased shares as constructively retired. Shares are
returned to the status of authorized and unissued shares at the time of repurchase or in the periods they are delivered, if repurchased
under an ASR. To reflect share repurchases in the consolidated statements of financial position, we (1) reduce common stock for
the par value of the shares, (2) reduce additional paid-in capital for the amount in excess of par during the period in which the
shares are repurchased and (3) record any residual amount in excess of available additional paid-in capital to retained earnings.
Upfront payments related to ASRs are accounted for as a reduction to stockholders’ equity in the consolidated statements of
financial position in the period the payments are made.
Revenue Recognition. We recognize revenues as we transfer control of deliverables (products, solutions and services) to
our clients in an amount reflecting the consideration to which we expect to be entitled. To recognize revenues, we apply the
following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract,
(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize
revenues when a performance obligation is satisfied. We account for a contract when it has approval and commitment from all
parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability
of consideration is probable. We apply judgment in determining the customer’s ability and intention to pay based on a variety of
factors including the customer’s historical payment experience.
For performance obligations where control is transferred over time, revenues are recognized based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires
judgment and is based on the nature of the deliverables to be provided.
Revenues related to fixed-price contracts for application development and systems integration services, consulting or other
technology services are recognized as the service is performed using the cost to cost method, under which the total value of revenues
is recognized on the basis of the percentage that each contract’s total labor cost to date bears to the total expected labor costs.
Revenues related to fixed-price application maintenance, testing and business process services are recognized based on our right
to invoice for services performed for contracts in which the invoicing is representative of the value being delivered. If our invoicing
is not consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described
above. The cost to cost method requires estimation of future costs, which is updated as the project progresses to reflect the latest
available information; such estimates and changes in estimates involve the use of judgment. The cumulative impact of any revision
in estimates is reflected in the financial reporting period in which the change in estimate becomes known and any anticipated
losses on contracts are recognized immediately.
Revenues related to fixed-price hosting and infrastructure services are recognized based on our right to invoice for services
performed for contracts in which the invoicing is representative of the value being delivered. If our invoicing is not consistent
with value delivered, revenues are recognized on a straight-line basis unless revenues are earned and obligations are fulfilled in a
different pattern. The revenue recognition method applied to the types of contracts described above provides the most faithful
depiction of performance towards satisfaction of our performance obligations; for example, the cost to cost method is used when
the value of services provided to the customer is best represented by the costs expended to deliver those services.
Revenues related to our time-and-materials, transaction-based or volume-based contracts are recognized over the period the
services are provided either using an output method such as labor hours, or a method that is otherwise consistent with the way in
which value is delivered to the customer.
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Revenues related to our non-hosted software license arrangements that do not require significant modification or customization
of the underlying software are recognized when the software is delivered as control is transferred at a point in time. For software
license arrangements that require significant functionality enhancements or modification of the software, revenues for the software
license and related services are recognized as the services are performed in accordance with the methods applicable to application
development and systems integration services described above. In software hosting arrangements, the rights provided to the
customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software,
are considered in determining whether the arrangement includes a license or a service. Sales and usage-based fees promised in
exchange for licenses of intellectual property are not recognized as revenue until the uncertainty related to the variable amounts
is resolved. Revenues related to software maintenance and support are generally recognized on a straight-line basis over the contract
period.
Incentive revenues, volume discounts, or any other form of variable consideration is estimated using either the sum of
probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in
a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of
consideration to which we may be entitled. We include in the transaction price variable consideration only to the extent it is probable
that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration
is resolved. Our estimates of variable consideration and determination of whether and when to include estimated amounts in the
transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information
that is reasonably available to us.
Revenues also include the reimbursement of out-of-pocket expenses. Our warranties generally provide a customer with
assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications and
is therefore not considered an additional performance obligation in the contract.
We may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any
combination of our deliverables. To the extent a contract includes multiple promised deliverables, we apply judgment to determine
whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not
met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct
performance obligations, we allocate consideration among the performance obligations based on their relative standalone selling
price. Standalone selling price is the price at which we would sell a promised good or service separately to the customer. When
not directly observable, we typically estimate standalone selling price by using the expected cost plus a margin approach. We
typically establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and
circumstances change.
We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine
whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing
component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises
for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary
purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to
receive or provide financing from or to customers. We do not consider set up or transition fees paid upfront by our customers to
represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from
early termination of the contract.
Our contracts may be modified to add, remove or change existing performance obligations. The accounting for modifications
to our contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the
standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are
distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the standalone selling
price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. Services
added to our application development and systems integration service contracts are typically not distinct, while services added to
our other contracts, including application maintenance, testing and business process services contracts, are typically distinct.
From time to time, we may enter into arrangements with third party suppliers to resell products or services. In such cases,
we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). In
doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good
or service before it is transferred to the customer, we are the principal; if not, we are the agent. Determining whether we control
the good or service before it is transferred to the customer may require judgment.
Prior to the adoption of the New Revenue Standard on January 1, 2018, revenues were earned and recognized when all of
the following criteria were met: evidence of an arrangement existed, the price was fixed or determinable, the services had been
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rendered and collectability was reasonably assured. Contingent or incentive revenues were recognized when the contingency was
satisfied and we concluded the amounts were earned. Volume discounts were recorded as a reduction of revenues as services were
provided. Revenues also included the reimbursement of out-of-pocket expenses.
Trade Accounts Receivable, Contract Assets and Contract Liabilities. We classify our right to consideration in exchange for
deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e., only the
passage of time is required before payment is due). For example, we recognize a receivable for revenues related to our time and
materials and transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present
such receivables in "Trade accounts receivable, net" in our consolidated statements of financial position at their net estimated
realizable value. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract
assets are presented in "Other current assets" in our consolidated statements of financial position and primarily relate to unbilled
amounts on fixed-price contracts utilizing the cost to cost method of revenue recognition. Our contract liabilities, or deferred
revenue, consist of advance payments from clients and billings in excess of revenues recognized. We classify deferred revenue as
current or noncurrent based on the timing of when we expect to recognize the revenues.
During the fourth quarter of 2019, we determined that it is preferable to change our accounting policy to net certain amounts
due to customers, such as discounts and rebates, with trade accounts receivable, in order to better align with industry practice and
better reflect amounts due from our customers on our consolidated statements of financial position. As a result, we netted $99
million of amounts due to customers, which would have otherwise been included in the caption "Accrued expenses and other
current liabilities", within the caption "Trade accounts receivable, net" in our consolidated statement of financial position as of
December 31, 2019. We applied this change in accounting policy retrospectively and decreased "Trade accounts receivable, net"
and "Accrued expenses and other current liabilities" by $67 million as of December 31, 2018. The impact of the adjustment to our
consolidated statements of financial position was immaterial for all periods presented and there was no impact to our operating
results or cash flows.
Our contract assets and contract liabilities are reported on a net basis by contract at the end of each reporting period. The
difference between the opening and closing balances of our contract assets and contract liabilities primarily results from the timing
difference between our performance obligations and the client’s payment. We receive payments from clients based on the terms
established in our contracts, which vary by contract type.
Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts to provide for the estimated amount of
trade accounts receivables that may not be collected. The allowance is based upon an assessment of client creditworthiness,
historical payment experience, the age of outstanding receivables and other applicable factors. We evaluate the collectability of
our trade accounts receivable on an on-going basis and write off accounts when they are deemed to be uncollectable.
Costs to Fulfill. Recurring operating costs for contracts with customers are recognized as incurred. Certain eligible,
nonrecurring costs (i.e., set-up or transition costs) are capitalized when such costs (1) relate directly to the contract, (2) generate
or enhance resources of the Company that will be used in satisfying the performance obligation in the future, and (3) are expected
to be recovered. These costs are expensed ratably over the estimated life of the customer relationship, including expected contract
renewals. In determining the estimated life of the customer relationship, we evaluate the average contract term, on a portfolio basis
by nature of the services to be provided, and apply judgment in evaluating the rate of technological and industry change. Capitalized
amounts are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating
cash flows are not sufficient to recover the carrying amount of the capitalized costs to fulfill.
Stock-Based Compensation. Stock-based compensation expense for awards of equity instruments to employees and non-
employee directors is determined based on the grant date fair value of those awards. We recognize these compensation costs net
of an estimated forfeiture rate over the requisite service period of the award. Forfeitures are estimated on the date of grant and
revised if actual or expected forfeiture activity differs materially from original estimates.
Foreign Currency. The assets and liabilities of our foreign subsidiaries whose functional currency is not the U.S. dollar are
translated into U.S. dollars from functional currencies at current exchange rates while revenues and expenses are translated from
functional currencies at average monthly exchange rates. The resulting translation adjustments are recorded in the caption
"Accumulated other comprehensive income (loss)" on the consolidated statements of financial position.
Foreign currency transactions and balances are those that are denominated in a currency other than the entity’s functional
currency. The entity's functional currency is the currency of the primary economic environment in which it operates. The U.S.
dollar is the functional currency for some of our foreign subsidiaries. For these subsidiaries, transactions and balances denominated
in the local currency are foreign currency transactions. Foreign currency transactions and balances related to non-monetary assets
and liabilities are remeasured to the functional currency of the entity at historical exchange rates while monetary assets and liabilities
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Revenues related to our non-hosted software license arrangements that do not require significant modification or customization
of the underlying software are recognized when the software is delivered as control is transferred at a point in time. For software
license arrangements that require significant functionality enhancements or modification of the software, revenues for the software
license and related services are recognized as the services are performed in accordance with the methods applicable to application
development and systems integration services described above. In software hosting arrangements, the rights provided to the
customer, such as ownership of a license, contract termination provisions and the feasibility of the client to operate the software,
are considered in determining whether the arrangement includes a license or a service. Sales and usage-based fees promised in
exchange for licenses of intellectual property are not recognized as revenue until the uncertainty related to the variable amounts
is resolved. Revenues related to software maintenance and support are generally recognized on a straight-line basis over the contract
period.
Incentive revenues, volume discounts, or any other form of variable consideration is estimated using either the sum of
probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in
a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of
consideration to which we may be entitled. We include in the transaction price variable consideration only to the extent it is probable
that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration
is resolved. Our estimates of variable consideration and determination of whether and when to include estimated amounts in the
transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information
that is reasonably available to us.
Revenues also include the reimbursement of out-of-pocket expenses. Our warranties generally provide a customer with
assurance that the related deliverable will function as the parties intended because it complies with agreed-upon specifications and
is therefore not considered an additional performance obligation in the contract.
We may enter into arrangements that consist of multiple performance obligations. Such arrangements may include any
combination of our deliverables. To the extent a contract includes multiple promised deliverables, we apply judgment to determine
whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not
met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct
performance obligations, we allocate consideration among the performance obligations based on their relative standalone selling
price. Standalone selling price is the price at which we would sell a promised good or service separately to the customer. When
not directly observable, we typically estimate standalone selling price by using the expected cost plus a margin approach. We
typically establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and
circumstances change.
We assess the timing of the transfer of goods or services to the customer as compared to the timing of payments to determine
whether a significant financing component exists. As a practical expedient, we do not assess the existence of a significant financing
component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises
for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary
purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to
receive or provide financing from or to customers. We do not consider set up or transition fees paid upfront by our customers to
represent a financing component, as such fees are required to encourage customer commitment to the project and protect us from
early termination of the contract.
Our contracts may be modified to add, remove or change existing performance obligations. The accounting for modifications
to our contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the
standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are
distinct are accounted for prospectively, either as a separate contract if the additional services are priced at the standalone selling
price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. Services
added to our application development and systems integration service contracts are typically not distinct, while services added to
our other contracts, including application maintenance, testing and business process services contracts, are typically distinct.
From time to time, we may enter into arrangements with third party suppliers to resell products or services. In such cases,
we evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis). In
doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good
or service before it is transferred to the customer, we are the principal; if not, we are the agent. Determining whether we control
the good or service before it is transferred to the customer may require judgment.
Prior to the adoption of the New Revenue Standard on January 1, 2018, revenues were earned and recognized when all of
the following criteria were met: evidence of an arrangement existed, the price was fixed or determinable, the services had been
rendered and collectability was reasonably assured. Contingent or incentive revenues were recognized when the contingency was
satisfied and we concluded the amounts were earned. Volume discounts were recorded as a reduction of revenues as services were
provided. Revenues also included the reimbursement of out-of-pocket expenses.
Trade Accounts Receivable, Contract Assets and Contract Liabilities. We classify our right to consideration in exchange for
deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e., only the
passage of time is required before payment is due). For example, we recognize a receivable for revenues related to our time and
materials and transaction or volume-based contracts when earned regardless of whether amounts have been billed. We present
such receivables in "Trade accounts receivable, net" in our consolidated statements of financial position at their net estimated
realizable value. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract
assets are presented in "Other current assets" in our consolidated statements of financial position and primarily relate to unbilled
amounts on fixed-price contracts utilizing the cost to cost method of revenue recognition. Our contract liabilities, or deferred
revenue, consist of advance payments from clients and billings in excess of revenues recognized. We classify deferred revenue as
current or noncurrent based on the timing of when we expect to recognize the revenues.
During the fourth quarter of 2019, we determined that it is preferable to change our accounting policy to net certain amounts
due to customers, such as discounts and rebates, with trade accounts receivable, in order to better align with industry practice and
better reflect amounts due from our customers on our consolidated statements of financial position. As a result, we netted $99
million of amounts due to customers, which would have otherwise been included in the caption "Accrued expenses and other
current liabilities", within the caption "Trade accounts receivable, net" in our consolidated statement of financial position as of
December 31, 2019. We applied this change in accounting policy retrospectively and decreased "Trade accounts receivable, net"
and "Accrued expenses and other current liabilities" by $67 million as of December 31, 2018. The impact of the adjustment to our
consolidated statements of financial position was immaterial for all periods presented and there was no impact to our operating
results or cash flows.
Our contract assets and contract liabilities are reported on a net basis by contract at the end of each reporting period. The
difference between the opening and closing balances of our contract assets and contract liabilities primarily results from the timing
difference between our performance obligations and the client’s payment. We receive payments from clients based on the terms
established in our contracts, which vary by contract type.
Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts to provide for the estimated amount of
trade accounts receivables that may not be collected. The allowance is based upon an assessment of client creditworthiness,
historical payment experience, the age of outstanding receivables and other applicable factors. We evaluate the collectability of
our trade accounts receivable on an on-going basis and write off accounts when they are deemed to be uncollectable.
Costs to Fulfill. Recurring operating costs for contracts with customers are recognized as incurred. Certain eligible,
nonrecurring costs (i.e., set-up or transition costs) are capitalized when such costs (1) relate directly to the contract, (2) generate
or enhance resources of the Company that will be used in satisfying the performance obligation in the future, and (3) are expected
to be recovered. These costs are expensed ratably over the estimated life of the customer relationship, including expected contract
renewals. In determining the estimated life of the customer relationship, we evaluate the average contract term, on a portfolio basis
by nature of the services to be provided, and apply judgment in evaluating the rate of technological and industry change. Capitalized
amounts are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating
cash flows are not sufficient to recover the carrying amount of the capitalized costs to fulfill.
Stock-Based Compensation. Stock-based compensation expense for awards of equity instruments to employees and non-
employee directors is determined based on the grant date fair value of those awards. We recognize these compensation costs net
of an estimated forfeiture rate over the requisite service period of the award. Forfeitures are estimated on the date of grant and
revised if actual or expected forfeiture activity differs materially from original estimates.
Foreign Currency. The assets and liabilities of our foreign subsidiaries whose functional currency is not the U.S. dollar are
translated into U.S. dollars from functional currencies at current exchange rates while revenues and expenses are translated from
functional currencies at average monthly exchange rates. The resulting translation adjustments are recorded in the caption
"Accumulated other comprehensive income (loss)" on the consolidated statements of financial position.
Foreign currency transactions and balances are those that are denominated in a currency other than the entity’s functional
currency. The entity's functional currency is the currency of the primary economic environment in which it operates. The U.S.
dollar is the functional currency for some of our foreign subsidiaries. For these subsidiaries, transactions and balances denominated
in the local currency are foreign currency transactions. Foreign currency transactions and balances related to non-monetary assets
and liabilities are remeasured to the functional currency of the entity at historical exchange rates while monetary assets and liabilities
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are remeasured to the functional currency of the entity at current exchange rates. Foreign currency exchange gains or losses from
remeasurement are included in the caption "Foreign currency exchange gain (losses), net" on our consolidated statements of
operations together with gains or losses on our undesignated foreign currency hedges.
Derivative Financial Instruments. Derivative financial instruments are recorded on our consolidated statements of financial
position as either an asset or liability measured at its fair value as of the reporting date. Our derivative financial instruments consist
primarily of foreign exchange forward contracts. For derivative financial instruments to qualify for hedge accounting, the following
criteria must be met: (1) the hedging instrument must be designated as a hedge; (2) the hedged exposure must be specifically
identifiable and must expose us to risk; and (3) it must be expected that a change in fair value of the derivative financial instrument
and an opposite change in the fair value of the hedged exposure will have a high degree of correlation. Changes in our derivatives’
fair values are recognized in net income unless specific hedge accounting and documentation criteria are met (i.e., the instruments
are designated and accounted for as hedges). We record the effective portion of the unrealized gains and losses on our derivative
financial instruments that are designated as cash flow hedges in the caption "Accumulated other comprehensive income (loss)" in
the consolidated statements of financial position. Any ineffectiveness or excluded portion of a designated cash flow hedge is
recognized in net income. Upon occurrence of the hedged transaction, the gains and losses on the derivative are recognized in net
income.
Income Taxes. We provide for income taxes utilizing the asset and liability method of accounting. Under this method, deferred
income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that
future tax benefits associated with a deferred income tax asset will not be realized, a valuation allowance is provided. The effect
of a change in tax rates on deferred income tax assets and liabilities is recognized in the provision for income taxes in the period
that includes the enactment date.
Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well
as any related penalties and interest. We adjust these reserves in light of changing facts and circumstances, such as the closing of
a tax audit. To the extent that the final outcome of these matters differs from the amounts recorded, such differences will impact
the provision for income taxes in the period in which such determination is made.
Earnings Per Share. Basic EPS is computed by dividing earnings available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS includes all potential dilutive common stock in the weighted
average shares outstanding. We exclude from the calculation of diluted EPS options with exercise prices that are greater than the
average market price and shares related to stock-based awards whose combined exercise price and unamortized fair value were
greater in each of those periods than the average market price of our common stock for the period, because their effect would be
anti-dilutive. We excluded less than 1 million of anti-dilutive shares in each of 2019, 2018 and 2017 from our diluted EPS calculation.
We include performance stock unit awards in the dilutive potential common shares when they become contingently issuable per
the authoritative guidance and exclude the awards when they are not contingently issuable.
Recently Adopted Accounting Pronouncements
Date Issued
and Topic
Date Adopted
and Method
May 2014
January 1, 2018
Revenue
Modified
Retrospective
Description
Impact
As a result of the adoption, we recorded an
adjustment to opening retained earnings of
approximately $121 million.
February 2016
January 1, 2019
Leases
Effective Date
Method
See Note 7 for the impact of adoption of this
standard.
The new standard, as amended, sets forth a
single comprehensive model for recognizing
and reporting revenues. The standard also
requires
additional
financial
statement
disclosures that enable users to understand the
nature, amount, timing and uncertainty of
revenues and cash flows relating to customer
contracts. The standard allows for
two
methods of adoption: the full retrospective
adoption, which requires the standard to be
applied to each prior period presented, or the
modified
retrospective adoption, which
requires the cumulative effect of adoption to
be recognized as an adjustment to opening
retained earnings in the period of adoption.
The new standard replaces the existing
guidance on leases and requires the lessee to
recognize a ROU asset and a lease liability for
all leases with lease terms greater than twelve
months. For finance
leases,
the
lessee
recognizes interest expense and amortization
of the ROU asset, and for operating leases, the
lessee recognizes total lease expense on a
straight-line basis. The standard offers several
practical expedients for transition and certain
expedients specific to lessees or lessors. The
standard allows for two methods of adoption:
retrospective to each prior reporting period
presented with the cumulative effect of
adoption recognized at the beginning of the
earliest period presented or the effective date
method, which
is
retrospective
to
the
beginning of the period of adoption through a
cumulative-effect adjustment.
amendments do not require an accounting
change for securities held at a discount. Upon
adoption, entities are required to use a
modified retrospective transition with the
cumulative effect adjustment recognized to
retained earnings as of the beginning of the
period of adoption.
This update aligns the accounting for costs
incurred to implement a CCA that is a service
arrangement with the guidance on capitalizing
costs associated with developing or obtaining
internal-use software. In addition, this update
clarifies the financial statement presentation
requirement for capitalized implementation
costs and related amortization of such costs.
This update shortens the amortization period
for certain callable debt securities held at a
The adoption of this update did not have an
impact on our consolidated
financial
premium
to
the earliest call date. The
statements.
The adoption of this update did not have an
impact on our consolidated
financial
statements.
March 2017
January 1, 2019
Nonrefundable
Fees and Other
Modified
Retrospective
Costs
Early adoption
on January 1,
2019
Prospective
August 2018
Customer’s
Accounting for
Implementation
Costs Incurred
in a CCA that is
a Service
Contract
F-14
F-15
are remeasured to the functional currency of the entity at current exchange rates. Foreign currency exchange gains or losses from
remeasurement are included in the caption "Foreign currency exchange gain (losses), net" on our consolidated statements of
operations together with gains or losses on our undesignated foreign currency hedges.
Derivative Financial Instruments. Derivative financial instruments are recorded on our consolidated statements of financial
position as either an asset or liability measured at its fair value as of the reporting date. Our derivative financial instruments consist
primarily of foreign exchange forward contracts. For derivative financial instruments to qualify for hedge accounting, the following
criteria must be met: (1) the hedging instrument must be designated as a hedge; (2) the hedged exposure must be specifically
identifiable and must expose us to risk; and (3) it must be expected that a change in fair value of the derivative financial instrument
and an opposite change in the fair value of the hedged exposure will have a high degree of correlation. Changes in our derivatives’
fair values are recognized in net income unless specific hedge accounting and documentation criteria are met (i.e., the instruments
are designated and accounted for as hedges). We record the effective portion of the unrealized gains and losses on our derivative
financial instruments that are designated as cash flow hedges in the caption "Accumulated other comprehensive income (loss)" in
the consolidated statements of financial position. Any ineffectiveness or excluded portion of a designated cash flow hedge is
recognized in net income. Upon occurrence of the hedged transaction, the gains and losses on the derivative are recognized in net
income.
Income Taxes. We provide for income taxes utilizing the asset and liability method of accounting. Under this method, deferred
income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities
and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that
future tax benefits associated with a deferred income tax asset will not be realized, a valuation allowance is provided. The effect
of a change in tax rates on deferred income tax assets and liabilities is recognized in the provision for income taxes in the period
that includes the enactment date.
Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well
as any related penalties and interest. We adjust these reserves in light of changing facts and circumstances, such as the closing of
a tax audit. To the extent that the final outcome of these matters differs from the amounts recorded, such differences will impact
the provision for income taxes in the period in which such determination is made.
Earnings Per Share. Basic EPS is computed by dividing earnings available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS includes all potential dilutive common stock in the weighted
average shares outstanding. We exclude from the calculation of diluted EPS options with exercise prices that are greater than the
average market price and shares related to stock-based awards whose combined exercise price and unamortized fair value were
greater in each of those periods than the average market price of our common stock for the period, because their effect would be
anti-dilutive. We excluded less than 1 million of anti-dilutive shares in each of 2019, 2018 and 2017 from our diluted EPS calculation.
We include performance stock unit awards in the dilutive potential common shares when they become contingently issuable per
the authoritative guidance and exclude the awards when they are not contingently issuable.
Table of Contents
Table of Contents
Recently Adopted Accounting Pronouncements
Impact
As a result of the adoption, we recorded an
adjustment to opening retained earnings of
approximately $121 million.
See Note 7 for the impact of adoption of this
standard.
Date Issued
and Topic
May 2014
Date Adopted
and Method
January 1, 2018
Revenue
Modified
Retrospective
February 2016
January 1, 2019
Leases
Effective Date
Method
financial
additional
Description
The new standard, as amended, sets forth a
single comprehensive model for recognizing
and reporting revenues. The standard also
statement
requires
disclosures that enable users to understand the
nature, amount, timing and uncertainty of
revenues and cash flows relating to customer
contracts. The standard allows for
two
methods of adoption: the full retrospective
adoption, which requires the standard to be
applied to each prior period presented, or the
modified
retrospective adoption, which
requires the cumulative effect of adoption to
be recognized as an adjustment to opening
retained earnings in the period of adoption.
the
leases,
The new standard replaces the existing
guidance on leases and requires the lessee to
recognize a ROU asset and a lease liability for
all leases with lease terms greater than twelve
months. For finance
lessee
recognizes interest expense and amortization
of the ROU asset, and for operating leases, the
lessee recognizes total lease expense on a
straight-line basis. The standard offers several
practical expedients for transition and certain
expedients specific to lessees or lessors. The
standard allows for two methods of adoption:
retrospective to each prior reporting period
presented with the cumulative effect of
adoption recognized at the beginning of the
earliest period presented or the effective date
method, which
the
beginning of the period of adoption through a
cumulative-effect adjustment.
retrospective
to
is
March 2017
January 1, 2019
Nonrefundable
Fees and Other
Costs
Modified
Retrospective
Early adoption
on January 1,
2019
Prospective
August 2018
Customer’s
Accounting for
Implementation
Costs Incurred
in a CCA that is
a Service
Contract
to
This update shortens the amortization period
for certain callable debt securities held at a
premium
the earliest call date. The
amendments do not require an accounting
change for securities held at a discount. Upon
adoption, entities are required to use a
modified retrospective transition with the
cumulative effect adjustment recognized to
retained earnings as of the beginning of the
period of adoption.
This update aligns the accounting for costs
incurred to implement a CCA that is a service
arrangement with the guidance on capitalizing
costs associated with developing or obtaining
internal-use software. In addition, this update
clarifies the financial statement presentation
requirement for capitalized implementation
costs and related amortization of such costs.
The adoption of this update did not have an
impact on our consolidated
financial
statements.
The adoption of this update did not have an
impact on our consolidated
financial
statements.
F-14
F-15
Table of Contents
New Accounting Pronouncement
Date Issued
and Topic
June 2016
Financial
Instruments-
Credit Losses
Description
the Company’s
Effective Date
January 1, 2020 The new standard requires the measurement
and recognition of expected credit losses using
the current expected credit loss model for
financial assets held at amortized cost, which
includes
trade accounts
receivable, certain financial instruments and
contract assets. It replaces the existing
incurred loss impairment model with an
expected loss methodology. The recorded
credit losses are adjusted each period for
changes in expected lifetime credit losses. The
standard
requires a cumulative effect
adjustment to the statement of financial
position as of the beginning of the first
reporting period in which the guidance is
effective.
Impact
We do not expect the adoption of this update
to have a material impact on our financial
statements.
Note 2 — Revenues
Disaggregation of Revenues
The tables below present disaggregated revenues from contracts with clients by client location, service line and contract-
type for each of our business segments. We believe this disaggregation best depicts how the nature, amount, timing and uncertainty
of our revenues and cash flows are affected by industry, market and other economic factors. Our consulting and technology services
include consulting, application development, systems integration, and application testing services as well as software solutions
and related services while our outsourcing services include application maintenance, infrastructure and business process services.
Revenues are attributed to geographic regions based upon client location. Substantially all of the revenue in our North America
region relates to operations in the United States.
Financial
Services
Healthcare
Year Ended
December 31, 2019
Products and
Resources
(in millions)
Communications,
Media and
Technology
Total
$
$
$
$
$
$
4,137
484
728
1,212
520
5,869
3,782
2,087
5,869
3,651
1,922
296
5,869
$
$
$
$
$
$
4,147
130
341
471
77
4,695
2,564
2,131
4,695
1,845
1,635
1,215
4,695
$
$
$
$
$
$
2,678
380
453
833
259
3,770
2,295
1,475
3,770
1,632
1,730
408
3,770
$
$
$
$
$
$
1,764
319
169
488
197
2,449
1,305
1,144
2,449
1,528
803
118
2,449
$
$
$
$
$
$
12,726
1,313
1,691
3,004
1,053
16,783
9,946
6,837
16,783
8,656
6,090
2,037
16,783
Revenues
Geography:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Service line:
Consulting and technology services
Outsourcing services
Total
Type of contract:
Time and materials
Fixed-price
Transaction or volume-based
Total
F-16
F-17
Table of Contents
Revenues (1)
Geography:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Service line:
Consulting and technology services
Outsourcing services
Total
Type of contract:
Time and materials
Fixed-price
Transaction or volume-based
Total
$
$
$
$
$
$
Financial
Services
Healthcare
Communications,
Media and
Technology
Total
Year Ended
December 31, 2018
Products and
Resources
(in millions)
4,162
$
4,254
$
2,397
$
1,480
$
12,293
91
270
361
53
358
440
798
220
344
187
531
186
1,274
1,563
2,837
995
5,845
$
4,668
$
3,415
$
2,197
$
16,125
$
$
$
2,553
2,115
4,668
1,836
1,852
980
$
$
$
2,024
1,391
3,415
1,506
1,521
388
1,161
1,036
2,197
$
$
9,309
6,816
16,125
1,366
$
734
97
8,470
5,966
1,689
5,845
$
4,668
$
3,415
$
2,197
$
16,125
481
666
1,147
536
3,571
2,274
5,845
3,762
1,859
224
$
$
$
(1)
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for
reporting periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior
period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies.
The following table presents information related to the capitalized costs to fulfill, such as setup or transition activities. Costs
to fulfill are recorded in "Other noncurrent assets" in our consolidated statements of financial position and the amortization expense
of costs to fulfill is included in "Cost of revenues" in our consolidated statement of operations. Costs to obtain contracts were
immaterial for the period disclosed.
Costs to Fulfill
Beginning balance
Costs capitalized
Amortization expense
Impairment charge
Ending balance
2019
2018
(in millions)
$
400
189
(79)
(25)
485
$
303
167
(70)
—
400
$
$
Table of Contents
New Accounting Pronouncement
Date Issued
and Topic
Financial
Instruments-
Credit Losses
Effective Date
Description
Impact
June 2016
January 1, 2020 The new standard requires the measurement
We do not expect the adoption of this update
to have a material impact on our financial
statements.
and recognition of expected credit losses using
the current expected credit loss model for
financial assets held at amortized cost, which
includes
the Company’s
trade accounts
receivable, certain financial instruments and
contract assets. It replaces the existing
incurred loss impairment model with an
expected loss methodology. The recorded
credit losses are adjusted each period for
changes in expected lifetime credit losses. The
standard
requires a cumulative effect
adjustment to the statement of financial
position as of the beginning of the first
reporting period in which the guidance is
effective.
Note 2 — Revenues
Disaggregation of Revenues
The tables below present disaggregated revenues from contracts with clients by client location, service line and contract-
type for each of our business segments. We believe this disaggregation best depicts how the nature, amount, timing and uncertainty
of our revenues and cash flows are affected by industry, market and other economic factors. Our consulting and technology services
include consulting, application development, systems integration, and application testing services as well as software solutions
and related services while our outsourcing services include application maintenance, infrastructure and business process services.
Revenues are attributed to geographic regions based upon client location. Substantially all of the revenue in our North America
region relates to operations in the United States.
Revenues
Geography:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Service line:
Consulting and technology services
Outsourcing services
Total
Type of contract:
Time and materials
Fixed-price
Transaction or volume-based
Total
$
$
$
$
$
$
Financial
Services
Healthcare
Communications,
Media and
Technology
Total
Year Ended
December 31, 2019
Products and
Resources
(in millions)
4,137
$
4,147
$
2,678
$
1,764
$
12,726
130
341
471
77
380
453
833
259
319
169
488
197
1,313
1,691
3,004
1,053
5,869
$
4,695
$
3,770
$
2,449
$
16,783
484
728
1,212
520
3,782
2,087
5,869
3,651
1,922
296
$
$
$
2,564
2,131
4,695
1,845
1,635
1,215
4,695
$
$
$
$
F-16
$
$
$
2,295
1,475
3,770
1,632
1,730
408
1,305
1,144
2,449
$
$
9,946
6,837
16,783
1,528
$
803
118
8,656
6,090
2,037
5,869
$
3,770
$
2,449
$
16,783
Table of Contents
Revenues (1)
Geography:
North America
United Kingdom
Continental Europe
Europe - Total
Rest of World
Total
Service line:
Consulting and technology services
Outsourcing services
Total
Type of contract:
Time and materials
Fixed-price
Transaction or volume-based
Total
Financial
Services
Healthcare
Year Ended
December 31, 2018
Products and
Resources
(in millions)
Communications,
Media and
Technology
Total
$
$
$
$
$
$
4,162
481
666
1,147
536
5,845
3,571
2,274
5,845
3,762
1,859
224
5,845
$
$
$
$
$
$
4,254
91
270
361
53
4,668
2,553
2,115
4,668
1,836
1,852
980
4,668
$
$
$
$
$
$
2,397
358
440
798
220
3,415
2,024
1,391
3,415
1,506
1,521
388
3,415
$
$
$
$
$
$
1,480
344
187
531
186
2,197
1,161
1,036
2,197
1,366
734
97
2,197
$
$
$
$
$
$
12,293
1,274
1,563
2,837
995
16,125
9,309
6,816
16,125
8,470
5,966
1,689
16,125
(1)
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for
reporting periods beginning on or after January 1, 2018 are presented under the New Revenue Standard, while prior
period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies.
Costs to Fulfill
The following table presents information related to the capitalized costs to fulfill, such as setup or transition activities. Costs
to fulfill are recorded in "Other noncurrent assets" in our consolidated statements of financial position and the amortization expense
of costs to fulfill is included in "Cost of revenues" in our consolidated statement of operations. Costs to obtain contracts were
immaterial for the period disclosed.
2019
2018
$
(in millions)
400
189
(79)
(25)
485
$
303
167
(70)
—
400
Beginning balance
Costs capitalized
Amortization expense
Impairment charge
Ending balance
$
$
F-17
Table of Contents
Contract Balances
Table of Contents
2019
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are
presented in "Other current assets" in our consolidated statements of financial position and primarily relate to unbilled amounts
on fixed-price contracts utilizing the cost to cost method of revenue recognition. The table below shows significant movements
in contract assets:
2019
2018
Beginning balance
Revenues recognized during the period but not billed
Amounts reclassified to trade accounts receivable
Ending balance
$
$
$
(in millions)
305
313
(284)
334
$
306
285
(286)
305
Our contract liabilities, or deferred revenue, consist of advance payments and billings in excess of revenues recognized. The
table below shows significant movements in the deferred revenue balances (current and noncurrent):
2019
2018
The allocations of preliminary purchase price to the fair value of the aggregate assets acquired and liabilities assumed were
Beginning balance
Amounts billed but not recognized as revenues
Revenues recognized related to the opening balance of deferred revenue
Other (1)
Ending balance
$
$
(1)
See the Business Combinations section in Note 1.
$
(in millions)
348
319
(261)
(70)
336
$
431
204
(287)
—
348
as follows:
Cash
Current assets
assets
Revenues recognized during the year ended December 31, 2019 for performance obligations satisfied or partially satisfied
in previous periods were immaterial.
Remaining Performance Obligations
As of December 31, 2019, the aggregate amount of transaction price allocated to remaining performance obligations, was
$1,647 million, of which approximately 70% is expected to be recognized as revenues within 2 years. Disclosure is not required
for performance obligations that meet any of the following criteria:
(1) contracts with a duration of one year or less as determined under the New Revenue Standard,
(2) contracts for which we recognize revenues based on the right to invoice for services performed,
(3) variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied
promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with
ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or
2018
In 2018, we completed the following five business combinations:
(4) variable consideration in the form of a sales-based or usage based royalty promised in exchange for a license of
• Bolder, a provider of revenue cycle management solutions to the healthcare industry in the United States.
intellectual property.
Many of our performance obligations meet one or more of these exemptions and therefore are not included in the remaining
performance obligation amount disclosed above.
Note 3 — Business Combinations
All acquisitions completed during the three years ended December 31, 2019, 2018 and 2017 were not individually or in the
aggregate material to our operations or cash flow. Accordingly, pro forma results have not been presented. We have allocated the
purchase price related to these transactions to tangible and intangible assets and liabilities, including non-deductible goodwill,
based on their estimated fair values. The primary items that generated goodwill are the value of the acquired assembled workforces
and synergies between the acquired companies and us, neither of which qualify as an amortizable intangible asset.
F-18
F-19
In 2019, we acquired 100% ownership in the following:
• Mustache, a creative content agency based in the United States, that extends our capabilities in creating original and
branded content for digital, broadcast and social mediums (acquired on January 15, 2019).
• Meritsoft, a financial software company based in Ireland, that complements our service offerings to capital markets
institutions (acquired on March 4, 2019).
• Samlink, a developer of services and solutions for the financial sector based in Finland, that strengthens our banking
capabilities and brings with it a strategic partnership with three Finnish financial institutions to transform and operate
a shared core banking platform (acquired on April 1, 2019).
• Zenith, a life sciences company based in Ireland, that extends our service capabilities for connected biopharmaceutical
and medical device manufacturers (acquired on July 29, 2019).
• Contino, a technology consulting firm that extends our capabilities in enterprise DevOps and cloud transformation
(acquired on October 31, 2019).
Property, plant and equipment and other noncurrent
Non-deductible goodwill
Customer relationship intangible assets
Other intangible assets
Current liabilities
Noncurrent liabilities
Contino
Meritsoft
Zenith
Others
Total
(dollars in millions)
$
$
14
$
$
$
7
16
4
198
29
2
(11)
(10)
6
1
147
46
29
(3)
(12)
9
52
6
76
73
4
(35)
(17)
15
21
14
21
19
6
(22)
(10)
Weighted
Average
Useful Life
10.7 years
6.1 years
45
95
25
442
167
41
(71)
(49)
695
Purchase price, inclusive of contingent consideration
$
235
$
228
$
168
$
64
$
For acquisitions completed in 2019, the allocation is preliminary and will be finalized as soon as practicable within the
measurement period, but in no event later than one year following the date of acquisition.
• Hedera Consulting, a business advisory and data analytics service provider in Belgium and the Netherlands.
• Softvision, a digital engineering and consulting company with significant operations in Romania and India that focuses
on agile development of custom cloud-based software and platforms for clients primarily in the United States.
• ATG, a United States based consulting company that helps companies plan, implement and optimize automated cloud-
based quote-to-cash business processes and technologies.
• SaaSfocus, a Salesforce services provider in Australia.
Table of Contents
Contract Balances
in contract assets:
Beginning balance
Ending balance
Revenues recognized during the period but not billed
Amounts reclassified to trade accounts receivable
presented in "Other current assets" in our consolidated statements of financial position and primarily relate to unbilled amounts
on fixed-price contracts utilizing the cost to cost method of revenue recognition. The table below shows significant movements
2019
2018
(in millions)
$
305
313
(284)
334
$
(in millions)
348
319
(261)
(70)
336
$
$
306
285
(286)
305
431
204
(287)
—
348
$
$
$
$
Our contract liabilities, or deferred revenue, consist of advance payments and billings in excess of revenues recognized. The
table below shows significant movements in the deferred revenue balances (current and noncurrent):
Amounts billed but not recognized as revenues
Revenues recognized related to the opening balance of deferred revenue
Beginning balance
Other (1)
Ending balance
(1)
See the Business Combinations section in Note 1.
in previous periods were immaterial.
Remaining Performance Obligations
Revenues recognized during the year ended December 31, 2019 for performance obligations satisfied or partially satisfied
As of December 31, 2019, the aggregate amount of transaction price allocated to remaining performance obligations, was
$1,647 million, of which approximately 70% is expected to be recognized as revenues within 2 years. Disclosure is not required
for performance obligations that meet any of the following criteria:
(1) contracts with a duration of one year or less as determined under the New Revenue Standard,
(2) contracts for which we recognize revenues based on the right to invoice for services performed,
(3) variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied
promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with
ASC 606-10-25-14(b), for which the criteria in ASC 606-10-32-40 have been met, or
Many of our performance obligations meet one or more of these exemptions and therefore are not included in the remaining
intellectual property.
performance obligation amount disclosed above.
Note 3 — Business Combinations
All acquisitions completed during the three years ended December 31, 2019, 2018 and 2017 were not individually or in the
aggregate material to our operations or cash flow. Accordingly, pro forma results have not been presented. We have allocated the
purchase price related to these transactions to tangible and intangible assets and liabilities, including non-deductible goodwill,
based on their estimated fair values. The primary items that generated goodwill are the value of the acquired assembled workforces
and synergies between the acquired companies and us, neither of which qualify as an amortizable intangible asset.
A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are
In 2019, we acquired 100% ownership in the following:
Table of Contents
2019
• Mustache, a creative content agency based in the United States, that extends our capabilities in creating original and
branded content for digital, broadcast and social mediums (acquired on January 15, 2019).
• Meritsoft, a financial software company based in Ireland, that complements our service offerings to capital markets
institutions (acquired on March 4, 2019).
• Samlink, a developer of services and solutions for the financial sector based in Finland, that strengthens our banking
capabilities and brings with it a strategic partnership with three Finnish financial institutions to transform and operate
a shared core banking platform (acquired on April 1, 2019).
• Zenith, a life sciences company based in Ireland, that extends our service capabilities for connected biopharmaceutical
and medical device manufacturers (acquired on July 29, 2019).
• Contino, a technology consulting firm that extends our capabilities in enterprise DevOps and cloud transformation
(acquired on October 31, 2019).
2019
2018
The allocations of preliminary purchase price to the fair value of the aggregate assets acquired and liabilities assumed were
as follows:
Cash
Current assets
Property, plant and equipment and other noncurrent
assets
Non-deductible goodwill
Customer relationship intangible assets
Other intangible assets
Current liabilities
Noncurrent liabilities
Purchase price, inclusive of contingent consideration
Contino
Meritsoft
Zenith
Others
Total
$
$
7
16
(dollars in millions)
$
14
6
9
52
$
4
198
29
2
(11)
(10)
235
$
1
147
46
29
(3)
(12)
228
$
6
76
73
4
(35)
(17)
168
$
$
$
15
21
45
95
14
21
19
6
(22)
(10)
64
$
25
442
167
41
(71)
(49)
695
Weighted
Average
Useful Life
10.7 years
6.1 years
(4) variable consideration in the form of a sales-based or usage based royalty promised in exchange for a license of
• Bolder, a provider of revenue cycle management solutions to the healthcare industry in the United States.
For acquisitions completed in 2019, the allocation is preliminary and will be finalized as soon as practicable within the
measurement period, but in no event later than one year following the date of acquisition.
2018
In 2018, we completed the following five business combinations:
• Hedera Consulting, a business advisory and data analytics service provider in Belgium and the Netherlands.
• Softvision, a digital engineering and consulting company with significant operations in Romania and India that focuses
on agile development of custom cloud-based software and platforms for clients primarily in the United States.
• ATG, a United States based consulting company that helps companies plan, implement and optimize automated cloud-
based quote-to-cash business processes and technologies.
• SaaSfocus, a Salesforce services provider in Australia.
F-18
F-19
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Table of Contents
The allocation of purchase price to the fair value of the aggregate assets acquired and liabilities assumed was as follows:
Note 4 — Restructuring Charges
Cash
Current assets
Property, plant and equipment and other noncurrent assets
Non-deductible goodwill
Customer relationship intangible assets
Other intangible assets
Trademark
Current liabilities
Noncurrent liabilities
Purchase price
Softvision
Bolder
Others
Total
( dollars in millions)
$
$
4
54
7
385
133
9
—
(47)
(4)
541
$
$
7
32
7
335
113
17
9
(11)
(37)
472
$
$
4
15
1
76
30
1
—
(9)
(9)
109
$
$
15
101
15
796
276
27
9
(67)
(50)
1,122
Weighted
Average
Useful Life
10.3 years
3.7 years
Indefinite
2017
In 2017, we completed the following five business combinations:
• Brilliant, an intelligent products and solutions company based in Japan specializing in digital strategy, product design
and engineering, the IoT, and enterprise mobility that expands our digital transformation portfolio and capabilities.
• Top Tier, a U.S. healthcare management consulting firm that strengthens our consulting service offerings within the
healthcare consulting market.
• TMG, a leading national provider of business process services to the U.S. government healthcare market that further
strengthens our business process-as-a-service solutions for government and public health programs.
• Netcentric, a provider of digital experience and marketing solutions for some of the world's most recognized brands
and an independent Adobe partner in Europe that will enhance our ability to deliver business critical digital experience
solutions.
• Zone, an independent full-service digital agency in the UK specializing in customer experience, digital strategy,
technology and content creation that will enhance and expand our digital interactive expertise in experience design,
human science-driven insights and analytics.
The allocation of purchase price to the fair value of the aggregate assets acquired and liabilities assumed was as follows:
The 2020 Fit for Growth Plan charges include $5 million of costs incurred in 2019 related to our exit from certain content-
Cash
Current assets
Property, plant and equipment and other noncurrent assets
Non-deductible goodwill
Customer relationship intangible assets
Other intangible assets
Current liabilities
Noncurrent liabilities
Purchase price
Weighted Average
Useful Life
10.6 years
2.4 years
Fair Value
(in millions)
8
$
47
19
125
147
4
(50)
(67)
233
$
Changes in our accrued employee separation costs, for both our realignment program and our 2020 Fit for Growth Plan,
included in "Accrued expenses and other current liabilities" in our consolidated statement of financial position, are presented in
The accrued employee separation costs as of December 31, 2017 were immaterial.
