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ý
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Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended June 30, 2018
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¨
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from to
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Delaware
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13-3728359
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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Glenpointe Centre West
500 Frank W. Burr Blvd.
Teaneck, New Jersey
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07666
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Class
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Number of Shares
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Class A Common Stock, par value $.01 per share
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580,233,834
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Page
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PART I.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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June 30,
2018 |
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December 31,
2017 |
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Assets
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Current assets:
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||||
Cash and cash equivalents
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$
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901
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$
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1,925
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Short-term investments
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3,346
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3,131
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Trade accounts receivable, net of allowances of $68 and $65, respectively
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3,204
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2,865
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Unbilled accounts receivable
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—
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357
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Other current assets
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852
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833
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Total current assets
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8,303
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9,111
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Property and equipment, net
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1,345
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1,324
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Goodwill
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3,036
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2,704
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Intangible assets, net
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1,060
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981
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Deferred income tax assets, net
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367
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418
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Long-term investments
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80
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235
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Other noncurrent assets
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615
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448
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Total assets
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$
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14,806
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$
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15,221
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Liabilities and Stockholders’ Equity
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Current liabilities:
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Accounts payable
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$
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217
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$
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210
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Deferred revenue
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308
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383
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Short-term debt
|
100
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175
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Accrued expenses and other current liabilities
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1,912
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2,071
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Total current liabilities
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2,537
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2,839
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Deferred revenue, noncurrent
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77
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104
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Deferred income tax liabilities, net
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145
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146
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Long-term debt
|
649
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698
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Long-term income taxes payable
|
508
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584
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Other noncurrent liabilities
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242
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181
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Total liabilities
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4,158
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4,552
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Commitments and contingencies (See
Note 13
)
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Stockholders’ equity:
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Preferred stock, $0.10 par value, 15.0 shares authorized, none issued
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—
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—
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Class A common stock, $0.01 par value, 1,000 shares authorized, 580 and 588 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
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6
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6
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Additional paid-in capital
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55
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49
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Retained earnings
|
10,681
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10,544
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Accumulated other comprehensive income (loss)
|
(94
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)
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70
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Total stockholders’ equity
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10,648
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10,669
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Total liabilities and stockholders’ equity
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$
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14,806
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$
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15,221
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
||||||||||||
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2018
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2017
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2018
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2017
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||||||||
Revenues
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$
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4,006
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$
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3,670
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$
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7,918
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$
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7,216
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Operating expenses:
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||||||||
Cost of revenues (exclusive of depreciation and amortization expense shown separately below)
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2,417
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2,261
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4,818
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4,455
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Selling, general and administrative expenses
|
805
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709
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1,516
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1,395
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Depreciation and amortization expense
|
114
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94
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|
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221
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|
190
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|
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Income from operations
|
670
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606
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1,363
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1,176
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Other income (expense), net:
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Interest income
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40
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31
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81
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|
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63
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|
||||
Interest expense
|
(7
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)
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(6
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)
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(13
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)
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(12
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)
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Foreign currency exchange gains (losses), net
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(80
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)
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5
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(111
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)
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57
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Other, net
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—
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(1
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)
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—
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—
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Total other income (expense), net
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(47
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)
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29
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(43
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)
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108
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Income before provision for income taxes
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623
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635
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1,320
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1,284
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Provision for income taxes
|
(168
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)
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(165
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)
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(345
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)
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(257
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)
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Income from equity method investments
|
1
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—
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1
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—
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Net income
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$
|
456
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$
|
470
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$
|
976
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$
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1,027
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Basic earnings per share
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$
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0.78
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$
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0.80
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$
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1.67
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$
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1.72
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Diluted earnings per share
|
$
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0.78
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$
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0.80
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$
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1.66
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$
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1.71
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Weighted average number of common shares outstanding - Basic
|
585
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589
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586
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597
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Dilutive effect of shares issuable under stock-based compensation plans
|
1
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2
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1
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2
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Weighted average number of common shares outstanding - Diluted
|
586
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591
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587
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|
599
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Dividends declared per common share
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$
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0.20
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$
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0.15
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$
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0.40
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$
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0.15
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|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
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|
2017
|
|
2018
|
|
2017
|
||||||||
Net income
|
$
|
456
|
|
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$
|
470
|
|
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$
|
976
|
|
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$
|
1,027
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(71
|
)
|
|
50
|
|
|
(34
|
)
|
|
67
|
|
||||
Change in unrealized gains and losses on cash flow hedges, net of taxes
|
(87
|
)
|
|
(1
|
)
|
|
(123
|
)
|
|
78
|
|
||||
Change in unrealized gains and losses on available-for-sale securities, net of taxes
|
1
|
|
|
1
|
|
|
(6
|
)
|
|
2
|
|
||||
Other comprehensive income (loss)
|
(157
|
)
|
|
50
|
|
|
(163
|
)
|
|
147
|
|
||||
Comprehensive income
|
$
|
299
|
|
|
$
|
520
|
|
|
$
|
813
|
|
|
$
|
1,174
|
|
|
|
Class A Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|||||||||||||||||||
Balance, December 31, 2017
|
|
588
|
|
|
$
|
6
|
|
|
$
|
49
|
|
|
$
|
10,544
|
|
|
$
|
70
|
|
|
$
|
10,669
|
|
Cumulative effect of changes in accounting principle
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
(1
|
)
|
|
121
|
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
976
|
|
|
—
|
|
|
976
|
|
|||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(163
|
)
|
|
(163
|
)
|
|||||
Common stock issued, stock-based compensation plans
|
|
4
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
|||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|||||
Repurchases of common stock
|
|
(12
|
)
|
|
—
|
|
|
(226
|
)
|
|
(723
|
)
|
|
—
|
|
|
(949
|
)
|
|||||
Dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|
—
|
|
|
(238
|
)
|
|||||
Balance, June 30, 2018
|
|
580
|
|
|
$
|
6
|
|
|
$
|
55
|
|
|
$
|