F-20
F-21
In 2017, we began a realignment program with the objective of improving our client focus, our cost structure and the efficiency
and effectiveness of our delivery while continuing to drive revenue growth. As part of the realignment program, we incurred
Executive Transition Costs, employee separation costs, employee retention costs and third party realignment costs. Our third party
realignment costs include professional fees related to the development of our realignment program and facility exit costs.
Over the next two years, we intend to implement our 2020 Fit for Growth Plan, which is expected to involve significant
investments in technology, sales and marketing, talent re-skilling, acquisitions and partnerships to further sharpen our strategic
positioning in key digital areas as well as our strategic decision to exit certain content-related services. The 2020 Fit for Growth
Plan involves certain measures, which commenced in the fourth quarter of 2019, to optimize our cost structure in order to partially
fund these investments and advance our growth agenda.
The total costs related to our realignment program and our 2020 Fit for Growth Plan are reported in "Restructuring charges"
in our consolidated statements of operations. We do not allocate these charges to individual segments in internal management
reports used by the chief operating decision maker. Accordingly, such expenses are separately disclosed in our segment reporting
as “unallocated costs”. See Note 19.
Charges related to our realignment program and our 2020 Fit for Growth Plan were as follows:
Realignment Program:
Employee separation costs
Executive Transition Costs
Employee retention costs
Third party realignment costs
2020 Fit for Growth Plan:
Employee separation costs
Employee retention costs
Facility exit costs
Total restructuring charges
related services.
the table below.
Balance - December 31, 2018
Employee separation costs accrued
Payments made
Balance - December 31, 2019
Years Ended December 31,
2019
2018
2017
(in millions)
$
$
$
$
217
$
$
64
22
45
38
45
2
1
$
$
18
—
—
1
—
—
—
19
(in millions)
53
—
—
19
—
—
—
72
—
109
62
47
Table of Contents
Table of Contents
The allocation of purchase price to the fair value of the aggregate assets acquired and liabilities assumed was as follows:
Note 4 — Restructuring Charges
Cash
Current assets
Property, plant and equipment and other noncurrent assets
Non-deductible goodwill
Customer relationship intangible assets
Other intangible assets
Trademark
Current liabilities
Noncurrent liabilities
Purchase price
2017
Softvision
Bolder
Others
Total
( dollars in millions)
$
$
$
$
4
54
7
385
133
9
—
(47)
(4)
7
32
7
335
113
17
9
(11)
(37)
4
15
1
76
30
1
—
(9)
(9)
$
541
$
472
$
109
$
1,122
Weighted
Average
Useful Life
10.3 years
3.7 years
Indefinite
15
101
15
796
276
27
9
(67)
(50)
In 2017, we completed the following five business combinations:
• Brilliant, an intelligent products and solutions company based in Japan specializing in digital strategy, product design
and engineering, the IoT, and enterprise mobility that expands our digital transformation portfolio and capabilities.
• Top Tier, a U.S. healthcare management consulting firm that strengthens our consulting service offerings within the
healthcare consulting market.
• TMG, a leading national provider of business process services to the U.S. government healthcare market that further
strengthens our business process-as-a-service solutions for government and public health programs.
• Netcentric, a provider of digital experience and marketing solutions for some of the world's most recognized brands
and an independent Adobe partner in Europe that will enhance our ability to deliver business critical digital experience
solutions.
• Zone, an independent full-service digital agency in the UK specializing in customer experience, digital strategy,
technology and content creation that will enhance and expand our digital interactive expertise in experience design,
human science-driven insights and analytics.
The allocation of purchase price to the fair value of the aggregate assets acquired and liabilities assumed was as follows:
In 2017, we began a realignment program with the objective of improving our client focus, our cost structure and the efficiency
and effectiveness of our delivery while continuing to drive revenue growth. As part of the realignment program, we incurred
Executive Transition Costs, employee separation costs, employee retention costs and third party realignment costs. Our third party
realignment costs include professional fees related to the development of our realignment program and facility exit costs.
Over the next two years, we intend to implement our 2020 Fit for Growth Plan, which is expected to involve significant
investments in technology, sales and marketing, talent re-skilling, acquisitions and partnerships to further sharpen our strategic
positioning in key digital areas as well as our strategic decision to exit certain content-related services. The 2020 Fit for Growth
Plan involves certain measures, which commenced in the fourth quarter of 2019, to optimize our cost structure in order to partially
fund these investments and advance our growth agenda.
The total costs related to our realignment program and our 2020 Fit for Growth Plan are reported in "Restructuring charges"
in our consolidated statements of operations. We do not allocate these charges to individual segments in internal management
reports used by the chief operating decision maker. Accordingly, such expenses are separately disclosed in our segment reporting
as “unallocated costs”. See Note 19.
Charges related to our realignment program and our 2020 Fit for Growth Plan were as follows:
Realignment Program:
Employee separation costs
Executive Transition Costs
Employee retention costs
Third party realignment costs
2020 Fit for Growth Plan:
Employee separation costs
Employee retention costs
Facility exit costs
Total restructuring charges
Years Ended December 31,
2019
2018
2017
(in millions)
$
$
64
22
45
38
45
2
1
$
217
$
18
—
—
1
—
—
—
19
$
$
53
—
—
19
—
—
—
72
Property, plant and equipment and other noncurrent assets
Non-deductible goodwill
Customer relationship intangible assets
Cash
Current assets
Other intangible assets
Current liabilities
Noncurrent liabilities
Purchase price
Fair Value
(in millions)
Weighted Average
Useful Life
$
$
8
47
19
125
147
4
(50)
(67)
233
The 2020 Fit for Growth Plan charges include $5 million of costs incurred in 2019 related to our exit from certain content-
related services.
Changes in our accrued employee separation costs, for both our realignment program and our 2020 Fit for Growth Plan,
included in "Accrued expenses and other current liabilities" in our consolidated statement of financial position, are presented in
the table below.
10.6 years
2.4 years
Balance - December 31, 2018
Employee separation costs accrued
Payments made
Balance - December 31, 2019
The accrued employee separation costs as of December 31, 2017 were immaterial.
(in millions)
—
109
62
47
$
$
F-20
F-21
Table of Contents
Note 5 — Investments
Our investments were as follows as of December 31:
Short-term investments:
Equity investment security
Available-for-sale investment securities
Held-to-maturity investment securities
Time deposits (1)
Total short-term investments
Long-term investments:
Equity and cost method investments
Held-to-maturity investment securities
Total long-term investments
2019
2018
(in millions)
$
$
$
$
26
—
287
466
779
17
—
17
$
$
$
$
25
1,760
1,065
500
3,350
74
6
80
(1)
Includes $414 million and $423 million in restricted time deposits as of December 31, 2019 and December 31, 2018,
respectively. See Note 11.
Equity Investment Security
Our equity investment security is a U.S. dollar denominated investment in a fixed income mutual fund. Realized and unrealized
The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at December 31,
gains and losses were immaterial for the years ended December 31, 2019 and 2018.
2019 were as follows:
Available-for-Sale Investment Securities
During 2019, all of our available-for-sale investment securities either matured or were sold. We determine the cost of the
securities sold based on the specific identification method. Proceeds from sales of available-for-sale investment securities and the
gross gains and losses that have been included in earnings as a result of those sales were as follows:
Short-term investments, due within one year:
Corporate and other debt securities
Commercial paper
2019
2018
2017
Total short-term held-to-maturity investments
Proceeds from sales of available-for-sale investment securities
Gross gains
Gross losses
Net realized gains (losses) on sales of available-for-sale investment securities
(in millions)
$
$
$
1,712
6
(5)
1
$
$
$
1,285
$
2,922
— $
(4)
(4)
$
1
(3)
(2)
The amortized cost, gross unrealized gains and losses and fair value of available-for-sale investment securities at December 31,
2018 were as follows:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury and agency debt securities
Corporate and other debt securities
Certificates of deposit and commercial paper
Asset-backed securities
Municipal debt securities
$
$
630
420
296
336
90
Total available-for-sale investment securities
$
1,772
$
(in millions)
1
—
—
—
—
1
$
$
(6)
(4)
—
(2)
(1)
(13)
$
625
416
296
334
89
$
1,760
F-22
Table of Contents
The fair value and related unrealized losses of available-for-sale investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2018:
U.S. Treasury and agency debt securities
$
$
— $
$
$
$
Corporate and other debt securities
Certificates of deposit and commercial paper
Asset-backed securities
Municipal debt securities
Total
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
84
108
295
93
17
(1)
—
—
—
(in millions)
446
254
—
179
64
943
(6)
(3)
—
(2)
(1)
530
362
295
272
81
(6)
(4)
—
(2)
(1)
$
597
$
(1)
$
$
(12)
$
1,540
$
(13)
The unrealized losses for the above securities as of December 31, 2018 were primarily attributable to changes in interest
rates. The gross unrealized gains and losses in the above tables were recorded, net of tax, in "Accumulated other comprehensive
income (loss)" in our consolidated statement of financial position.
Held-to-Maturity Investment Securities
Our held-to-maturity investment securities consist of Indian rupee denominated investments primarily in commercial paper
and international corporate bonds. Our investment guidelines are to purchase securities that are investment grade at the time of
acquisition. We monitor the credit ratings of the securities in our portfolio on an ongoing basis. The basis for the measurement of
fair value of our held-to-maturity investments is Level 2 in the fair value hierarchy.
The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at December 31,
2018 were as follows:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
(in millions)
101
186
287
$
$
— $
— $
—
—
— $
— $
101
186
287
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
(in millions)
$
— $
— $
546
519
1,065
6
—
—
—
546
518
1,064
6
(1)
(1)
—
(1)
Short-term investments:
Corporate and other debt securities
Commercial paper
Total short-term held-to-maturity investments
Long-term investments:
Corporate and other debt securities
Total held-to-maturity investment securities
$
1,071
$
— $
$
1,070
$
$
$
F-23
$
597
$
$
84
108
295
93
17
Asset-backed securities
Municipal debt securities
Total
U.S. Treasury and agency debt securities
$
Corporate and other debt securities
Certificates of deposit and commercial paper
— $
(1)
—
—
—
(1)
$
(in millions)
446
254
—
179
64
943
$
$
(6)
(3)
—
(2)
(1)
(12)
$
$
530
362
295
272
81
$
1,540
$
(6)
(4)
—
(2)
(1)
(13)
Table of Contents
The fair value and related unrealized losses of available-for-sale investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2018:
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Table of Contents
Note 5 — Investments
Our investments were as follows as of December 31:
Short-term investments:
Equity investment security
Available-for-sale investment securities
Held-to-maturity investment securities
Time deposits (1)
Total short-term investments
Long-term investments:
Equity and cost method investments
Held-to-maturity investment securities
Total long-term investments
respectively. See Note 11.
Equity Investment Security
Available-for-Sale Investment Securities
2019
2018
(in millions)
$
$
$
$
26
—
287
466
779
17
—
17
$
$
$
$
25
1,760
1,065
500
3,350
74
6
80
Gross gains
Gross losses
Net realized gains (losses) on sales of available-for-sale investment securities
$
$
$
(in millions)
$
$
$
— $
(4)
(4)
$
1
(3)
(2)
The amortized cost, gross unrealized gains and losses and fair value of available-for-sale investment securities at December 31,
2018 were as follows:
U.S. Treasury and agency debt securities
Corporate and other debt securities
Certificates of deposit and commercial paper
Asset-backed securities
Municipal debt securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
$
$
$
(in millions)
630
420
296
336
90
(6)
(4)
—
(2)
(1)
625
416
296
334
89
Total available-for-sale investment securities
$
1,772
$
$
(13)
$
1,760
6
(5)
1
1
—
—
—
—
1
(1)
Includes $414 million and $423 million in restricted time deposits as of December 31, 2019 and December 31, 2018,
The unrealized losses for the above securities as of December 31, 2018 were primarily attributable to changes in interest
rates. The gross unrealized gains and losses in the above tables were recorded, net of tax, in "Accumulated other comprehensive
income (loss)" in our consolidated statement of financial position.
Held-to-Maturity Investment Securities
Our held-to-maturity investment securities consist of Indian rupee denominated investments primarily in commercial paper
and international corporate bonds. Our investment guidelines are to purchase securities that are investment grade at the time of
acquisition. We monitor the credit ratings of the securities in our portfolio on an ongoing basis. The basis for the measurement of
fair value of our held-to-maturity investments is Level 2 in the fair value hierarchy.
Our equity investment security is a U.S. dollar denominated investment in a fixed income mutual fund. Realized and unrealized
The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at December 31,
gains and losses were immaterial for the years ended December 31, 2019 and 2018.
2019 were as follows:
During 2019, all of our available-for-sale investment securities either matured or were sold. We determine the cost of the
securities sold based on the specific identification method. Proceeds from sales of available-for-sale investment securities and the
gross gains and losses that have been included in earnings as a result of those sales were as follows:
Short-term investments, due within one year:
Corporate and other debt securities
Commercial paper
2019
2018
2017
Total short-term held-to-maturity investments
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
$
101
186
287
$
$
(in millions)
— $
—
— $
— $
—
— $
101
186
287
Proceeds from sales of available-for-sale investment securities
1,712
1,285
$
2,922
The amortized cost, gross unrealized gains and losses and fair value of held-to-maturity investment securities at December 31,
2018 were as follows:
Short-term investments:
Corporate and other debt securities
Commercial paper
Total short-term held-to-maturity investments
Long-term investments:
Corporate and other debt securities
Total held-to-maturity investment securities
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
$
546
519
1,065
6
1,071
$
$
(in millions)
— $
—
—
—
— $
— $
(1)
(1)
—
(1)
$
546
518
1,064
6
1,070
F-22
F-23
Table of Contents
Table of Contents
The fair value and related unrealized losses of held-to-maturity investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2019:
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Corporate and other debt securities
Commercial Paper
Total
$
$
42
70
112
$
$
— $
—
— $
(in millions)
— $
—
— $
— $
—
— $
42
70
112
$
$
—
—
—
The fair value and related unrealized losses of held-to-maturity investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2018:
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Corporate and other debt securities
Commercial paper
Total
$
$
263
268
531
$
$
— $
(1)
(1)
$
$
(in millions)
57
—
57
$
— $
—
— $
320
268
588
$
$
—
(1)
(1)
At each reporting date, the Company performs an evaluation of held-to-maturity securities to determine if the unrealized
losses are other-than-temporary. We do not consider any of the investments to be other-than-temporarily impaired as of
December 31, 2019.
During the years ended December 31, 2019 and 2018, there were no transfers of investments between our available-for-sale
and held-to-maturity investment portfolios.
Equity and Cost Method Investments
As of December 31, 2019 and 2018, we had equity method investments of $9 million and $66 million, respectively, which
primarily consist of a 49% ownership interest in a strategic consulting firm specializing in the use of human sciences to help
business leaders better understand customer behavior. Our investments are assessed for impairment whenever factors indicate an
other-than-temporary decline in carrying value has occurred. As a result of recent events indicating one of our investments
experienced an other-than-temporary impairment, we assessed its fair value and determined that the carrying value exceeded the
fair value. As such, we recorded an impairment charge of $57 million in the fourth quarter of 2019 within the caption "Income
(loss) from equity method investments" in our consolidated statement of operations. In determining the fair value of the equity
method investment we considered results from the following valuation methodologies: income approach, based on discounted
future cash flows, market approach, based on current market multiples and net asset value approach, based on the assets and
liabilities of the investee. The basis for the measurement of fair value for this equity method investment is Level 3 in the fair value
hierarchy.
As of December 31, 2019 and 2018, we had cost method investments of $8 million.
Adoption of the New Lease Standard
F-24
F-25
Note 6 — Property and Equipment, net
Property and equipment were as follows as of December 31:
Buildings
Computer equipment
Computer software
Furniture and equipment
Land
Leasehold land
Capital work-in-progress
Leasehold improvements
Sub-total
Estimated Useful Life (Years)
2019
2018
$
(in millions)
$
30
3 – 5
3 – 8
5 – 9
lease term
Shorter of the lease term or
the life of the asset
790
516
820
702
11
—
133
379
3,351
(2,042)
839
412
721
639
19
60
156
338
3,184
(1,790)
1,394
Accumulated depreciation and amortization
Property and equipment, net
$
1,309
$
Depreciation and amortization expense related to property and equipment was $363 million, $347 million and $313 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
The gross amount of property and equipment recorded under finance leases was $30 million as of December 31, 2019. The
gross amount of property and equipment recorded under capital leases was $73 million as of December 31, 2018. In 2019, as a
result of the adoption of the New Lease Standard, we reclassified leasehold land and a built-to-suit building lease asset from
"Property and equipment, net" to "Operating lease assets, net". See Note 7 for additional information. Accumulated amortization
and amortization expense for our finance lease assets was $14 million as of December 31, 2019 and $11 million for the year ended
December 31, 2019, respectively. Accumulated amortization and amortization expense related to our capital lease assets were
immaterial as of and for the years ended December 31, 2018 and 2017.
The gross amount of property and equipment recorded for software to be sold, leased or marketed reported in the caption
"Computer software" above was $129 million and $85 million, as of December 31, 2019 and 2018, respectively. Accumulated
amortization for software to be sold, leased or marketed was $46 million and $24 million as of December 31, 2019 and 2018,
respectively. Amortization expense for software to be sold, leased or marketed recorded as property and equipment was $22 million
and $14 million for the years ended December 31, 2019 and 2018 respectively, and was immaterial for the year ended December
31, 2017.
Note 7 — Leases
On January 1, 2019, we adopted the New Lease Standard using the effective date method applied to all lease contracts
existing as of January 1, 2019. Under the effective date method, results for reporting periods beginning on or after January 1, 2019
are presented under the New Lease Standard. We elected the package of practical expedients that permits us to not reassess prior
conclusions related to contracts containing leases, lease classification and initial direct costs. Prior period amounts are not adjusted
and continue to be reported in accordance with our historical accounting policies.
Table of Contents
Table of Contents
The fair value and related unrealized losses of held-to-maturity investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2019:
Corporate and other debt securities
Commercial Paper
Total
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in millions)
42
70
112
$
$
— $
— $
— $
—
—
—
— $
— $
— $
42
70
112
$
$
—
—
—
The fair value and related unrealized losses of held-to-maturity investment securities in a continuous unrealized loss position
for less than 12 months and for 12 months or longer were as follows as of December 31, 2018:
Corporate and other debt securities
Commercial paper
Total
Less than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
263
268
531
$
$
— $
(1)
(1)
$
(in millions)
57
—
57
$
$
— $
—
— $
320
268
588
$
$
—
(1)
(1)
At each reporting date, the Company performs an evaluation of held-to-maturity securities to determine if the unrealized
losses are other-than-temporary. We do not consider any of the investments to be other-than-temporarily impaired as of
December 31, 2019.
During the years ended December 31, 2019 and 2018, there were no transfers of investments between our available-for-sale
$
$
$
$
and held-to-maturity investment portfolios.
Equity and Cost Method Investments
As of December 31, 2019 and 2018, we had equity method investments of $9 million and $66 million, respectively, which
primarily consist of a 49% ownership interest in a strategic consulting firm specializing in the use of human sciences to help
business leaders better understand customer behavior. Our investments are assessed for impairment whenever factors indicate an
other-than-temporary decline in carrying value has occurred. As a result of recent events indicating one of our investments
experienced an other-than-temporary impairment, we assessed its fair value and determined that the carrying value exceeded the
fair value. As such, we recorded an impairment charge of $57 million in the fourth quarter of 2019 within the caption "Income
(loss) from equity method investments" in our consolidated statement of operations. In determining the fair value of the equity
method investment we considered results from the following valuation methodologies: income approach, based on discounted
future cash flows, market approach, based on current market multiples and net asset value approach, based on the assets and
liabilities of the investee. The basis for the measurement of fair value for this equity method investment is Level 3 in the fair value
hierarchy.
Note 6 — Property and Equipment, net
Property and equipment were as follows as of December 31:
Buildings
Computer equipment
Computer software
Furniture and equipment
Land
Leasehold land
Capital work-in-progress
Leasehold improvements
Sub-total
Accumulated depreciation and amortization
Property and equipment, net
Estimated Useful Life (Years)
2019
2018
30
3 – 5
3 – 8
5 – 9
lease term
Shorter of the lease term or
the life of the asset
(in millions)
$
790
516
820
702
11
—
133
839
412
721
639
19
60
156
379
3,351
(2,042)
1,309
$
338
3,184
(1,790)
1,394
$
$
Depreciation and amortization expense related to property and equipment was $363 million, $347 million and $313 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
The gross amount of property and equipment recorded under finance leases was $30 million as of December 31, 2019. The
gross amount of property and equipment recorded under capital leases was $73 million as of December 31, 2018. In 2019, as a
result of the adoption of the New Lease Standard, we reclassified leasehold land and a built-to-suit building lease asset from
"Property and equipment, net" to "Operating lease assets, net". See Note 7 for additional information. Accumulated amortization
and amortization expense for our finance lease assets was $14 million as of December 31, 2019 and $11 million for the year ended
December 31, 2019, respectively. Accumulated amortization and amortization expense related to our capital lease assets were
immaterial as of and for the years ended December 31, 2018 and 2017.
The gross amount of property and equipment recorded for software to be sold, leased or marketed reported in the caption
"Computer software" above was $129 million and $85 million, as of December 31, 2019 and 2018, respectively. Accumulated
amortization for software to be sold, leased or marketed was $46 million and $24 million as of December 31, 2019 and 2018,
respectively. Amortization expense for software to be sold, leased or marketed recorded as property and equipment was $22 million
and $14 million for the years ended December 31, 2019 and 2018 respectively, and was immaterial for the year ended December
31, 2017.
Note 7 — Leases
As of December 31, 2019 and 2018, we had cost method investments of $8 million.
Adoption of the New Lease Standard
On January 1, 2019, we adopted the New Lease Standard using the effective date method applied to all lease contracts
existing as of January 1, 2019. Under the effective date method, results for reporting periods beginning on or after January 1, 2019
are presented under the New Lease Standard. We elected the package of practical expedients that permits us to not reassess prior
conclusions related to contracts containing leases, lease classification and initial direct costs. Prior period amounts are not adjusted
and continue to be reported in accordance with our historical accounting policies.
F-24
F-25
Table of Contents
Table of Contents
The impact of adoption primarily relates to the recognition of ROU operating lease assets and operating lease liabilities on
our consolidated statement of financial position for all operating leases with a term greater than twelve months. The accounting
for our finance leases remained substantially unchanged. The following table provides the impact of adoption of the New Lease
Standard on our consolidated statement of financial position as of January 1, 2019:
Location on Statement of Financial Position
Property and equipment, net(1)
Operating lease assets, net(1) (2) (3)
Total assets
Operating lease liabilities(2) (3)
Operating lease liabilities, noncurrent(2) (3)
Accrued expenses and other liabilities(3)
Other noncurrent liabilities(3)
Total liabilities
Retained earnings(4)
January 1, 2019
(in millions)
(81)
839
758
191
670
(10)
(95)
756
2
$
$
$
$
$
(1)
(2)
(3)
Reflects the reclassification of leasehold land and a built-to-suit lease asset from "Property and equipment, net" to
"Operating lease assets, net".
Represents the recognition of operating lease assets and liabilities (current and noncurrent), as defined by the New Lease
Standard, including the liability for a built-to-suit lease that was previously accounted for as a capital lease under the
former lease guidance.
Represents the reclassification of deferred rent from "Accrued expenses and other liabilities" and "Other noncurrent
liabilities" to "Operating lease assets, net" and the reclassification of built-to-suit lease liabilities from "Accrued expenses
and other liabilities" and "Other noncurrent liabilities" to "Operating lease liabilities" and "Operating lease liabilities,
noncurrent".
(4)
Represents the net impact of the derecognition of a built-to-suit lease under the former lease guidance and the re-
establishment of that lease as an operating lease under the New Lease Standard.
The adoption of the New Lease Standard did not materially impact our consolidated statement of operations or our consolidated
statement of cash flows.
The following table provides information on the weighted average remaining lease term and weighted average discount rate
for our operating leases:
Operating Lease Term and Discount Rate
Weighted average remaining lease term
Weighted-average discount rate
The following table provides supplemental cash flow information related to our operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities
$
ROU assets obtained in exchange for operating lease liabilities
Cash paid for amounts included in the measurement of finance lease liabilities and ROU assets obtained in exchange for
finance lease liabilities were each immaterial for the year ended December 31, 2019.
The following table provides the schedule of maturities of our operating lease liabilities, under the New Lease Standard, as
The following table provides information on the components of our operating and finance leases included in our consolidated
2018, which were accounted for in accordance with our historical accounting policies.
The following table provides the schedule of our future minimum payments on our operating leases, as of December 31,
statement of financial position:
Leases
Assets
Location on Statement of Financial Position
December 31, 2019
(in millions)
ROU operating lease assets
Operating lease assets, net
ROU finance lease assets
Property and equipment, net
Total
Liabilities
Current
Operating lease
Finance lease
Noncurrent
Operating lease
Finance lease
Operating lease liabilities
Accrued expenses and other current liabilities
Operating lease liabilities, noncurrent
Other noncurrent liabilities
Total
$
$
$
$
926
16
942
202
11
745
15
973
Our operating lease cost was $264 million for the year ended December 31, 2019 and included $18 million of variable lease
cost. Our short term lease rental expense was $16 million for the year ended December 31, 2019. Lease interest expense related
to our finance leases for year ended December 31, 2019 was immaterial.
F-26
F-27
As of December 31, 2019, we had $316 million of additional obligations related to operating leases whose lease term had
yet to commence and which are therefore not included in our statement of financial position. These leases are primarily related to
real estate and will commence in various months in 2020 and 2021 with lease terms of 1 year to 11 years.
of December 31, 2019:
2020
2021
2022
2023
2024
Thereafter
Interest
Total lease payments
Total lease liabilities
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
December 31, 2019
6.0 years
6.0%
2019
(in millions)
232
274
Operating lease
obligations
(in millions)
249
217
167
132
96
273
1,134
(187)
947
226
197
157
121
90
197
988
Operating lease
obligations
(in millions)
$
$
$
Location on Statement of Financial Position
Property and equipment, net(1)
Operating lease assets, net(1) (2) (3)
Total assets
Operating lease liabilities(2) (3)
Operating lease liabilities, noncurrent(2) (3)
Accrued expenses and other liabilities(3)
Other noncurrent liabilities(3)
Total liabilities
Retained earnings(4)
Table of Contents
Table of Contents
The impact of adoption primarily relates to the recognition of ROU operating lease assets and operating lease liabilities on
The following table provides information on the weighted average remaining lease term and weighted average discount rate
our consolidated statement of financial position for all operating leases with a term greater than twelve months. The accounting
for our operating leases:
for our finance leases remained substantially unchanged. The following table provides the impact of adoption of the New Lease
Standard on our consolidated statement of financial position as of January 1, 2019:
January 1, 2019
(in millions)
Operating Lease Term and Discount Rate
Weighted average remaining lease term
Weighted-average discount rate
The following table provides supplemental cash flow information related to our operating leases:
Cash paid for amounts included in the measurement of operating lease liabilities
$
ROU assets obtained in exchange for operating lease liabilities
December 31, 2019
6.0 years
6.0%
2019
(in millions)
232
274
Cash paid for amounts included in the measurement of finance lease liabilities and ROU assets obtained in exchange for
finance lease liabilities were each immaterial for the year ended December 31, 2019.
The following table provides the schedule of maturities of our operating lease liabilities, under the New Lease Standard, as
"Operating lease assets, net".
former lease guidance.
noncurrent".
(1)
Reflects the reclassification of leasehold land and a built-to-suit lease asset from "Property and equipment, net" to
(2)
Represents the recognition of operating lease assets and liabilities (current and noncurrent), as defined by the New Lease
Standard, including the liability for a built-to-suit lease that was previously accounted for as a capital lease under the
(3)
Represents the reclassification of deferred rent from "Accrued expenses and other liabilities" and "Other noncurrent
liabilities" to "Operating lease assets, net" and the reclassification of built-to-suit lease liabilities from "Accrued expenses
and other liabilities" and "Other noncurrent liabilities" to "Operating lease liabilities" and "Operating lease liabilities,
(4)
Represents the net impact of the derecognition of a built-to-suit lease under the former lease guidance and the re-
establishment of that lease as an operating lease under the New Lease Standard.
The adoption of the New Lease Standard did not materially impact our consolidated statement of operations or our consolidated
of December 31, 2019:
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Interest
Total lease liabilities
Operating lease
obligations
(in millions)
249
217
167
132
96
273
1,134
(187)
947
$
The following table provides information on the components of our operating and finance leases included in our consolidated
2018, which were accounted for in accordance with our historical accounting policies.
The following table provides the schedule of our future minimum payments on our operating leases, as of December 31,
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Operating lease
obligations
(in millions)
$
$
226
197
157
121
90
197
988
As of December 31, 2019, we had $316 million of additional obligations related to operating leases whose lease term had
yet to commence and which are therefore not included in our statement of financial position. These leases are primarily related to
real estate and will commence in various months in 2020 and 2021 with lease terms of 1 year to 11 years.
Location on Statement of Financial Position
December 31, 2019
(in millions)
statement of cash flows.
statement of financial position:
Leases
Assets
ROU operating lease assets
Operating lease assets, net
ROU finance lease assets
Property and equipment, net
Total
Liabilities
Current
Operating lease
Finance lease
Noncurrent
Operating lease
Finance lease
Operating lease liabilities
Accrued expenses and other current liabilities
Operating lease liabilities, noncurrent
Other noncurrent liabilities
Total
$
$
$
$
$
$
$
$
$
(81)
839
758
191
670
(10)
(95)
756
2
926
16
942
202
11
745
15
973
Our operating lease cost was $264 million for the year ended December 31, 2019 and included $18 million of variable lease
cost. Our short term lease rental expense was $16 million for the year ended December 31, 2019. Lease interest expense related
to our finance leases for year ended December 31, 2019 was immaterial.
F-26
F-27
(in millions)
$
152
365
152
126
795
$
$
265
2,106
240
93
2,704
$
$
(6)
(2)
(8)
(2)
(18)
$
$
411
2,469
384
217
3,481
January 1,
2018
Goodwill
Additions and
Adjustments
Foreign Currency
Translation
Adjustments
December
31, 2018
(1)
See the Business Combinations section in Note 1.
Segment
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total goodwill
Table of Contents
Table of Contents
Note 8 — Goodwill and Intangible Assets, net
Note 9 — Accrued Expenses and Other Current Liabilities
Changes in goodwill by our reportable segments were as follows for the years ended December 31, 2019 and 2018:
Accrued expenses and other current liabilities were as follows as of December 31:
Segment
January 1,
2019
Goodwill
Additions and
Adjustments
Foreign Currency
Translation
Adjustments
(in millions)
Other(1)
December 31,
2019
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total goodwill
$
$
411
2,469
384
217
3,481
$
$
288
86
18
49
441
$
$
$
(2)
—
1
1
— $
3
40
14
—
57
$
$
700
2,595
417
267
3,979
2019
2018
(in millions)
$
1,239
$
251
8
—
152
137
24
380
1,216
256
25
28
162
110
34
369
Compensation and benefits
Customer volume and other incentives (1)
Derivative financial instruments
FCPA Accrual (2)
Income taxes
Professional fees
Travel and entertainment
Other
(1)
(2)
Refer to Note 15.
Note 10 — Debt
Total accrued expenses and other current liabilities
$
2,191
$
2,200
See the Trade Accounts Receivable, Contract Assets and Contract Liabilities section in Note 1.
In 2018, we entered into a Credit Agreement providing for a $750 million Term Loan and a $1,750 million unsecured revolving
credit facility, which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly
The Credit Agreement requires interest to be paid, at our option, at either the ABR or the Eurocurrency Rate (each as defined
in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable
Margin is 0.875% with respect to Eurocurrency Rate loans and 0.00% with respect to ABR loans. Subsequently, the Applicable
Margin with respect to Eurocurrency Rate loans may range from 0.75% to 1.125%, depending on our public debt ratings (or, if
we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of
indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement). Under the Credit Agreement,
we are required to pay commitment fees on the unused portion of the revolving credit facility, which vary based on our public
debt ratings (or, if we have not received public debt ratings, on the Leverage Ratio). As the interest rates on our Term Loan and
any notes outstanding under the revolving credit facility are variable, the fair value of our debt balances approximates their carrying
value as of December 31, 2019 and 2018.
The Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. The financial
covenant is tested at the end of each fiscal quarter and requires us to maintain a Leverage Ratio, which is the ratio of indebtedness
for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement, not in excess of 3.50 to 1.00, or for a period
of up to four quarters following certain material acquisitions, 3.75 to 1.00. We were in compliance with all debt covenants and
representations of the Credit Agreement as of December 31, 2019.
Short-term Debt
The following summarizes our short-term debt balances as of December 31:
Term loan - current maturities
$
38
2.6% $
9
3.3%
2019
Weighted Average
Interest Rate
Amount
(in millions)
Amount
(in millions)
2018
Weighted Average
Interest Rate
F-29
Based on our most recent goodwill impairment assessment performed as of October 31, 2019, we concluded that the goodwill
principal payments on the Term Loan.
in each of our reporting units was not at risk of impairment. We have not recognized any impairment losses on our goodwill.
Components of intangible assets were as follows as of December 31:
2019
2018
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
Customer relationships
Developed technology
Indefinite life trademarks
Other
Total intangible assets
$
1,181
388
72
71
1,712
$
$
(390)
(239)
—
(42)
(671)
$
$
$
(in millions)
791
149
72
29
1,041
$
1,277
355
72
64
1,768
$
$
(398)
(187)
—
(33)
(618)
$
$
879
168
72
31
1,150
Other than certain trademarks with indefinite lives, our intangible assets have finite lives and, as such, are subject to
amortization. Amortization of intangible assets totaled $162 million for 2019, $151 million for 2018 and $130 million for 2017.
The following table provides the estimated amortization expense related to our existing intangible assets for the next five
In 2019, our India subsidiary entered into a 13 billion Indian rupee ($182 million at the December 31, 2019 exchange rate)
years.
working capital facility, which requires us to repay any balances within 90 days from the date of disbursement.
Estimated Amortization
(in millions)
144
140
132
90
83
2020
2021
2022
2023
2024
$
F-28
$
Table of Contents
Table of Contents
Note 8 — Goodwill and Intangible Assets, net
Note 9 — Accrued Expenses and Other Current Liabilities
Changes in goodwill by our reportable segments were as follows for the years ended December 31, 2019 and 2018:
Accrued expenses and other current liabilities were as follows as of December 31:
Segment
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
January 1,
2019
Goodwill
Additions and
Adjustments
Foreign Currency
Translation
Adjustments
(in millions)
Other(1)
December 31,
2019
$
$
288
$
$
$
411
2,469
384
217
86
18
49
(2)
—
1
1
3
40
14
—
57
700
2,595
417
267
Total goodwill
$
3,481
$
441
$
— $
$
3,979
(1)
See the Business Combinations section in Note 1.
Segment
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total goodwill
January 1,
2018
Goodwill
Additions and
Adjustments
Foreign Currency
Translation
Adjustments
December
31, 2018
$
$
265
2,106
240
93
$
2,704
$
(in millions)
152
365
152
126
795
$
$
$
(6)
(2)
(8)
(2)
411
2,469
384
217
(18)
$
3,481
Based on our most recent goodwill impairment assessment performed as of October 31, 2019, we concluded that the goodwill
in each of our reporting units was not at risk of impairment. We have not recognized any impairment losses on our goodwill.
Components of intangible assets were as follows as of December 31:
2019
2018
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
$
1,181
$
$
$
1,277
$
$
Developed technology
Indefinite life trademarks
Other
388
72
71
(390)
(239)
—
(42)
(in millions)
791
149
72
29
355
72
64
(398)
(187)
—
(33)
879
168
72
31
Total intangible assets
$
1,712
$
(671)
$
1,041
$
1,768
$
(618)
$
1,150
Other than certain trademarks with indefinite lives, our intangible assets have finite lives and, as such, are subject to
amortization. Amortization of intangible assets totaled $162 million for 2019, $151 million for 2018 and $130 million for 2017.
Compensation and benefits
Customer volume and other incentives (1)
Derivative financial instruments
FCPA Accrual (2)
Income taxes
Professional fees
Travel and entertainment
Other
2019
2018
(in millions)
$
1,239
$
251
8
—
152
137
24
380
1,216
256
25
28
162
110
34
369
Total accrued expenses and other current liabilities
$
2,191
$
2,200
(1)
(2)
See the Trade Accounts Receivable, Contract Assets and Contract Liabilities section in Note 1.
Refer to Note 15.
Note 10 — Debt
In 2018, we entered into a Credit Agreement providing for a $750 million Term Loan and a $1,750 million unsecured revolving
credit facility, which are due to mature in November 2023. We are required under the Credit Agreement to make scheduled quarterly
principal payments on the Term Loan.
The Credit Agreement requires interest to be paid, at our option, at either the ABR or the Eurocurrency Rate (each as defined
in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). Initially, the Applicable
Margin is 0.875% with respect to Eurocurrency Rate loans and 0.00% with respect to ABR loans. Subsequently, the Applicable
Margin with respect to Eurocurrency Rate loans may range from 0.75% to 1.125%, depending on our public debt ratings (or, if
we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of
indebtedness for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement). Under the Credit Agreement,
we are required to pay commitment fees on the unused portion of the revolving credit facility, which vary based on our public
debt ratings (or, if we have not received public debt ratings, on the Leverage Ratio). As the interest rates on our Term Loan and
any notes outstanding under the revolving credit facility are variable, the fair value of our debt balances approximates their carrying
value as of December 31, 2019 and 2018.
The Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. The financial
covenant is tested at the end of each fiscal quarter and requires us to maintain a Leverage Ratio, which is the ratio of indebtedness
for borrowed money to Consolidated EBITDA, as defined in the Credit Agreement, not in excess of 3.50 to 1.00, or for a period
of up to four quarters following certain material acquisitions, 3.75 to 1.00. We were in compliance with all debt covenants and
representations of the Credit Agreement as of December 31, 2019.
The following table provides the estimated amortization expense related to our existing intangible assets for the next five
In 2019, our India subsidiary entered into a 13 billion Indian rupee ($182 million at the December 31, 2019 exchange rate)
years.
working capital facility, which requires us to repay any balances within 90 days from the date of disbursement.
Estimated Amortization
(in millions)
$
144
140
132
90
83
2020
2021
2022
2023
2024
Short-term Debt
The following summarizes our short-term debt balances as of December 31:
Term loan - current maturities
$
38
2.6% $
9
3.3%
2019
Weighted Average
Interest Rate
Amount
(in millions)
Amount
(in millions)
2018
Weighted Average
Interest Rate
F-28
F-29
Table of Contents
Long-term Debt
The following summarizes our long-term debt balances as of December 31:
Term loan
Less:
Current maturities
Deferred financing costs
Long-term debt, net of current maturities
The following represents the schedule of maturities of our term loan:
2019
2018
(in millions)
741
$
(38)
(3)
700
$
750
(9)
(5)
736
$
$
Year
2020
2021
2022
2023
Amounts
(in millions)
38
38
38
627
741
$
$
Note 11 — Income Taxes
Income before provision for income taxes shown below is based on the geographic location to which such income was
attributed for years ended December 31:
2019
2018
2017
United States
Foreign
Income before provision for income taxes
$
$
931
1,612
2,543
(in millions)
947
$
1,850
2,797
$
The provision for income taxes consisted of the following components for the years ended December 31:
Current:
Federal and state
Foreign
Total current provision
Deferred:
Federal and state
Foreign
Total deferred (benefit) provision
Total provision for income taxes
2019
2018
(in millions)
$
$
549
400
949
(320)
14
(306)
643
$
$
241
449
690
1
7
8
698
$
$
$
$
810
1,845
2,655
2017
767
262
1,029
102
22
124
1,153
We are involved in an ongoing dispute with the ITD in connection with a previously disclosed 2016 share repurchase
transaction undertaken by CTS India to repurchase shares from its shareholders (non-Indian Cognizant entities) valued at $2.8
billion. As a result of that transaction, which was undertaken pursuant to a plan approved by the Court in Chennai, India, we
previously paid $135 million in Indian income taxes - an amount we believe includes all the applicable taxes owed for this
transaction under Indian law. In March 2018, we received a communication from the ITD asserting that the ITD is owed an
additional 33 billion Indian rupees ($463 million at the December 31, 2019 exchange rate) on the 2016 transaction. Immediately
thereafter, the ITD placed an attachment on certain of our India bank accounts. In addition to the dispute on the 2016 transaction,
we are also involved in another ongoing dispute with the ITD relating to a 2013 transaction undertaken by CTS India to repurchase
shares from its shareholders valued at $523 million (the two disputes collectively referred to as the "ITD Dispute").
Table of Contents
In April 2018, the Court admitted our writ petition for a stay of the actions of the ITD and lifted the ITD’s attachment on
our bank accounts. As part of the interim stay order, we deposited 5 billion Indian rupees ($70 million at the December 31, 2019
exchange rate and $71 million at the December 31, 2018 exchange rate) representing 15% of the disputed tax amount related to
the 2016 transaction, with the ITD. These amounts are presented in "Other current assets" in our consolidated statements of financial
position. In addition, the Court also placed a lien on certain time deposits of CTS India in the amount of 28 billion Indian rupees
($393 million at the December 31, 2019 exchange rate and $404 million at the December 31, 2018 exchange rate), which is the
remainder of the disputed tax amount related to the 2016 transaction. The affected time deposits are considered restricted assets
and we have reported them in “Short-term investments” in our consolidated statements of financial position. As of December 31,
2019 and 2018, the restricted time deposits balance was $414 million and $423 million, respectively, including a portion of the
interest previously earned on such deposits.
In June 2019, the Court dismissed our previously admitted writ petitions on the ITD Dispute, holding that the Company
must exhaust other remedies, such as pursuing the matter before other appellate bodies, for resolution of the ITD Dispute prior to
intervention by the Court. The Court did not issue a ruling on the substantive issue of whether we owe additional tax as a result
of either the 2016 or the 2013 transaction. In July 2019, we appealed the Court’s orders before the Division Bench. In September
2019, the Division Bench partly allowed the Company’s appeal, but did not issue a ruling on the substantive issue of the tax
implications of the transactions. In October 2019, we filed a SLP before the Supreme Court of India. The Supreme Court has
scheduled the next hearing on the SLP at the end of February 2020 and has instructed the ITD to maintain status quo until a ruling
is issued.
ended December 31:
We believe we have paid all applicable taxes owed on both the 2016 and the 2013 transactions. Accordingly, we have not
recorded any reserves for these matters as of December 31, 2019.
The reconciliation between our effective income tax rate and the U.S. federal statutory rate were as follows for the years
Tax expense, at U.S. federal statutory rate
$
534
21.0
$
587
21.0
$
929
35.0
2019
%
2018
%
2017
%
(Dollars in millions)
State and local income taxes, net of federal
benefit
Non-taxable income for Indian tax purposes
Rate differential on foreign earnings
Net impact related to the implementation of the
Tax Reform Act
Net impact related to the India Tax Law
Recognition of previously unrecognized income
tax benefits related to uncertain tax positions
Credits and other incentives
Other
59
(90)
145
—
21
—
(57)
31
643
2.3
(3.5)
5.7
0.0
0.8
0.0
(2.2)
1.2
25.3
56
(146)
206
(5)
—
(12)
(19)
31
698
2.0
(5.2)
7.4
(0.2)
—
(0.4)
(0.7)
1.1
25.0
39
(216)
(76)
617
—
(73)
(37)
(30)
1.5
(8.2)
(2.9)
23.2
—
(2.7)
(1.4)
(1.1)
43.4
Total provision for income taxes
$
$
$
1,153
F-30
F-31
Table of Contents
Long-term Debt
The following summarizes our long-term debt balances as of December 31:
Term loan
Less:
Current maturities
Deferred financing costs
Long-term debt, net of current maturities
The following represents the schedule of maturities of our term loan:
2019
2018
(in millions)
741
$
(38)
(3)
700
$
750
(9)
(5)
736
$
$
Year
2020
2021
2022
2023
Amounts
(in millions)
38
38
38
627
741
$
$
Income before provision for income taxes shown below is based on the geographic location to which such income was
Table of Contents
In April 2018, the Court admitted our writ petition for a stay of the actions of the ITD and lifted the ITD’s attachment on
our bank accounts. As part of the interim stay order, we deposited 5 billion Indian rupees ($70 million at the December 31, 2019
exchange rate and $71 million at the December 31, 2018 exchange rate) representing 15% of the disputed tax amount related to
the 2016 transaction, with the ITD. These amounts are presented in "Other current assets" in our consolidated statements of financial
position. In addition, the Court also placed a lien on certain time deposits of CTS India in the amount of 28 billion Indian rupees
($393 million at the December 31, 2019 exchange rate and $404 million at the December 31, 2018 exchange rate), which is the
remainder of the disputed tax amount related to the 2016 transaction. The affected time deposits are considered restricted assets
and we have reported them in “Short-term investments” in our consolidated statements of financial position. As of December 31,
2019 and 2018, the restricted time deposits balance was $414 million and $423 million, respectively, including a portion of the
interest previously earned on such deposits.
In June 2019, the Court dismissed our previously admitted writ petitions on the ITD Dispute, holding that the Company
must exhaust other remedies, such as pursuing the matter before other appellate bodies, for resolution of the ITD Dispute prior to
intervention by the Court. The Court did not issue a ruling on the substantive issue of whether we owe additional tax as a result
of either the 2016 or the 2013 transaction. In July 2019, we appealed the Court’s orders before the Division Bench. In September
2019, the Division Bench partly allowed the Company’s appeal, but did not issue a ruling on the substantive issue of the tax
implications of the transactions. In October 2019, we filed a SLP before the Supreme Court of India. The Supreme Court has
scheduled the next hearing on the SLP at the end of February 2020 and has instructed the ITD to maintain status quo until a ruling
is issued.
We believe we have paid all applicable taxes owed on both the 2016 and the 2013 transactions. Accordingly, we have not
recorded any reserves for these matters as of December 31, 2019.
The reconciliation between our effective income tax rate and the U.S. federal statutory rate were as follows for the years
ended December 31:
Tax expense, at U.S. federal statutory rate
State and local income taxes, net of federal
benefit
Non-taxable income for Indian tax purposes
Rate differential on foreign earnings
Net impact related to the implementation of the
Tax Reform Act
Net impact related to the India Tax Law
Recognition of previously unrecognized income
tax benefits related to uncertain tax positions
Credits and other incentives
Other
Total provision for income taxes
$
2019
%
2018
%
2017
%
$
534
21.0
$
587
21.0
$
929
35.0
(Dollars in millions)
59
(90)
145
—
21
—
(57)
31
643
2.3
(3.5)
5.7
0.0
0.8
0.0
(2.2)
1.2
25.3
$
56
(146)
206
(5)
—
(12)
(19)
31
698
2.0
(5.2)
7.4
(0.2)
—
(0.4)
(0.7)
1.1
25.0
$
39
(216)
(76)
617
—
(73)
(37)
(30)
1,153
1.5
(8.2)
(2.9)
23.2
—
(2.7)
(1.4)
(1.1)
43.4
The provision for income taxes consisted of the following components for the years ended December 31:
Note 11 — Income Taxes
attributed for years ended December 31:
United States
Foreign
Income before provision for income taxes
Current:
Federal and state
Foreign
Deferred:
Federal and state
Foreign
Total current provision
Total deferred (benefit) provision
Total provision for income taxes
2019
2018
2017
931
1,612
2,543
(in millions)
947
1,850
2,797
2019
2018
2017
(in millions)
$
$
$
549
400
949
(320)
14
(306)
643
241
449
690
1
7
8
$
$
$
810
1,845
2,655
767
262
1,029
102
22
124
$
698
$
1,153
$
$
$
$
We are involved in an ongoing dispute with the ITD in connection with a previously disclosed 2016 share repurchase
transaction undertaken by CTS India to repurchase shares from its shareholders (non-Indian Cognizant entities) valued at $2.8
billion. As a result of that transaction, which was undertaken pursuant to a plan approved by the Court in Chennai, India, we
previously paid $135 million in Indian income taxes - an amount we believe includes all the applicable taxes owed for this
transaction under Indian law. In March 2018, we received a communication from the ITD asserting that the ITD is owed an
additional 33 billion Indian rupees ($463 million at the December 31, 2019 exchange rate) on the 2016 transaction. Immediately
thereafter, the ITD placed an attachment on certain of our India bank accounts. In addition to the dispute on the 2016 transaction,
we are also involved in another ongoing dispute with the ITD relating to a 2013 transaction undertaken by CTS India to repurchase
shares from its shareholders valued at $523 million (the two disputes collectively referred to as the "ITD Dispute").
F-30
F-31
Table of Contents
Table of Contents
The significant components of deferred income tax assets and liabilities recorded on the consolidated statements of financial
We conduct business globally and file income tax returns in the United States, including federal and state, as well as various
position were as follows as of December 31:
Deferred income tax assets:
Net operating losses
Revenue recognition
Compensation and benefits
MAT and credit carryforwards
Expenses not currently deductible
Less: valuation allowance
Deferred income tax assets, net
Deferred income tax liabilities:
Depreciation and amortization
Deferred costs
Other
Deferred income tax liabilities
Net deferred income tax assets
2019
2018
(in millions)
$
$
27
39
171
307
352
896
(24)
872
187
110
25
322
550
$
$
13
51
150
340
60
614
(11)
603
256
79
9
344
259
At December 31, 2019, we had foreign and U.S. net operating loss carryforwards of approximately $39 million and $80
million, respectively. We have recorded valuation allowances on certain net operating loss carryforwards. As of December 31,
2019 and 2018, deferred income tax assets related to the MAT carryforwards were $176 million and $228 million, respectively.
The calculation of the MAT includes all profits realized by our Indian subsidiaries and any MAT paid is creditable against future
corporate income tax, subject to certain limitations. Our existing MAT carryforwards expire between March 2024 and March 2032
and we expect to fully utilize them within the applicable expiration periods of 15 years.
Our Indian subsidiaries are primarily export-oriented and are eligible for certain income tax holiday benefits granted by the
government of India for export activities conducted within SEZs for periods of up to 15 years. Our SEZ income tax holiday benefits
are currently scheduled to expire in whole or in part through the year 2028 and may be extended on a limited basis for an additional
five years per unit if certain reinvestment criteria are met. Our Indian profits ineligible for SEZ benefits are subject to corporate
income tax at the rate of 34.94%. In addition, all Indian profits, including those generated within SEZs, are subject to the MAT.
The current rate of MAT for the India fiscal years starting on or after April 1, 2019 is 17.47%. For the years ended December 31,
2019, 2018 and 2017, the effect of the income tax holidays granted by the Indian government was to reduce the overall income
tax provision and increase net income by $90 million, $146 million and $217 million, respectively, and increase diluted EPS by
$0.16, $0.25 and $0.36, respectively.
In December 2019, the Government of India enacted the India Tax Law effective retroactively to April 1, 2019 that enables
Indian companies to elect to be taxed at a lower income tax rate of 25.17%, as compared to the current income tax rate of 34.94%.
Once a company elects into the lower income tax rate, a company may not benefit from any tax holidays associated with SEZs
and certain other tax incentives, including MAT carryforwards, and may not reverse its election.
Our current intent is to elect into the new tax regime once our MAT carryforwards are fully or substantially utilized. While
our existing MAT carryforwards expire between March 2024 and March 2032, we expect to fully or substantially utilize our
existing MAT carryforwards in or after the India financial year starting April 1, 2022. Our intent is based on a number of assumptions
and financial projections. An election into the new tax law regime prior to utilization of our MAT carryforwards will result in a
write-off of any remaining deferred income tax assets relating to the MAT carryforwards. As a result of the enactment of the India
Tax Law, we recorded a one-time net income tax expense of $21 million due to the revaluation to the lower income tax rate of our
India net deferred income tax assets that are expected to reverse after we elect into the new tax regime.
We consider our earnings in India to be indefinitely reinvested, which is consistent with our ongoing strategy to expand our
Indian operations, including through infrastructure investments. As of December 31, 2019, the amount of unrepatriated Indian
earnings was approximately $5,242 million. If all of our accumulated unrepatriated Indian earnings were to be repatriated, based
on our current interpretation of India tax law, we estimate that we would incur an additional income tax expense of approximately
$1,101 million. This estimate is subject to change based on tax legislation developments in India and other jurisdictions as well
as judicial and interpretive developments of applicable tax laws.
foreign jurisdictions. Tax years that remain subject to examination by the Internal Revenue Service are 2012 and onward, and
years that remain subject to examination by state authorities vary by state. Years under examination by foreign tax authorities are
2001 and onward. In addition, transactions between our affiliated entities are arranged in accordance with applicable transfer
pricing laws, regulations and relevant guidelines. As a result, and due to the interpretive nature of certain aspects of these laws
and guidelines, we have pending applications for APAs before the taxing authorities in some of our most significant jurisdictions.
We record incremental tax expense, based upon the more-likely-than-not standard, for any uncertain tax positions. In addition,
when applicable, we adjust the previously recorded income tax expense to reflect examination results when the position is effectively
settled or otherwise resolved. Our ongoing evaluations of the more-likely-than-not outcomes of the examinations and related tax
positions require judgment and can result in adjustments that increase or decrease our effective income tax rate, as well as impact
our operating results. The specific timing of when the resolution of each tax position will be reached is uncertain.
Changes in unrecognized income tax benefits were as follows for the years ended December 31:
Balance, beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Additions for tax positions of acquired subsidiaries
Reductions for tax positions due to lapse of statutes of limitations
Reductions for tax positions of prior years
Settlements
Foreign currency exchange movement
Balance, end of year
2019
2018
2017
(in millions)
$
117
$
$
151
22
14
—
—
(1)
—
—
97
8
19
6
(12)
—
—
(1)
117
$
152
$
$
17
2
—
(41)
(32)
—
—
97
At December 31, 2019, the unrecognized income tax benefits would affect our effective income tax rate, if recognized.
While the Company believes uncertain tax positions may be settled or resolved within the next twelve months, it is difficult to
estimate the income tax impact of these potential resolutions at this time. We recognize accrued interest and any penalties associated
with uncertain tax positions as part of our provision for income taxes. The total amount of accrued interest and penalties at
December 31, 2019 and 2018 was approximately $16 million and $11 million, respectively, and relates to U.S. and foreign tax
matters. The amounts of interest and penalties recorded in the provision for income taxes in 2019, 2018 and 2017 were immaterial.
Note 12 — Derivative Financial Instruments
In the normal course of business, we use foreign exchange forward contracts to manage foreign currency exchange rate risk.
The estimated fair value of the foreign exchange forward contracts considers the following items: discount rate, timing and amount
of cash flow and counterparty credit risk. Derivatives may give rise to credit risks from the possible non-performance by
counterparties. Credit risk is limited to the fair value of those contracts that are favorable to us. We have limited our credit risk by
entering into derivative transactions only with highly-rated financial institutions, limiting the amount of credit exposure with any
one financial institution and conducting ongoing evaluation of the creditworthiness of the financial institutions with which we do
business. In addition, all the assets and liabilities related to our foreign exchange forward contracts set forth in the below table are
subject to master netting arrangements, such as the ISDA, with each individual counterparty. These master netting arrangements
generally provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a
termination event. We have presented all the assets and liabilities related to our foreign exchange forward contracts on a gross
basis, with no offsets, in our consolidated statements of financial position. There is no financial collateral (including cash collateral)
posted or received by us related to our foreign exchange forward contracts.
F-32
F-33
Table of Contents
Table of Contents
The significant components of deferred income tax assets and liabilities recorded on the consolidated statements of financial
position were as follows as of December 31:
Deferred income tax assets:
Net operating losses
Revenue recognition
Compensation and benefits
MAT and credit carryforwards
Expenses not currently deductible
Less: valuation allowance
Deferred income tax assets, net
Deferred income tax liabilities:
Depreciation and amortization
Deferred costs
Other
Deferred income tax liabilities
Net deferred income tax assets
2019
2018
(in millions)
$
$
27
39
171
307
352
896
(24)
872
187
110
25
322
550
13
51
150
340
60
614
(11)
603
256
79
9
344
259
$
$
At December 31, 2019, we had foreign and U.S. net operating loss carryforwards of approximately $39 million and $80
million, respectively. We have recorded valuation allowances on certain net operating loss carryforwards. As of December 31,
2019 and 2018, deferred income tax assets related to the MAT carryforwards were $176 million and $228 million, respectively.
The calculation of the MAT includes all profits realized by our Indian subsidiaries and any MAT paid is creditable against future
corporate income tax, subject to certain limitations. Our existing MAT carryforwards expire between March 2024 and March 2032
and we expect to fully utilize them within the applicable expiration periods of 15 years.
Our Indian subsidiaries are primarily export-oriented and are eligible for certain income tax holiday benefits granted by the
government of India for export activities conducted within SEZs for periods of up to 15 years. Our SEZ income tax holiday benefits
are currently scheduled to expire in whole or in part through the year 2028 and may be extended on a limited basis for an additional
five years per unit if certain reinvestment criteria are met. Our Indian profits ineligible for SEZ benefits are subject to corporate
income tax at the rate of 34.94%. In addition, all Indian profits, including those generated within SEZs, are subject to the MAT.
The current rate of MAT for the India fiscal years starting on or after April 1, 2019 is 17.47%. For the years ended December 31,
2019, 2018 and 2017, the effect of the income tax holidays granted by the Indian government was to reduce the overall income
tax provision and increase net income by $90 million, $146 million and $217 million, respectively, and increase diluted EPS by
$0.16, $0.25 and $0.36, respectively.
In December 2019, the Government of India enacted the India Tax Law effective retroactively to April 1, 2019 that enables
Indian companies to elect to be taxed at a lower income tax rate of 25.17%, as compared to the current income tax rate of 34.94%.
Once a company elects into the lower income tax rate, a company may not benefit from any tax holidays associated with SEZs
and certain other tax incentives, including MAT carryforwards, and may not reverse its election.
Our current intent is to elect into the new tax regime once our MAT carryforwards are fully or substantially utilized. While
our existing MAT carryforwards expire between March 2024 and March 2032, we expect to fully or substantially utilize our
existing MAT carryforwards in or after the India financial year starting April 1, 2022. Our intent is based on a number of assumptions
and financial projections. An election into the new tax law regime prior to utilization of our MAT carryforwards will result in a
write-off of any remaining deferred income tax assets relating to the MAT carryforwards. As a result of the enactment of the India
Tax Law, we recorded a one-time net income tax expense of $21 million due to the revaluation to the lower income tax rate of our
India net deferred income tax assets that are expected to reverse after we elect into the new tax regime.
We consider our earnings in India to be indefinitely reinvested, which is consistent with our ongoing strategy to expand our
Indian operations, including through infrastructure investments. As of December 31, 2019, the amount of unrepatriated Indian
earnings was approximately $5,242 million. If all of our accumulated unrepatriated Indian earnings were to be repatriated, based
on our current interpretation of India tax law, we estimate that we would incur an additional income tax expense of approximately
$1,101 million. This estimate is subject to change based on tax legislation developments in India and other jurisdictions as well
as judicial and interpretive developments of applicable tax laws.
We conduct business globally and file income tax returns in the United States, including federal and state, as well as various
foreign jurisdictions. Tax years that remain subject to examination by the Internal Revenue Service are 2012 and onward, and
years that remain subject to examination by state authorities vary by state. Years under examination by foreign tax authorities are
2001 and onward. In addition, transactions between our affiliated entities are arranged in accordance with applicable transfer
pricing laws, regulations and relevant guidelines. As a result, and due to the interpretive nature of certain aspects of these laws
and guidelines, we have pending applications for APAs before the taxing authorities in some of our most significant jurisdictions.
We record incremental tax expense, based upon the more-likely-than-not standard, for any uncertain tax positions. In addition,
when applicable, we adjust the previously recorded income tax expense to reflect examination results when the position is effectively
settled or otherwise resolved. Our ongoing evaluations of the more-likely-than-not outcomes of the examinations and related tax
positions require judgment and can result in adjustments that increase or decrease our effective income tax rate, as well as impact
our operating results. The specific timing of when the resolution of each tax position will be reached is uncertain.
Changes in unrecognized income tax benefits were as follows for the years ended December 31:
Balance, beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Additions for tax positions of acquired subsidiaries
Reductions for tax positions due to lapse of statutes of limitations
Reductions for tax positions of prior years
Settlements
Foreign currency exchange movement
Balance, end of year
2019
2018
2017
(in millions)
97
$
8
19
6
(12)
—
—
(1)
117
$
$
$
117
22
14
—
—
(1)
—
—
152
$
$
151
17
2
—
(41)
(32)
—
—
97
At December 31, 2019, the unrecognized income tax benefits would affect our effective income tax rate, if recognized.
While the Company believes uncertain tax positions may be settled or resolved within the next twelve months, it is difficult to
estimate the income tax impact of these potential resolutions at this time. We recognize accrued interest and any penalties associated
with uncertain tax positions as part of our provision for income taxes. The total amount of accrued interest and penalties at
December 31, 2019 and 2018 was approximately $16 million and $11 million, respectively, and relates to U.S. and foreign tax
matters. The amounts of interest and penalties recorded in the provision for income taxes in 2019, 2018 and 2017 were immaterial.
Note 12 — Derivative Financial Instruments
In the normal course of business, we use foreign exchange forward contracts to manage foreign currency exchange rate risk.
The estimated fair value of the foreign exchange forward contracts considers the following items: discount rate, timing and amount
of cash flow and counterparty credit risk. Derivatives may give rise to credit risks from the possible non-performance by
counterparties. Credit risk is limited to the fair value of those contracts that are favorable to us. We have limited our credit risk by
entering into derivative transactions only with highly-rated financial institutions, limiting the amount of credit exposure with any
one financial institution and conducting ongoing evaluation of the creditworthiness of the financial institutions with which we do
business. In addition, all the assets and liabilities related to our foreign exchange forward contracts set forth in the below table are
subject to master netting arrangements, such as the ISDA, with each individual counterparty. These master netting arrangements
generally provide for net settlement of all outstanding contracts with the counterparty in the case of an event of default or a
termination event. We have presented all the assets and liabilities related to our foreign exchange forward contracts on a gross
basis, with no offsets, in our consolidated statements of financial position. There is no financial collateral (including cash collateral)
posted or received by us related to our foreign exchange forward contracts.
F-32
F-33
Table of Contents
Table of Contents
The following table provides information on the location and fair values of derivative financial instruments included in our
The following table provides information on the location and amounts of pre-tax gains and losses on our cash flow hedges
consolidated statements of financial position as of December 31:
for the year ended December 31:
Designation of Derivatives
Location on Statement of
Financial Position
2019
2018
Assets
Liabilities
Assets
Liabilities
(in millions)
Foreign exchange forward contracts -
Designated as cash flow hedging
instruments
Foreign exchange forward contracts -
Not designated as cash flow hedging
instruments
Total
Cash Flow Hedges
Other current assets
Other noncurrent assets
Accrued expenses and
other current liabilities
Other noncurrent liabilities
Total
Other current assets
Accrued expenses and
other current liabilities
Total
$
$
32
8
—
—
40
3
—
3
43
$
— $
—
7
2
9
—
1
1
10
$
$
11
15
—
—
26
1
—
1
27
$
$
—
—
21
9
30
—
4
4
34
We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of Indian rupee
denominated payments in India. These contracts are intended to partially offset the impact of movement of exchange rates on
future operating costs and are scheduled to mature each month during 2020 and 2021. Under these contracts, we purchase Indian
rupees and sell U.S. dollars. The changes in fair value of these contracts are initially reported in the caption "Accumulated other
comprehensive income (loss)" in our consolidated statements of financial position and are subsequently reclassified to earnings
in the same period the forecasted Indian rupee denominated payments are recorded in earnings. As of December 31, 2019, we
estimate that $21 million, net of tax, of the net gains related to derivatives designated as cash flow hedges reported in the caption
"Accumulated other comprehensive income (loss)" in our consolidated statements of financial position is expected to be reclassified
into earnings within the next 12 months.
The notional value of our outstanding contracts by year of maturity and the net unrealized gains and losses included in the
caption "Accumulated other comprehensive income (loss)" in our consolidated statements of financial position, for such contracts
were as follows as of December 31:
2019
2018
Foreign exchange forward
contracts - Designated as cash
flow hedging instruments
Derivative Gains/Losses
Change in
Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)
2019
2018
Location of Net Derivative
Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
(in millions)
Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
2019
2018
$
39
$
(87)
Cost of revenues
Selling, general and
administrative expenses
Total
$
$
3
1
4
$
$
61
10
71
The activity related to the change in net unrealized gains and losses on our cash flow hedges included in "Accumulated other
comprehensive income (loss)" in our consolidated statements of stockholders equity is presented in Note 14.
Other Derivatives
We use foreign exchange forward contracts to provide an economic hedge against balance sheet exposures to certain monetary
assets and liabilities denominated in currencies, other than the functional currency of our foreign subsidiaries, primarily the Indian
rupee, British pound and Euro. We entered into a series of foreign exchange forward contracts that are scheduled to mature in
2020. Realized gains or losses and changes in the estimated fair value of these derivative financial instruments are recorded in the
caption "Foreign currency exchange gains (losses), net" in our consolidated statements of operations.
Additional information related to our outstanding foreign exchange forward contracts not designated as hedging instruments
was as follows as of December 31:
2019
2018
Notional
Market Value
Notional
Market Value
Contracts outstanding
$
702
$
507
$
(3)
(in millions)
2
$
The following table provides information on the location and amounts of realized and unrealized pre-tax gains on our other
derivative financial instruments for the year ended December 31:
Foreign exchange forward contracts - Not designated as hedging
instruments
Foreign currency exchange
gains (losses), net
$
8
$
31
Location of Net Gains
on Derivative Instruments
Amount of Net Gains
on Derivative Instruments
2019
2018
(in millions)
Note 13 — Fair Value Measurements
We measure our cash equivalents, certain investments, contingent consideration liabilities and foreign exchange forward
contracts at fair value. The authoritative guidance defines fair value as the exit price, or the amount that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The
authoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair
value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to
measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would
use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a
reporting entity’s pricing based upon their own market assumptions.
Upon settlement or maturity of the cash flow hedge contracts, we record the related gains or losses, based on our designation
at the commencement of the contract, with the related hedged Indian rupee denominated expense reported within the caption "Cost
of revenues" and "Selling, general and administrative expenses" in our consolidated statements of operations.
F-34
F-35
2019
2020
2021
Total notional value of contracts outstanding
Net unrealized gains (losses) included in accumulated other comprehensive income
(loss), net of taxes
$
$
$
26
$
(3)
The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.
(in millions)
—
1,505
883
2,388
1,388
780
—
2,168
$
$
Designation of Derivatives
Assets
Liabilities
Assets
Liabilities
Location on Statement of
Financial Position
2019
2018
(in millions)
Foreign exchange forward contracts -
Designated as cash flow hedging
instruments
Other current assets
$
$
— $
$
Other noncurrent assets
Accrued expenses and
other current liabilities
Other noncurrent liabilities
Total
Other current assets
Accrued expenses and
other current liabilities
Total
32
8
—
—
40
3
—
3
43
—
7
2
9
—
1
1
10
11
15
—
—
26
1
—
1
27
—
—
21
9
30
—
4
4
34
Foreign exchange forward contracts -
Not designated as cash flow hedging
instruments
Total
Cash Flow Hedges
We have entered into a series of foreign exchange forward contracts that are designated as cash flow hedges of Indian rupee
denominated payments in India. These contracts are intended to partially offset the impact of movement of exchange rates on
future operating costs and are scheduled to mature each month during 2020 and 2021. Under these contracts, we purchase Indian
rupees and sell U.S. dollars. The changes in fair value of these contracts are initially reported in the caption "Accumulated other
comprehensive income (loss)" in our consolidated statements of financial position and are subsequently reclassified to earnings
in the same period the forecasted Indian rupee denominated payments are recorded in earnings. As of December 31, 2019, we
estimate that $21 million, net of tax, of the net gains related to derivatives designated as cash flow hedges reported in the caption
"Accumulated other comprehensive income (loss)" in our consolidated statements of financial position is expected to be reclassified
into earnings within the next 12 months.
The notional value of our outstanding contracts by year of maturity and the net unrealized gains and losses included in the
caption "Accumulated other comprehensive income (loss)" in our consolidated statements of financial position, for such contracts
were as follows as of December 31:
2019
2020
2021
Total notional value of contracts outstanding
Net unrealized gains (losses) included in accumulated other comprehensive income
(loss), net of taxes
2019
2018
(in millions)
$
$
$
—
1,505
883
2,388
26
$
$
$
1,388
780
—
2,168
(3)
Upon settlement or maturity of the cash flow hedge contracts, we record the related gains or losses, based on our designation
at the commencement of the contract, with the related hedged Indian rupee denominated expense reported within the caption "Cost
of revenues" and "Selling, general and administrative expenses" in our consolidated statements of operations.
Table of Contents
Table of Contents
The following table provides information on the location and fair values of derivative financial instruments included in our
The following table provides information on the location and amounts of pre-tax gains and losses on our cash flow hedges
consolidated statements of financial position as of December 31:
for the year ended December 31:
Change in
Derivative Gains/Losses
Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)
2019
2018
Location of Net Derivative
Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
(in millions)
Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
2019
2018
Foreign exchange forward
contracts - Designated as cash
flow hedging instruments
$
39
$
(87)
Cost of revenues
Selling, general and
administrative expenses
Total
$
$
3
1
4
$
$
61
10
71
The activity related to the change in net unrealized gains and losses on our cash flow hedges included in "Accumulated other
comprehensive income (loss)" in our consolidated statements of stockholders equity is presented in Note 14.
$
$
$
$
Other Derivatives
We use foreign exchange forward contracts to provide an economic hedge against balance sheet exposures to certain monetary
assets and liabilities denominated in currencies, other than the functional currency of our foreign subsidiaries, primarily the Indian
rupee, British pound and Euro. We entered into a series of foreign exchange forward contracts that are scheduled to mature in
2020. Realized gains or losses and changes in the estimated fair value of these derivative financial instruments are recorded in the
caption "Foreign currency exchange gains (losses), net" in our consolidated statements of operations.
Additional information related to our outstanding foreign exchange forward contracts not designated as hedging instruments
was as follows as of December 31:
Contracts outstanding
2019
2018
Notional
Market Value
Notional
Market Value
$
702
$
(in millions)
2
$
507
$
(3)
The following table provides information on the location and amounts of realized and unrealized pre-tax gains on our other
derivative financial instruments for the year ended December 31:
Location of Net Gains
on Derivative Instruments
Amount of Net Gains
on Derivative Instruments
2019
2018
(in millions)
Foreign exchange forward contracts - Not designated as hedging
instruments
Foreign currency exchange
gains (losses), net
$
8
$
31
The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.
Note 13 — Fair Value Measurements
We measure our cash equivalents, certain investments, contingent consideration liabilities and foreign exchange forward
contracts at fair value. The authoritative guidance defines fair value as the exit price, or the amount that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The
authoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair
value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to
measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would
use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a
reporting entity’s pricing based upon their own market assumptions.
F-34
F-35
Table of Contents
The fair value hierarchy consists of the following three levels:
• Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.
• Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-
corroborated inputs which are derived principally from or corroborated by observable market data.
• Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are
unobservable.
The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of
Certificates of deposit and commercial paper
December 31, 2019:
Cash equivalents:
Money market funds
Short-term investments:
Time deposits(1)
Equity investment security
Other current assets
Foreign exchange forward contracts
Other noncurrent assets
Foreign exchange forward contracts
Accrued expenses and other current liabilities:
Foreign exchange forward contracts
Contingent consideration liabilities
Other noncurrent liabilities
Foreign exchange forward contracts
Contingent consideration liabilities
(1) Includes $414 million in restricted time deposits. See Note 11.
Level 1
Level 2
Level 3
Total
(in millions)
$
1,646
$
— $
— $
1,646
—
26
—
—
—
—
—
—
466
—
35
8
(8)
—
(2)
—
—
—
—
—
—
(8)
—
(30)
466
26
35
8
(8)
(8)
(2)
(30)
The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of
Table of Contents
December 31, 2018:
Cash equivalents:
Money market funds
Bank deposits
Short-term investments:
Time deposits(1)
Equity investment security
Available-for-sale investment securities:
U.S. Treasury and agency debt securities
Corporate and other debt securities
Certificates of deposit and commercial paper
Asset-backed securities
Municipal debt securities
Other current assets:
Foreign exchange forward contracts
Other noncurrent assets:
Foreign exchange forward contracts
Accrued expenses and other current liabilities:
Foreign exchange forward contracts
Other noncurrent liabilities:
Foreign exchange forward contracts
Level 1
Level 2
Level 3
Total
(in millions)
$
$
— $
— $
103
—
—
570
—
25
—
—
—
—
—
—
—
—
32
68
500
—
55
416
296
334
89
12
15
(25)
(9)
—
—
—
—
—
—
—
—
—
—
—
—
—
103
32
68
500
25
625
416
296
334
89
12
15
(25)
(9)
(1) Includes $423 million in restricted time deposits. See Note 11
We measure the fair value of money market funds and U.S. Treasury securities based on quoted prices in active markets for
identical assets and therefore classify these assets as Level 1. The fair value of our equity security invested in an open-ended
mutual fund is based on the published daily net asset value at which investors can freely subscribe to or redeem from the fund.
The fair value of commercial paper, certificates of deposit, U.S. government agency securities, municipal debt securities, debt
securities issued by supranational institutions, U.S. and international corporate bonds and foreign government debt securities is
measured based on relevant trade data, dealer quotes, or model-driven valuations using significant inputs derived from or
corroborated by observable market data, such as yield curves and credit spreads. We measure the fair value of our asset-backed
securities using model-driven valuations based on significant inputs derived from or corroborated by observable market data such
as dealer quotes, available trade information, spread data, current market assumptions on prepayment speeds and defaults and
historical data on deal collateral performance. The carrying value of the time deposits approximated fair value as of December 31,
2019 and 2018.
We estimate the fair value of each foreign exchange forward contract by using a present value of expected cash flows model.
This model calculates the difference between the current market forward price and the contracted forward price for each foreign
exchange contract and applies the difference in the rates to each outstanding contract. The market forward rates include a discount
and credit risk factor. The amounts are aggregated by type of contract and maturity.
We estimate the fair value of our contingent consideration liabilities associated with our acquisitions utilizing one or more
significant inputs that are unobservable. We calculate the fair value of the contingent consideration liabilities based on the
probability-weighted expected performance of the acquired entity against the target performance metric, discounted to present
value when appropriate. Contingent consideration liabilities were immaterial as of December 31, 2018.
During the years ended December 31, 2019, 2018 and 2017, there were no transfers among Level 1, Level 2 or Level 3
financial assets and liabilities.
F-36
F-37
Table of Contents
Table of Contents
The fair value hierarchy consists of the following three levels:
• Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.
• Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-
corroborated inputs which are derived principally from or corroborated by observable market data.
• Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are
The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of
unobservable.
December 31, 2019:
Cash equivalents:
Money market funds
Short-term investments:
Time deposits(1)
Equity investment security
Other current assets
Foreign exchange forward contracts
Other noncurrent assets
Foreign exchange forward contracts
Accrued expenses and other current liabilities:
Foreign exchange forward contracts
Contingent consideration liabilities
Other noncurrent liabilities
Foreign exchange forward contracts
Contingent consideration liabilities
(1) Includes $414 million in restricted time deposits. See Note 11.
Level 1
Level 2
Level 3
Total
(in millions)
$
1,646
$
— $
— $
1,646
—
26
—
—
—
—
—
—
466
—
35
8
(8)
—
(2)
—
—
—
—
—
—
(8)
—
(30)
466
26
35
8
(8)
(8)
(2)
(30)
The following table summarizes our financial assets and (liabilities) measured at fair value on a recurring basis as of
December 31, 2018:
Level 1
Level 2
Level 3
Total
Cash equivalents:
Money market funds
Bank deposits
Certificates of deposit and commercial paper
Short-term investments:
Time deposits(1)
Equity investment security
Available-for-sale investment securities:
U.S. Treasury and agency debt securities
Corporate and other debt securities
Certificates of deposit and commercial paper
Asset-backed securities
Municipal debt securities
Other current assets:
Foreign exchange forward contracts
Other noncurrent assets:
Foreign exchange forward contracts
Accrued expenses and other current liabilities:
Foreign exchange forward contracts
Other noncurrent liabilities:
Foreign exchange forward contracts
$
(in millions)
— $
32
68
— $
—
—
500
—
55
416
296
334
89
12
15
(25)
(9)
—
—
—
—
—
—
—
—
—
—
—
$
103
—
—
—
25
570
—
—
—
—
—
—
—
—
103
32
68
500
25
625
416
296
334
89
12
15
(25)
(9)
(1) Includes $423 million in restricted time deposits. See Note 11
We measure the fair value of money market funds and U.S. Treasury securities based on quoted prices in active markets for
identical assets and therefore classify these assets as Level 1. The fair value of our equity security invested in an open-ended
mutual fund is based on the published daily net asset value at which investors can freely subscribe to or redeem from the fund.
The fair value of commercial paper, certificates of deposit, U.S. government agency securities, municipal debt securities, debt
securities issued by supranational institutions, U.S. and international corporate bonds and foreign government debt securities is
measured based on relevant trade data, dealer quotes, or model-driven valuations using significant inputs derived from or
corroborated by observable market data, such as yield curves and credit spreads. We measure the fair value of our asset-backed
securities using model-driven valuations based on significant inputs derived from or corroborated by observable market data such
as dealer quotes, available trade information, spread data, current market assumptions on prepayment speeds and defaults and
historical data on deal collateral performance. The carrying value of the time deposits approximated fair value as of December 31,
2019 and 2018.
We estimate the fair value of each foreign exchange forward contract by using a present value of expected cash flows model.
This model calculates the difference between the current market forward price and the contracted forward price for each foreign
exchange contract and applies the difference in the rates to each outstanding contract. The market forward rates include a discount
and credit risk factor. The amounts are aggregated by type of contract and maturity.
We estimate the fair value of our contingent consideration liabilities associated with our acquisitions utilizing one or more
significant inputs that are unobservable. We calculate the fair value of the contingent consideration liabilities based on the
probability-weighted expected performance of the acquired entity against the target performance metric, discounted to present
value when appropriate. Contingent consideration liabilities were immaterial as of December 31, 2018.
During the years ended December 31, 2019, 2018 and 2017, there were no transfers among Level 1, Level 2 or Level 3
financial assets and liabilities.
F-36
F-37
Table of Contents
Note 14 — Accumulated Other Comprehensive Income (Loss)
Changes in "Accumulated other comprehensive income (loss)" by component were as follows for the years ended
Changes in "Accumulated other comprehensive income (loss)" by component were as follows for the year ended
December 31, 2019:
Foreign currency translation adjustments:
Beginning balance
Change in foreign currency translation adjustments
Ending balance
Unrealized (losses) on available-for-sale investment securities:
Beginning balance
Net gains arising during the period
Reclassification of net gains to Other, net
Net change
Ending balance
Unrealized (losses) gains on cash flow hedges:
Beginning balance
Unrealized gains arising during the period
Reclassifications of net (gains) to:
Cost of revenues
Selling, general and administrative expenses
Net change
Ending balance
Accumulated other comprehensive income (loss):
Beginning balance
Other comprehensive income (loss)
Ending balance
Before Tax
Amount
2019
Tax
Effect
(in millions)
Net of Tax
Amount
$
$
$
$
$
$
$
$
(108)
45
(63)
$
$
5
(6)
(1)
(12)
13
(1)
12
—
(4)
39
(3)
(1)
35
31
(124)
92
(32)
$
4
(4)
—
(4)
$ —
$
$
$
$
1
(7)
1
—
(6)
(5)
10
(16)
(6)
$
$
$
$
$
$
$
$
(103)
39
(64)
(8)
9
(1)
8
—
(3)
32
(2)
(1)
29
26
(114)
76
(38)
Table of Contents
December 31, 2018 and 2017:
Before Tax
Amount
Net of Tax
Amount
Before Tax
Amount
Net of Tax
Amount
2018
Tax
Effect
2017
Tax
Effect
(in millions)
— $
(38)
(149)
$
— $
(149)
(65)
(103)
111
(38)
—
$
— $
111
(38)
Foreign currency translation adjustments:
Beginning balance
Change in foreign currency
translation adjustments
Ending balance
Unrealized (losses) on available-for-sale
investment securities:
Beginning balance
Cumulative effect of change in
accounting principle
Net unrealized (losses) arising
during the period
Reclassification of net losses to
Other, net
Net change
Ending balance
Unrealized gains (losses) on cash flow
hedges:
Beginning balance
Unrealized (losses) gains arising
during the period
Reclassifications of net (gains)
losses to:
Cost of revenues
Selling, general and
administrative expenses
Net change
Ending balance
Accumulated other comprehensive
income (loss):
Beginning balance
Other comprehensive income
(loss)
Ending balance
$
$
$
$
$
$
$
$
(38)
(70)
(108)
(11)
—
(5)
4
(1)
(12)
154
(87)
(61)
(10)
(158)
(4)
105
(229)
(124)
$
$
$
$
$
$
$
$
Note 15 — Commitments and Contingencies
5
5
4
2
(1)
(1)
—
4
23
15
2
40
1
(35)
45
10
$
$
$
$
$
$
(7)
(1)
(3)
3
(1)
(8)
(46)
(8)
(118)
(3)
70
(184)
(114)
$
$
$
$
$
$
$
$
(6)
$
2
$
—
(7)
2
(5)
(11)
$
$
(4)
—
(4)
1
(3)
(7)
(109)
(20)
103
154
(104)
209
105
$
$
$
(83)
(16)
76
115
(114)
184
70
$
$
$
—
(1)
3
2
4
26
4
(27)
(39)
(10)
(25)
(35)
(39)
$
115
51
$
(12)
$
39
(64)
232
(57)
175
We are involved in various claims and legal proceedings arising in the ordinary course of business. We accrue a liability
when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably
possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate
of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. While we do not expect that the
ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely),
individually or in the aggregate, will have a material adverse effect on our financial position, an unfavorable outcome in some or
all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. This
assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject
to inherent uncertainties and may change in the future.
F-38
F-39
Foreign currency translation adjustments:
Change in foreign currency translation adjustments
Unrealized (losses) on available-for-sale investment securities:
Net gains arising during the period
Reclassification of net gains to Other, net
Beginning balance
Ending balance
Beginning balance
Net change
Ending balance
Unrealized (losses) gains on cash flow hedges:
Beginning balance
Unrealized gains arising during the period
Reclassifications of net (gains) to:
Cost of revenues
Selling, general and administrative expenses
Net change
Ending balance
Accumulated other comprehensive income (loss):
Beginning balance
Ending balance
Other comprehensive income (loss)
Before Tax
Amount
Net of Tax
Amount
2019
Tax
Effect
(in millions)
$
$
$
$
$
$
$
$
(108)
45
(63)
(12)
13
(1)
12
—
(4)
39
(3)
(1)
35
31
(124)
92
(32)
$ —
$
$
$
$
$
$
$
5
(6)
(1)
4
(4)
—
(4)
1
(7)
1
—
(6)
(5)
10
(16)
(6)
$
$
$
$
$
$
$
$
(103)
39
(64)
(8)
9
(1)
8
—
(3)
32
(2)
(1)
29
26
(114)
76
(38)
Table of Contents
Table of Contents
Note 14 — Accumulated Other Comprehensive Income (Loss)
Changes in "Accumulated other comprehensive income (loss)" by component were as follows for the years ended
December 31, 2018 and 2017:
Changes in "Accumulated other comprehensive income (loss)" by component were as follows for the year ended
December 31, 2019:
Before Tax
Amount
2018
Tax
Effect
Net of Tax
Amount
Before Tax
Amount
(in millions)
2017
Tax
Effect
Net of Tax
Amount
Foreign currency translation adjustments:
Beginning balance
Change in foreign currency
translation adjustments
Ending balance
Unrealized (losses) on available-for-sale
investment securities:
Beginning balance
Cumulative effect of change in
accounting principle
Net unrealized (losses) arising
during the period
Reclassification of net losses to
Other, net
Net change
Ending balance
Unrealized gains (losses) on cash flow
hedges:
Beginning balance
Unrealized (losses) gains arising
during the period
Reclassifications of net (gains)
losses to:
Cost of revenues
Selling, general and
administrative expenses
Net change
Ending balance
Accumulated other comprehensive
income (loss):
Beginning balance
Other comprehensive income
(loss)
Ending balance
$
$
$
$
$
$
$
$
(38)
(70)
(108)
(11)
—
(5)
4
(1)
(12)
154
(87)
(61)
(10)
(158)
(4)
105
(229)
(124)
$
$
$
$
$
$
$
$
— $
(38)
5
5
4
(1)
2
(1)
—
4
$
$
$
(65)
(103)
(7)
(1)
(3)
3
(1)
(8)
(39)
$
115
23
15
2
40
1
(35)
45
10
$
$
$
(64)
(46)
(8)
(118)
(3)
70
(184)
(114)
Note 15 — Commitments and Contingencies
$
$
$
$
$
$
$
$
(149)
$
— $
(149)
111
(38)
—
$
— $
111
(38)
(6)
$
2
$
(4)
—
(4)
1
(3)
(7)
—
3
(1)
2
4
$
(12)
$
39
(57)
175
26
4
(27)
(39)
(10)
(25)
(35)
$
$
$
(83)
(16)
76
115
(114)
184
70
—
(7)
2
(5)
(11)
51
232
(109)
(20)
103
154
(104)
209
105
$
$
$
$
$
We are involved in various claims and legal proceedings arising in the ordinary course of business. We accrue a liability
when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably
possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate
of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. While we do not expect that the
ultimate resolution of any existing claims and proceedings (other than the specific matters described below, if decided adversely),
individually or in the aggregate, will have a material adverse effect on our financial position, an unfavorable outcome in some or
all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. This
assessment is based on our current understanding of relevant facts and circumstances. As such, our view of these matters is subject
to inherent uncertainties and may change in the future.
F-38
F-39
Table of Contents
Table of Contents
On February 28, 2019, a ruling of the Supreme Court of India interpreting the India Defined Contribution Obligation altered
historical understandings of the obligation, extending it to cover additional portions of the employee’s income. As a result, the
ongoing contributions of our affected employees and the Company were required to be increased. In the first quarter of 2019, we
accrued $117 million with respect to prior periods, assuming retroactive application of the Supreme Court’s ruling, in "Selling,
general and administrative expenses" in our consolidated statements of operations. There is significant uncertainty as to how the
liability should be calculated as it is impacted by multiple variables, including the period of assessment, the application with
respect to certain current and former employees and whether interest and penalties may be assessed. Since the ruling, a variety of
trade associations and industry groups have advocated to the Indian government, highlighting the harm to the information
technology sector, other industries and job growth in India that would result from a retroactive application of the ruling. It is
possible the Indian government will review the matter and there is a substantial question as to whether the Indian government will
apply the Supreme Court’s ruling on a retroactive basis. As such, the ultimate amount of our obligation may be materially different
from the amount accrued.
In February 2019, we completed our previously disclosed internal investigation focused on whether certain payments relating
to Company-owned facilities in India were made improperly and in violation of the FCPA and other applicable laws. We also
announced a resolution of the previously disclosed investigations by the United States DOJ and SEC into the matters that were
the subject of our internal investigation. In connection with this resolution, in February 2019 we paid approximately $28 million
to the DOJ and SEC, an amount consistent with our December 31, 2018 accrual for this matter. The DOJ also issued a declination
letter, declining to take any additional action against the Company.
On October 5, 2016, October 27, 2016 and November 18, 2016, three putative securities class action complaints were filed
in the United States District Court for the District of New Jersey, naming us and certain of our current and former officers as
defendants. These complaints were consolidated into a single action and on April 7, 2017, the lead plaintiffs filed a consolidated
amended complaint on behalf of a putative class of persons and entities who purchased our common stock during the period
between February 27, 2015 and September 29, 2016, naming us and certain of our current and former officers as defendants and
alleging violations of the Exchange Act, based on allegedly false or misleading statements related to potential violations of the
FCPA, our business, prospects and operations, and the effectiveness of our internal controls over financial reporting and our
disclosure controls and procedures. The lead plaintiffs seek an award of compensatory damages, among other relief, and their
reasonable costs and expenses, including attorneys’ fees. Defendants filed a motion to dismiss the consolidated amended complaint
on June 6, 2017. On August 8, 2018, the Court issued an order which granted the motion to dismiss in part, including dismissal
of all claims against current officers of the Company, and denied them in part. On September 7, 2018, we filed a motion in the
United States District Court for the District of New Jersey to certify the August 8, 2018 order for immediate appeal to the United
States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 1292(b). On October 18, 2018, the District Court issued an
order granting our motion, and staying the action pending the outcome of our appeal petition to the Third Circuit. On October 29,
2018, we filed a petition for permission to appeal with the United States Court of Appeals for the Third Circuit. On March 6, 2019,
the Third Circuit denied our petition without prejudice. In an order dated March 19, 2019, the District Court directed the lead
plaintiffs to provide the defendants with a proposed amended complaint. On April 26, 2019, lead plaintiffs filed their second
amended complaint. We filed a motion to dismiss the second amended complaint on June 10, 2019.
On October 31, 2016, November 15, 2016 and November 18, 2016, three putative shareholder derivative complaints were
filed in New Jersey Superior Court, Bergen County, naming us, all of our then current directors and certain of our current and
former officers as defendants. These actions were consolidated in an order dated January 24, 2017. The complaints assert claims
for breach of fiduciary duty, corporate waste, unjust enrichment, abuse of control, mismanagement, and/or insider selling by
defendants. On March 16, 2017, the parties filed a stipulation deferring all further proceedings pending a final, non-appealable
ruling on the then anticipated motion to dismiss the consolidated putative securities class action. On April 26, 2017, in lieu of
ordering the stipulation filed by the parties, the New Jersey Superior Court deferred further proceedings by dismissing the
consolidated putative shareholder derivative litigation without prejudice but permitting the parties to file a motion to vacate the
dismissal in the future.
On February 22, 2017, April 7, 2017 and May 10, 2017, three additional putative shareholder derivative complaints alleging
similar claims were filed in the United States District Court for the District of New Jersey, naming us and certain of our current
and former directors and officers as defendants. These complaints asserted claims similar to those in the previously-filed putative
shareholder derivative actions. In an order dated June 20, 2017, the United States District Court for the District of New Jersey
consolidated these actions into a single action, appointed lead plaintiff and lead counsel, and stayed all further proceedings pending
a final, non-appealable ruling on the motions to dismiss the consolidated putative securities class action. On October 30, 2018,
lead plaintiff filed a consolidated verified derivative complaint.
On March 11, 2019, a seventh putative shareholder derivative complaint was filed in the United States District Court for the
District of New Jersey, naming us, certain of our current and former directors, and certain of our current and former officers as
defendants. The complaint in that action asserts claims similar to those in the previously-filed putative shareholder derivative
F-40
actions. On May 14, 2019, the Court approved a stipulation that (i) consolidated this action with the putative shareholder derivative
suits that were previously filed in the United States District Court for the District of New Jersey; and (ii) stayed all of these suits
pending a final, non-appealable order on the motion to dismiss the second amended complaint in the securities class action.
We are presently unable to predict the duration, scope or result of the consolidated putative securities class action, the putative
shareholder derivative actions or any other lawsuits. As such, we are presently unable to develop a reasonable estimate of a possible
loss or range of losses, if any, and thus have not recorded any accruals related to these matters. While the Company intends to
defend the lawsuits vigorously, these lawsuits and any other related lawsuits are subject to inherent uncertainties, the actual cost
of such litigation will depend upon many unknown factors and the outcome of the litigation is necessarily uncertain.
We have indemnification and expense advancement obligations pursuant to our bylaws and indemnification agreements with
respect to certain current and former members of senior management and the Company’s directors. In connection with the matters
that were the subject of our previously disclosed internal investigation, the DOJ and SEC investigations and the related litigation,
we have received and expect to continue to receive requests under such indemnification agreements and our bylaws to provide
funds for legal fees and other expenses. We have expensed such costs incurred through December 31, 2019.
We have maintained directors and officers insurance and have recorded an insurance receivable of $20 million as of December
31, 2019, reported in "Other current assets," related to the recovery of a portion of the indemnification expenses and costs related
to the putative securities class action complaints. We are unable to make a reliable estimate of the eventual cash flows by period
related to the indemnification and expense advancement obligations described here.
See Note 11 for information relating to the ITD Dispute.
Many of our engagements involve projects that are critical to the operations of our clients’ business and provide benefits
that are difficult to quantify. Any failure in a client’s systems or our failure to meet our contractual obligations to our clients,
including any breach involving a client’s confidential information or sensitive data, or our obligations under applicable laws or
regulations could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although
we attempt to contractually limit our liability for damages arising from negligent acts, errors, mistakes, or omissions in rendering
our services, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances
or will otherwise protect us from liability for damages. Although we have general liability insurance coverage, including coverage
for errors or omissions, there can be no assurance that such coverage will cover all types of claims, continue to be available on
reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim
coverage as to any future claim. The successful assertion of one or more large claims against us that exceed or are not covered by
our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible
or co-insurance requirements, could have a material adverse effect on our business, results of operations, financial position and
cash flows for a particular period.
In the normal course of business and in conjunction with certain client engagements, we have entered into contractual
arrangements through which we may be obligated to indemnify clients or other parties with whom we conduct business with
respect to certain matters. These arrangements can include provisions whereby we agree to hold the indemnified party and certain
of their affiliated entities harmless with respect to third-party claims related to such matters as our breach of certain representations
or covenants, our intellectual property infringement, our gross negligence or willful misconduct or certain other claims made
against certain parties. Payments by us under any of these arrangements are generally conditioned on the client making a claim
and providing us with full control over the defense and settlement of such claim. It is not possible to determine the maximum
potential liability under these indemnification agreements due to the unique facts and circumstances involved in each particular
agreement. Historically, we have not made material payments under these indemnification agreements and therefore they have
not had a material impact on our operating results, financial position, or cash flows. However, if events arise requiring us to make
payment for indemnification claims under our indemnification obligations in contracts we have entered, such payments could
have a material adverse effect on our business, results of operations, financial position and cash flows for a particular period.
Note 16 — Employee Benefits
We contribute to defined contribution plans in the United States and Europe, including 401(k) savings and supplemental
retirement plans in the United States. Total expenses for our contributions to these plans were $117 million, $108 million and $91
million for the years ended December 31, 2019, 2018 and 2017, respectively.
We maintain employee benefit plans that cover substantially all India-based employees. The employees’ provident fund,
pension and family pension plans are statutorily defined contribution retirement benefit plans. Under the plans, employees
contribute up to 12.0% of their eligible compensation, which is matched by an equal contribution by the Company. For these plans,
we recognized a contribution expense of $101 million, $88 million and $86 million for the years ended December 31, 2019, 2018
F-41
Table of Contents
Table of Contents
On February 28, 2019, a ruling of the Supreme Court of India interpreting the India Defined Contribution Obligation altered
historical understandings of the obligation, extending it to cover additional portions of the employee’s income. As a result, the
ongoing contributions of our affected employees and the Company were required to be increased. In the first quarter of 2019, we
accrued $117 million with respect to prior periods, assuming retroactive application of the Supreme Court’s ruling, in "Selling,
general and administrative expenses" in our consolidated statements of operations. There is significant uncertainty as to how the
liability should be calculated as it is impacted by multiple variables, including the period of assessment, the application with
respect to certain current and former employees and whether interest and penalties may be assessed. Since the ruling, a variety of
trade associations and industry groups have advocated to the Indian government, highlighting the harm to the information
technology sector, other industries and job growth in India that would result from a retroactive application of the ruling. It is
possible the Indian government will review the matter and there is a substantial question as to whether the Indian government will
apply the Supreme Court’s ruling on a retroactive basis. As such, the ultimate amount of our obligation may be materially different
from the amount accrued.
In February 2019, we completed our previously disclosed internal investigation focused on whether certain payments relating
to Company-owned facilities in India were made improperly and in violation of the FCPA and other applicable laws. We also
announced a resolution of the previously disclosed investigations by the United States DOJ and SEC into the matters that were
the subject of our internal investigation. In connection with this resolution, in February 2019 we paid approximately $28 million
to the DOJ and SEC, an amount consistent with our December 31, 2018 accrual for this matter. The DOJ also issued a declination
letter, declining to take any additional action against the Company.
On October 5, 2016, October 27, 2016 and November 18, 2016, three putative securities class action complaints were filed
in the United States District Court for the District of New Jersey, naming us and certain of our current and former officers as
defendants. These complaints were consolidated into a single action and on April 7, 2017, the lead plaintiffs filed a consolidated
amended complaint on behalf of a putative class of persons and entities who purchased our common stock during the period
between February 27, 2015 and September 29, 2016, naming us and certain of our current and former officers as defendants and
alleging violations of the Exchange Act, based on allegedly false or misleading statements related to potential violations of the
FCPA, our business, prospects and operations, and the effectiveness of our internal controls over financial reporting and our
disclosure controls and procedures. The lead plaintiffs seek an award of compensatory damages, among other relief, and their
reasonable costs and expenses, including attorneys’ fees. Defendants filed a motion to dismiss the consolidated amended complaint
on June 6, 2017. On August 8, 2018, the Court issued an order which granted the motion to dismiss in part, including dismissal
of all claims against current officers of the Company, and denied them in part. On September 7, 2018, we filed a motion in the
United States District Court for the District of New Jersey to certify the August 8, 2018 order for immediate appeal to the United
States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 1292(b). On October 18, 2018, the District Court issued an
order granting our motion, and staying the action pending the outcome of our appeal petition to the Third Circuit. On October 29,
2018, we filed a petition for permission to appeal with the United States Court of Appeals for the Third Circuit. On March 6, 2019,
the Third Circuit denied our petition without prejudice. In an order dated March 19, 2019, the District Court directed the lead
plaintiffs to provide the defendants with a proposed amended complaint. On April 26, 2019, lead plaintiffs filed their second
amended complaint. We filed a motion to dismiss the second amended complaint on June 10, 2019.
On October 31, 2016, November 15, 2016 and November 18, 2016, three putative shareholder derivative complaints were
filed in New Jersey Superior Court, Bergen County, naming us, all of our then current directors and certain of our current and
former officers as defendants. These actions were consolidated in an order dated January 24, 2017. The complaints assert claims
for breach of fiduciary duty, corporate waste, unjust enrichment, abuse of control, mismanagement, and/or insider selling by
defendants. On March 16, 2017, the parties filed a stipulation deferring all further proceedings pending a final, non-appealable
ruling on the then anticipated motion to dismiss the consolidated putative securities class action. On April 26, 2017, in lieu of
ordering the stipulation filed by the parties, the New Jersey Superior Court deferred further proceedings by dismissing the
consolidated putative shareholder derivative litigation without prejudice but permitting the parties to file a motion to vacate the
dismissal in the future.
On February 22, 2017, April 7, 2017 and May 10, 2017, three additional putative shareholder derivative complaints alleging
similar claims were filed in the United States District Court for the District of New Jersey, naming us and certain of our current
and former directors and officers as defendants. These complaints asserted claims similar to those in the previously-filed putative
shareholder derivative actions. In an order dated June 20, 2017, the United States District Court for the District of New Jersey
consolidated these actions into a single action, appointed lead plaintiff and lead counsel, and stayed all further proceedings pending
a final, non-appealable ruling on the motions to dismiss the consolidated putative securities class action. On October 30, 2018,
lead plaintiff filed a consolidated verified derivative complaint.
On March 11, 2019, a seventh putative shareholder derivative complaint was filed in the United States District Court for the
District of New Jersey, naming us, certain of our current and former directors, and certain of our current and former officers as
defendants. The complaint in that action asserts claims similar to those in the previously-filed putative shareholder derivative
F-40
actions. On May 14, 2019, the Court approved a stipulation that (i) consolidated this action with the putative shareholder derivative
suits that were previously filed in the United States District Court for the District of New Jersey; and (ii) stayed all of these suits
pending a final, non-appealable order on the motion to dismiss the second amended complaint in the securities class action.
We are presently unable to predict the duration, scope or result of the consolidated putative securities class action, the putative
shareholder derivative actions or any other lawsuits. As such, we are presently unable to develop a reasonable estimate of a possible
loss or range of losses, if any, and thus have not recorded any accruals related to these matters. While the Company intends to
defend the lawsuits vigorously, these lawsuits and any other related lawsuits are subject to inherent uncertainties, the actual cost
of such litigation will depend upon many unknown factors and the outcome of the litigation is necessarily uncertain.
We have indemnification and expense advancement obligations pursuant to our bylaws and indemnification agreements with
respect to certain current and former members of senior management and the Company’s directors. In connection with the matters
that were the subject of our previously disclosed internal investigation, the DOJ and SEC investigations and the related litigation,
we have received and expect to continue to receive requests under such indemnification agreements and our bylaws to provide
funds for legal fees and other expenses. We have expensed such costs incurred through December 31, 2019.
We have maintained directors and officers insurance and have recorded an insurance receivable of $20 million as of December
31, 2019, reported in "Other current assets," related to the recovery of a portion of the indemnification expenses and costs related
to the putative securities class action complaints. We are unable to make a reliable estimate of the eventual cash flows by period
related to the indemnification and expense advancement obligations described here.
See Note 11 for information relating to the ITD Dispute.
Many of our engagements involve projects that are critical to the operations of our clients’ business and provide benefits
that are difficult to quantify. Any failure in a client’s systems or our failure to meet our contractual obligations to our clients,
including any breach involving a client’s confidential information or sensitive data, or our obligations under applicable laws or
regulations could result in a claim for substantial damages against us, regardless of our responsibility for such failure. Although
we attempt to contractually limit our liability for damages arising from negligent acts, errors, mistakes, or omissions in rendering
our services, there can be no assurance that the limitations of liability set forth in our contracts will be enforceable in all instances
or will otherwise protect us from liability for damages. Although we have general liability insurance coverage, including coverage
for errors or omissions, there can be no assurance that such coverage will cover all types of claims, continue to be available on
reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim
coverage as to any future claim. The successful assertion of one or more large claims against us that exceed or are not covered by
our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible
or co-insurance requirements, could have a material adverse effect on our business, results of operations, financial position and
cash flows for a particular period.
In the normal course of business and in conjunction with certain client engagements, we have entered into contractual
arrangements through which we may be obligated to indemnify clients or other parties with whom we conduct business with
respect to certain matters. These arrangements can include provisions whereby we agree to hold the indemnified party and certain
of their affiliated entities harmless with respect to third-party claims related to such matters as our breach of certain representations
or covenants, our intellectual property infringement, our gross negligence or willful misconduct or certain other claims made
against certain parties. Payments by us under any of these arrangements are generally conditioned on the client making a claim
and providing us with full control over the defense and settlement of such claim. It is not possible to determine the maximum
potential liability under these indemnification agreements due to the unique facts and circumstances involved in each particular
agreement. Historically, we have not made material payments under these indemnification agreements and therefore they have
not had a material impact on our operating results, financial position, or cash flows. However, if events arise requiring us to make
payment for indemnification claims under our indemnification obligations in contracts we have entered, such payments could
have a material adverse effect on our business, results of operations, financial position and cash flows for a particular period.
Note 16 — Employee Benefits
We contribute to defined contribution plans in the United States and Europe, including 401(k) savings and supplemental
retirement plans in the United States. Total expenses for our contributions to these plans were $117 million, $108 million and $91
million for the years ended December 31, 2019, 2018 and 2017, respectively.
We maintain employee benefit plans that cover substantially all India-based employees. The employees’ provident fund,
pension and family pension plans are statutorily defined contribution retirement benefit plans. Under the plans, employees
contribute up to 12.0% of their eligible compensation, which is matched by an equal contribution by the Company. For these plans,
we recognized a contribution expense of $101 million, $88 million and $86 million for the years ended December 31, 2019, 2018
F-41
Table of Contents
Table of Contents
and 2017, respectively. On February 28, 2019, a ruling of the Supreme Court of India altered historical understandings of the
obligation under these plans, extending them to cover additional portions of the employee’s income. In the first quarter of 2019,
we accrued $117 million with respect to prior periods, assuming retroactive application of the Supreme Court’s ruling, in "Selling,
general and administrative expenses" in our consolidated statements of operations. See Note 15 for further information.
We also maintain a gratuity plan in India that is a statutory post-employment benefit plan providing defined lump sum
benefits. We make annual contributions to the employees’ gratuity fund established with a government-owned insurance corporation
to fund a portion of the estimated obligation. Accordingly, our liability for the gratuity plan reflected the undiscounted benefit
obligation payable as of the balance sheet date, which was based upon the employees’ salary and years of service. As of December 31,
2019 and 2018, the amount accrued under the gratuity plan was $135 million and $141 million, which is net of fund assets of $160
million and $136 million, respectively. Expense recognized by us was $38 million, $53 million and $40 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
Note 17 — Stock-Based Compensation Plans
The Company's 2017 Incentive Plan and the Purchase Plan provide for the issuance of up to 48.8 million (plus any shares
underlying outstanding awards that are forfeited under the 2009 Incentive Plan) and 40.0 million shares, respectively, of Class A
common stock to eligible employees. The 2017 Incentive Plan does not affect any awards outstanding under the 2009 Incentive
Plan. As of December 31, 2019, we have 34.3 million and 8.9 million shares available for grant under the 2017 Incentive Plan
and the Purchase Plan, respectively.
Unvested at January 1, 2019
milestones.
Granted
Vested
Forfeited
immaterial.
The allocation of total stock-based compensation expense between cost of revenues and selling, general and administrative
expenses as well as the related income tax benefit were as follows for the three years ended December 31:
$70.77, $81.98 and $60.77, respectively.
Cost of revenues
Selling, general and administrative expenses
Total stock-based compensation expense
Income tax benefit
2019
2018
2017
$
$
$
54
163
217
39
(in millions)
62
$
205
267
66
$
$
$
$
$
55
166
221
101
Restricted Stock Units and Performance Stock Units
We granted RSUs that vest proportionately in quarterly or annual installments ranging from one year to four years to
employees, including our executive officers. Stock-based compensation expense relating to RSUs is recognized on a straight-line
basis over the requisite service period. A summary of the activity for RSUs granted under our stock-based compensation plans as
of December 31, 2019 and changes during the year then ended is presented below:
Unvested at January 1, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2019
Number of
Units
(in millions)
Weighted Average
Grant Date
Fair Value
(in dollars)
5.0
3.0
(2.6)
(0.9)
4.5
$
$
69.64
64.12
67.43
70.11
67.07
As of December 31, 2019, $241 million of total remaining unrecognized stock-based compensation cost related to RSUs is
expected to be recognized over the weighted-average remaining requisite service period of 1.9 years.
The total vesting date fair value of vested RSUs was $170 million, $194 million and $169 million for the years ended
December 31, 2019, 2018 and 2017, respectively. The weighted-average grant date fair value of RSUs granted in 2019, 2018 and
2017 was $64.12, $74.94 and $67.56, respectively.
We granted PSUs that vest over periods ranging from one year to four years to employees, including our executive officers.
The vesting of PSUs is contingent on both meeting certain financial performance targets and continued service. Stock-based
compensation costs for PSUs that vest proportionally are recognized on a graded-vesting basis over the vesting period based on
the most probable outcome of the performance conditions. If the minimum performance targets are not met, no compensation cost
is recognized and any recognized compensation cost is reversed.
A summary of the activity for PSUs granted under our stock-based compensation plans as of December 31, 2019 and changes
during the year then ended is presented below. The presentation reflects the number of PSUs at the maximum performance
Number of
Units
(in millions)
Weighted Average
Grant Date
Fair Value
(in dollars)
3.3
2.1
(1.3)
(0.7)
(1.4)
2.0
$
$
71.59
70.77
60.05
75.35
81.77
69.73
Adjustment at the conclusion of the performance measurement period
Unvested at December 31, 2019
As of December 31, 2019, we have estimated that the minimum performance threshold will not be achieved for most
outstanding PSU awards. Accordingly, the total remaining unrecognized stock-based compensation cost related to PSUs is
The total vesting date fair value of vested PSUs was $82 million, $53 million and $60 million for the years ended December
31, 2019, 2018 and 2017, respectively. The weighted-average grant date fair value of PSUs granted in 2019, 2018 and 2017 was
All RSUs and PSUs have dividend equivalent rights, which entitle holders to the same dividend value per share as holders
of common stock. Dividend equivalent rights are subject to the same vesting and other terms and conditions as the corresponding
unvested RSUs and PSUs and are accumulated and paid when the underlying shares vest. The fair value of RSUs and PSUs is
determined based on the number of stock units granted and the quoted price of our stock at date of grant.
The Purchase Plan
The Purchase Plan provides for eligible employees to purchase shares of Class A common stock at a price of 90% of
the lesser of: (a) the fair market value of a share of Class A common stock on the first date of the purchase period or (b) the fair
market value of a share of Class A common stock on the last date of the purchase period. Stock-based compensation expense
for the Purchase Plan is recognized over the vesting period of three months on a straight-line basis.
The fair values of the options granted under the Purchase Plan, were estimated at the date of grant during the years ended
December 31, 2019, 2018, and 2017 based upon the following assumptions and were as follows:
2019
2018
2017
1.3%
24.9%
0.25
2.2%
1.0%
21.0%
0.25
1.9%
1.0%
24.3%
0.25
0.9%
$
9.82
$ 10.87
$
9.23
Dividend yield
Weighted average volatility factor
Weighted average expected life (in years)
Weighted average risk-free interest rate
Weighted average grant date fair value
with a total fair value of approximately $28 million.
Note 18 — Related Party Transactions
During the year ended December 31, 2019, we issued 2.8 million shares of Class A common stock under the Purchase Plan
Brackett B. Denniston, III was the Interim General Counsel and an executive officer of the Company from December 2016
until May 15, 2017, during which period Mr. Denniston was also a Senior Counsel at the law firm of Goodwin Procter LLP. During
the year ended December 31, 2017 Goodwin performed legal services for the Company for which it earned approximately $4
million. The provision of legal services from Goodwin was reviewed and approved by our Audit Committee. During the years
ended December 31, 2019 and 2018, Goodwin was not a related party of the Company.
In 2018, we provided $100 million of initial funding to the Cognizant U.S. Foundation, which is focused on science,
technology, engineering and math education in the United States. The expense was reported in the caption "Selling, general and
administrative expenses" in our consolidated statement of operations. Additionally, two of our executive officers served as directors
of the Cognizant U.S. Foundation in 2019 and 2018.
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F-43
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and 2017, respectively. On February 28, 2019, a ruling of the Supreme Court of India altered historical understandings of the
obligation under these plans, extending them to cover additional portions of the employee’s income. In the first quarter of 2019,
we accrued $117 million with respect to prior periods, assuming retroactive application of the Supreme Court’s ruling, in "Selling,
general and administrative expenses" in our consolidated statements of operations. See Note 15 for further information.
We also maintain a gratuity plan in India that is a statutory post-employment benefit plan providing defined lump sum
benefits. We make annual contributions to the employees’ gratuity fund established with a government-owned insurance corporation
to fund a portion of the estimated obligation. Accordingly, our liability for the gratuity plan reflected the undiscounted benefit
obligation payable as of the balance sheet date, which was based upon the employees’ salary and years of service. As of December 31,
2019 and 2018, the amount accrued under the gratuity plan was $135 million and $141 million, which is net of fund assets of $160
million and $136 million, respectively. Expense recognized by us was $38 million, $53 million and $40 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
Note 17 — Stock-Based Compensation Plans
The Company's 2017 Incentive Plan and the Purchase Plan provide for the issuance of up to 48.8 million (plus any shares
underlying outstanding awards that are forfeited under the 2009 Incentive Plan) and 40.0 million shares, respectively, of Class A
common stock to eligible employees. The 2017 Incentive Plan does not affect any awards outstanding under the 2009 Incentive
Plan. As of December 31, 2019, we have 34.3 million and 8.9 million shares available for grant under the 2017 Incentive Plan
and the Purchase Plan, respectively.
The allocation of total stock-based compensation expense between cost of revenues and selling, general and administrative
expenses as well as the related income tax benefit were as follows for the three years ended December 31:
Cost of revenues
Selling, general and administrative expenses
Total stock-based compensation expense
Income tax benefit
Restricted Stock Units and Performance Stock Units
We granted RSUs that vest proportionately in quarterly or annual installments ranging from one year to four years to
of December 31, 2019 and changes during the year then ended is presented below:
2019
2018
2017
(in millions)
$
$
$
54
163
217
39
$
$
$
62
205
267
66
$
$
$
55
166
221
101
Number of
Units
(in millions)
Weighted Average
Grant Date
Fair Value
(in dollars)
5.0
3.0
(2.6)
(0.9)
4.5
$
$
69.64
64.12
67.43
70.11
67.07
Unvested at January 1, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2019
As of December 31, 2019, $241 million of total remaining unrecognized stock-based compensation cost related to RSUs is
expected to be recognized over the weighted-average remaining requisite service period of 1.9 years.
The total vesting date fair value of vested RSUs was $170 million, $194 million and $169 million for the years ended
December 31, 2019, 2018 and 2017, respectively. The weighted-average grant date fair value of RSUs granted in 2019, 2018 and
2017 was $64.12, $74.94 and $67.56, respectively.
We granted PSUs that vest over periods ranging from one year to four years to employees, including our executive officers.
The vesting of PSUs is contingent on both meeting certain financial performance targets and continued service. Stock-based
compensation costs for PSUs that vest proportionally are recognized on a graded-vesting basis over the vesting period based on
the most probable outcome of the performance conditions. If the minimum performance targets are not met, no compensation cost
is recognized and any recognized compensation cost is reversed.
A summary of the activity for PSUs granted under our stock-based compensation plans as of December 31, 2019 and changes
during the year then ended is presented below. The presentation reflects the number of PSUs at the maximum performance
milestones.
Unvested at January 1, 2019
Granted
Vested
Forfeited
Adjustment at the conclusion of the performance measurement period
Unvested at December 31, 2019
Number of
Units
(in millions)
Weighted Average
Grant Date
Fair Value
(in dollars)
3.3
2.1
(1.3)
(0.7)
(1.4)
2.0
$
$
71.59
70.77
60.05
75.35
81.77
69.73
As of December 31, 2019, we have estimated that the minimum performance threshold will not be achieved for most
outstanding PSU awards. Accordingly, the total remaining unrecognized stock-based compensation cost related to PSUs is
immaterial.
The total vesting date fair value of vested PSUs was $82 million, $53 million and $60 million for the years ended December
31, 2019, 2018 and 2017, respectively. The weighted-average grant date fair value of PSUs granted in 2019, 2018 and 2017 was
$70.77, $81.98 and $60.77, respectively.
All RSUs and PSUs have dividend equivalent rights, which entitle holders to the same dividend value per share as holders
of common stock. Dividend equivalent rights are subject to the same vesting and other terms and conditions as the corresponding
unvested RSUs and PSUs and are accumulated and paid when the underlying shares vest. The fair value of RSUs and PSUs is
determined based on the number of stock units granted and the quoted price of our stock at date of grant.
The Purchase Plan
The Purchase Plan provides for eligible employees to purchase shares of Class A common stock at a price of 90% of
the lesser of: (a) the fair market value of a share of Class A common stock on the first date of the purchase period or (b) the fair
market value of a share of Class A common stock on the last date of the purchase period. Stock-based compensation expense
for the Purchase Plan is recognized over the vesting period of three months on a straight-line basis.
employees, including our executive officers. Stock-based compensation expense relating to RSUs is recognized on a straight-line
The fair values of the options granted under the Purchase Plan, were estimated at the date of grant during the years ended
basis over the requisite service period. A summary of the activity for RSUs granted under our stock-based compensation plans as
December 31, 2019, 2018, and 2017 based upon the following assumptions and were as follows:
Dividend yield
Weighted average volatility factor
Weighted average expected life (in years)
Weighted average risk-free interest rate
Weighted average grant date fair value
2019
2018
2017
1.3%
24.9%
0.25
2.2%
1.0%
21.0%
0.25
1.9%
1.0%
24.3%
0.25
0.9%
$
9.82
$ 10.87
$
9.23
During the year ended December 31, 2019, we issued 2.8 million shares of Class A common stock under the Purchase Plan
with a total fair value of approximately $28 million.
Note 18 — Related Party Transactions
Brackett B. Denniston, III was the Interim General Counsel and an executive officer of the Company from December 2016
until May 15, 2017, during which period Mr. Denniston was also a Senior Counsel at the law firm of Goodwin Procter LLP. During
the year ended December 31, 2017 Goodwin performed legal services for the Company for which it earned approximately $4
million. The provision of legal services from Goodwin was reviewed and approved by our Audit Committee. During the years
ended December 31, 2019 and 2018, Goodwin was not a related party of the Company.
In 2018, we provided $100 million of initial funding to the Cognizant U.S. Foundation, which is focused on science,
technology, engineering and math education in the United States. The expense was reported in the caption "Selling, general and
administrative expenses" in our consolidated statement of operations. Additionally, two of our executive officers served as directors
of the Cognizant U.S. Foundation in 2019 and 2018.
F-42
F-43
Table of Contents
Note 19 — Segment Information
Our reportable segments are:
• Financial Services, which consists of our banking and insurance operating segments;
• Healthcare, which consists of our healthcare and life sciences operating segments;
• Products and Resources, which consists of our retail and consumer goods; manufacturing, logistics, energy, and utilities;
and travel and hospitality operating segments; and
• Communications, Media and Technology, which includes our communications and media operating segment and our
technology operating segment.
Our sales managers, account executives, account managers and project teams are aligned in accordance with the specific
industries they serve. Our chief operating decision maker evaluates the Company's performance and allocates resources based on
segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs.
Generally, operating expenses for each operating segment have similar characteristics and are subject to the same factors, pressures
and challenges. However, the economic environment and its effects on industries served by our operating segments may affect
revenues and operating expenses to differing degrees.
In 2019, we made certain changes to the internal measurement of segment operating profits for the purpose of evaluating
segment performance and resource allocation. The primary reason for the change was to charge to our business segments costs
that are directly managed and controlled by them. Specifically, segment operating profit now includes certain benefit, immigration,
recruitment and sales and field marketing costs, which were previously included in "unallocated costs." We have reported our
2019 segment operating profits using the new allocation methodology and have restated the 2018 results to conform to the new
methodology. Additionally, we combined our energy and utilities operating segment with our manufacturing and logistics operating
segment for our internal reporting. Our products and resources segment, which was previously comprised of four operating segments
((i) retail and consumer goods; (ii) manufacturing and logistics; (iii) travel and hospitality; and (iv) energy and utilities) is now
comprised of three operating segments ((i) retail and consumer goods; (ii) manufacturing, logistics, energy and utilities; and (iii)
travel and hospitality). This change reflects how this operating segment is currently managed and reported to chief operating
decision makers but will not affect our reportable segment financial results.
Expenses included in segment operating profit consist principally of direct selling and delivery costs (including stock-based
compensation expense) as well as a per employee charge for use of our global delivery centers and infrastructure. Certain selling,
general and administrative expenses, the excess or shortfall of incentive compensation for commercial and delivery personnel as
compared to target, costs related to our realignment program, a portion of depreciation and amortization and the impact of the
settlements of our cash flow hedges are not allocated to individual segments in internal management reports used by the chief
operating decision maker. Accordingly, such expenses are excluded from segment operating profit and are separately disclosed as
“unallocated costs” and adjusted against our total income from operations. The incremental accrual related to the India Defined
Contribution Obligation recorded in 2019 has been excluded from segment operating profits for the year ended December 31,
2019. Additionally, the initial funding of the Cognizant U.S. Foundation recorded in 2018 has been excluded from segment operating
profits for the year ended December 31, 2018. These costs are included in "unallocated costs" in the table below. Additionally,
management has determined that it is not practical to allocate identifiable assets by segment, since such assets are used
interchangeably among the segments.
For revenues by reportable segment and geographic area, please see Note 2.
Table of Contents
Segment operating profits by reportable segment were as follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total segment operating profit
Less: unallocated costs
Income from operations
2019
2018
2017(1)
(in millions)
1,605
1,261
1,028
732
4,626
2,173
2,453
1,713
1,416
1,023
692
4,844
2,043
2,801
1,771
1,301
923
601
4,596
2,115
2,481
$
$
$
$
$
$
$
$
2019
2018
2017
(in millions)
445
104
760
1,309
436
105
853
1,394
360
63
901
1,324
$
$
$
$
(1)
As described above, in 2019 we made changes to the internal measurement of segment operating profits. While we have
restated the 2018 results to conform to the new methodology, it is impracticable for us to restate our 2017 segment
operating results as the detailed information required for the allocation of such costs to the segments is not reasonably
available.
Geographic Area Information
Long-lived assets by geographic area are as follows:
Long-lived Assets:(1)
North America(2)
Europe
Rest of World(3)
Total
Long-lived assets include property and equipment, net of accumulated depreciation and amortization.
(1)
(2)
(3)
Substantially all relates to the United States.
Substantially all relates to India.
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F-45
Table of Contents
Note 19 — Segment Information
Our reportable segments are:
• Financial Services, which consists of our banking and insurance operating segments;
• Healthcare, which consists of our healthcare and life sciences operating segments;
• Products and Resources, which consists of our retail and consumer goods; manufacturing, logistics, energy, and utilities;
and travel and hospitality operating segments; and
• Communications, Media and Technology, which includes our communications and media operating segment and our
technology operating segment.
Our sales managers, account executives, account managers and project teams are aligned in accordance with the specific
industries they serve. Our chief operating decision maker evaluates the Company's performance and allocates resources based on
segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs.
Generally, operating expenses for each operating segment have similar characteristics and are subject to the same factors, pressures
and challenges. However, the economic environment and its effects on industries served by our operating segments may affect
revenues and operating expenses to differing degrees.
In 2019, we made certain changes to the internal measurement of segment operating profits for the purpose of evaluating
segment performance and resource allocation. The primary reason for the change was to charge to our business segments costs
that are directly managed and controlled by them. Specifically, segment operating profit now includes certain benefit, immigration,
recruitment and sales and field marketing costs, which were previously included in "unallocated costs." We have reported our
2019 segment operating profits using the new allocation methodology and have restated the 2018 results to conform to the new
methodology. Additionally, we combined our energy and utilities operating segment with our manufacturing and logistics operating
segment for our internal reporting. Our products and resources segment, which was previously comprised of four operating segments
((i) retail and consumer goods; (ii) manufacturing and logistics; (iii) travel and hospitality; and (iv) energy and utilities) is now
comprised of three operating segments ((i) retail and consumer goods; (ii) manufacturing, logistics, energy and utilities; and (iii)
travel and hospitality). This change reflects how this operating segment is currently managed and reported to chief operating
decision makers but will not affect our reportable segment financial results.
Expenses included in segment operating profit consist principally of direct selling and delivery costs (including stock-based
compensation expense) as well as a per employee charge for use of our global delivery centers and infrastructure. Certain selling,
general and administrative expenses, the excess or shortfall of incentive compensation for commercial and delivery personnel as
compared to target, costs related to our realignment program, a portion of depreciation and amortization and the impact of the
settlements of our cash flow hedges are not allocated to individual segments in internal management reports used by the chief
operating decision maker. Accordingly, such expenses are excluded from segment operating profit and are separately disclosed as
“unallocated costs” and adjusted against our total income from operations. The incremental accrual related to the India Defined
Contribution Obligation recorded in 2019 has been excluded from segment operating profits for the year ended December 31,
2019. Additionally, the initial funding of the Cognizant U.S. Foundation recorded in 2018 has been excluded from segment operating
profits for the year ended December 31, 2018. These costs are included in "unallocated costs" in the table below. Additionally,
management has determined that it is not practical to allocate identifiable assets by segment, since such assets are used
interchangeably among the segments.
For revenues by reportable segment and geographic area, please see Note 2.
Table of Contents
Segment operating profits by reportable segment were as follows:
Financial Services
Healthcare
Products and Resources
Communications, Media and Technology
Total segment operating profit
Less: unallocated costs
Income from operations
2019
2018
2017(1)
$
$
1,605
1,261
1,028
732
4,626
2,173
2,453
(in millions)
1,713
$
1,416
1,023
692
4,844
2,043
2,801
$
$
$
1,771
1,301
923
601
4,596
2,115
2,481
(1)
As described above, in 2019 we made changes to the internal measurement of segment operating profits. While we have
restated the 2018 results to conform to the new methodology, it is impracticable for us to restate our 2017 segment
operating results as the detailed information required for the allocation of such costs to the segments is not reasonably
available.
Geographic Area Information
Long-lived assets by geographic area are as follows:
Long-lived Assets:(1)
North America(2)
Europe
Rest of World(3)
Total
2019
2018
2017
(in millions)
$
$
445
104
760
1,309
$
$
436
105
853
1,394
$
$
360
63
901
1,324
(1)
(2)
(3)
Long-lived assets include property and equipment, net of accumulated depreciation and amortization.
Substantially all relates to the United States.
Substantially all relates to India.
F-44
F-45
Cognizant Technology Solutions Corporation
Valuation and Qualifying Accounts
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Trade accounts receivable allowance for doubtful
Valuation allowance—deferred income tax assets:
Warranty accrual:
Description
accounts:
2019
2018
2017
2019
2018
2017
2019
2018
2017
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
(in millions)
Deductions
/Other
Balance at
End of
Period
$
$
$
$
$
$
$
$
$
78
65
48
32
30
26
11
10
10
$
$
$
$
$
$
$
$
$
(11)
13
15
33
32
30
15
1
$
$
$
$
$
$
$
$
— $
— $
— $
3
$
— $
— $
— $
— $
— $
— $
— $
— $
1
32
30
26
2
$
$
$
$
$
— $
— $
67
78
65
33
32
30
24
11
10
Table of Contents
Table of Contents
Note 20 — Quarterly Financial Data (Unaudited)
Summarized quarterly results for the two years ended December 31, 2019 are as follows:
2019
March 31
June 30
September 30
December 31
Full Year
Three Months Ended
Revenues
Cost of revenues (exclusive of depreciation
and amortization expense shown
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
(in millions, except per share data)
4,110
$
4,141
$
4,248
$
4,284
$
16,783
2,575
871
2
123
539
441
0.77
0.77
$
$
2,629
719
49
125
619
509
0.90
0.90
$
$
2,681
706
65
127
669
497
0.90
0.90
$
$
2,749
676
101
132
626
395
0.72
0.72
$
$
10,634
2,972
217
507
2,453
1,842
3.30
3.29
$
$
2018
March 31
June 30
September 30
December 31
Full Year
Three Months Ended
Revenues
Cost of revenues (exclusive of depreciation
and amortization expense shown
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
$
3,912
$
4,006
$
4,078
$
4,129
$
16,125
(in millions, except per share data)
2,401
710
1
107
693
520
0.89
0.88
$
$
2,417
805
—
114
670
456
0.78
0.78
$
$
2,480
723
11
119
745
477
0.82
0.82
$
$
2,540
769
7
120
693
648
1.12
1.12
$
$
$
$
9,838
3,007
19
460
2,801
2,101
3.61
3.60
(1)
The sum of the quarterly basic and diluted earnings per share for each of the four quarters may not equal the earnings
per share for the year due to rounding.
Note 21 — Subsequent Events
Dividend
On February 3, 2020, our Board of Directors approved the Company's declaration of a $0.22 per share dividend with a record
date of February 18, 2020 and a payment date of February 28, 2020.
Share Repurchase Program
In February 2020, our Board of Directors increased our stock repurchase program authorization from $5.5 billion to $7.5
billion, excluding fees and expenses, and eliminated the expiration date of the program.
F-46
F-47
Table of Contents
Table of Contents
Note 20 — Quarterly Financial Data (Unaudited)
Summarized quarterly results for the two years ended December 31, 2019 are as follows:
Cognizant Technology Solutions Corporation
Valuation and Qualifying Accounts
For the Years Ended December 31, 2019, 2018 and 2017
(in millions)
Description
Trade accounts receivable allowance for doubtful
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
(in millions)
Deductions
/Other
Balance at
End of
Period
accounts:
2019
2018
2017
Warranty accrual:
2019
2018
2017
Valuation allowance—deferred income tax assets:
2019
2018
2017
$
$
$
$
$
$
$
$
$
78
65
48
32
30
26
11
10
10
$
$
$
$
$
$
$
$
$
(11)
13
15
33
32
30
$
$
$
$
$
$
$
15
1
$
— $
— $
— $
$
3
— $
— $
— $
— $
— $
— $
— $
— $
$
1
32
30
26
$
$
$
2
$
— $
— $
67
78
65
33
32
30
24
11
10
Three Months Ended
March 31
June 30
September 30
December 31
Full Year
(in millions, except per share data)
4,110
$
4,141
$
4,248
$
4,284
$
16,783
2,575
2,629
2,681
2,749
871
2
123
539
441
0.77
0.77
710
1
107
693
520
0.89
0.88
$
$
$
$
719
49
125
619
509
0.90
0.90
805
—
114
670
456
0.78
0.78
$
$
$
$
706
65
127
669
497
0.90
0.90
723
11
119
745
477
0.82
0.82
$
$
$
$
676
101
132
626
395
0.72
0.72
769
7
120
693
648
1.12
1.12
$
$
$
$
10,634
2,972
217
507
2,453
1,842
3.30
3.29
9,838
3,007
19
460
2,801
2,101
3.61
3.60
Three Months Ended
March 31
June 30
September 30
December 31
Full Year
(in millions, except per share data)
$
3,912
$
4,006
$
4,078
$
4,129
$
16,125
2,401
2,417
2,480
2,540
2019
Revenues
Cost of revenues (exclusive of depreciation
and amortization expense shown
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
2018
Revenues
Cost of revenues (exclusive of depreciation
and amortization expense shown
separately below)
Selling, general and administrative expenses
Restructuring charges
Depreciation and amortization expense
Income from operations
Net income
Basic earnings per share (1)
Diluted earnings per share (1)
$
$
$
$
per share for the year due to rounding.
Note 21 — Subsequent Events
Dividend
Share Repurchase Program
(1)
The sum of the quarterly basic and diluted earnings per share for each of the four quarters may not equal the earnings
On February 3, 2020, our Board of Directors approved the Company's declaration of a $0.22 per share dividend with a record
date of February 18, 2020 and a payment date of February 28, 2020.
In February 2020, our Board of Directors increased our stock repurchase program authorization from $5.5 billion to $7.5
billion, excluding fees and expenses, and eliminated the expiration date of the program.
F-46
F-47
I, Brian Humphries, certify that:
CERTIFICATION
CERTIFICATION
EXHIBIT 31.1
EXHIBIT 31.2
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;
I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
I, Karen McLoughlin, certify that:
1.
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: February 14, 2020
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer
(Principal Executive Officer)
Dated: February 14, 2020
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
1.
2.
I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
I, Brian Humphries, certify that:
I, Karen McLoughlin, certify that:
CERTIFICATION
CERTIFICATION
EXHIBIT 31.1
EXHIBIT 31.2
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Cognizant Technology Solutions Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
5.
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: February 14, 2020
Dated: February 14, 2020
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer
(Principal Executive Officer)
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
EXHIBIT 32.1
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Cognizant Technology Solutions Corporation (the
In connection with the Annual Report on Form 10-K of Cognizant Technology Solutions Corporation (the
“Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned, Brian Humphries, Chief Executive Officer of the Company, hereby certifies, pursuant to 18
U.S.C. Section 1350, that:
“Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned, Karen McLoughlin, Chief Financial Officer of the Company, hereby certifies, pursuant to 18
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
(1) The Report fully complies with the requirements of Section 13(a) or 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
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: February 14, 2020
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer
(Principal Executive Officer)
U.S.C. Section 1350, that:
1934; and
of operations of the Company.
Dated: February 14, 2020
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
_____________________
_____________________
* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions
Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions
Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
EXHIBIT 32.1
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Cognizant Technology Solutions Corporation (the
In connection with the Annual Report on Form 10-K of Cognizant Technology Solutions Corporation (the
“Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned, Brian Humphries, Chief Executive Officer of the Company, hereby certifies, pursuant to 18
“Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), the undersigned, Karen McLoughlin, Chief Financial Officer of the Company, hereby certifies, pursuant to 18
U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
(1) The Report fully complies with the requirements of Section 13(a) or 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
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Dated: February 14, 2020
/s/ KAREN MCLOUGHLIN
Karen McLoughlin
Chief Financial Officer
(Principal Financial Officer)
U.S.C. Section 1350, that:
1934; and
of operations of the Company.
Dated: February 14, 2020
/s/ BRIAN HUMPHRIES
Brian Humphries
Chief Executive Officer
(Principal Executive Officer)
_____________________
_____________________
* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions
Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
* A signed original of this written statement required by Section 906 has been provided to Cognizant Technology Solutions
Corporation and will be retained by Cognizant Technology Solutions Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
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Powering the
Next Phase
of Growth
Corporate information
Directors
Michael Patsalos-Fox (CC) (FC) (GC)
Chairman of the Board
Cognizant
Former CEO
Stroz Friedberg
Former Chairman, the Americas
McKinsey & Company
Zein Abdalla (FC) (GC*)
Former President
PepsiCo
Vinita Bali
Former CEO and Managing Director
Britannia Industries
Former Vice President
The Coca-Cola Company
Maureen Breakiron-Evans (AC*) (GC)
Former CFO
Towers Perrin
Archana Deskus
Chief Information Officer
Intel
John M. Dineen (AC) (FC*)
Former President & CEO
GE Healthcare
John N. Fox, Jr. (CC*) (GC)
Former Vice Chairman
Deloitte & Touche
Brian Humphries
Chief Executive Officer
Cognizant
Leo S. Mackay, Jr. (AC) (CC)
Senior Vice President,
Ethics & Enterprise Assurance
Lockheed Martin
Joseph M. Velli (AC) (CC)
Former Senior Executive Vice President
The Bank of New York
Sandra S. Wijnberg (AC) (FC)
Former Partner
Aquiline Holdings
Board committees
AC Audit
FC Finance & Strategy
CC Management Development
& Compensation
GC Nominating, Governance & Public Affairs
* Denotes committee chairperson
Executive officers
Brian Humphries
Chief Executive Officer
Karen McLoughlin
Chief Financial Officer
Executive offices
Glenpointe Centre West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666
Phone: 201.801.0233
www.cognizant.com
Robert Telesmanic
Senior Vice President,
Controller and Chief Accounting Officer
Matthew Friedrich
Executive Vice President,
General Counsel, Chief Corporate Affairs
Officer and Secretary
Becky Schmitt
Executive Vice President
Chief People Officer
Dharmendra Kumar Sinha
Executive Vice President
President, North America
Malcolm Frank
Executive Vice President
President, Cognizant Digital Business
Balu Ganesh Ayyar
Executive Vice President
President, Cognizant Digital Operations
Greg Hyttenrauch
Executive Vice President
President, Cognizant Digital Systems
& Technology
Pradeep Shilige
Executive Vice President
Head of Global Delivery
Form 10-K
A copy of the Company’s Annual Report
on Form 10-K is available without charge
upon request by contacting Investor
Relations.
Common stock information
The Company’s Class A Common Stock
(CTSH) is listed on the Nasdaq Global
Select Market.
Annual meeting
The Company’s annual meeting
of stockholders will be held on
Tuesday, June 2, 2020 via live webcast at
www.virtualshareholdermeeting.com/
CTSH2020
Online check-in begins at 9:15 am;
meeting begins at 9:30 am.
Independent registered
public accounting firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Transfer agent
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Investor relations
For more information, contact:
Katie Royce
Global Head of Investor Relations
Katie.Royce@cognizant.com.
This Annual Report includes statements which may constitute forward-looking statements made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which
are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be
accurate. These statements include, but are not limited to, express or implied forward-looking statements
relating to our expectations regarding opportunities in the marketplace, our cost structure, investment in and
growth of our business, our realignment plans, the timing, cost and impact of the 2020 Fit for Growth Plan,
our shift to digital solutions and services, our anticipated financial performance, our capital deployment plan
and clarification, if any, by the Indian government as to the application of the Supreme Court’s ruling related
to the India Defined Contribution Obligation. These statements are neither promises nor guarantees, but
are subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause
actual results to differ materially from those contemplated in these forward-looking statements. Existing
and prospective investors are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. Factors that could cause actual results to differ materially from
those expressed or implied include general economic conditions, the impact of the COVID-19 pandemic,
changes in the regulatory environment, including with respect to immigration and taxes, and the other
factors discussed in our most recent Annual Report on Form 10-K and other filings with the SEC. Cognizant
undertakes no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as may be required under applicable securities law.
370583_CGZ_AnnualReport_04_14_2020_MARKUP_CVR.indd Letter V
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Engineering
Modern
Businesses
ANNUAL REP ORT 2019
370583_CGZ_AnnualReport_04_14_2020_MARKUP_CVR.indd Letter V
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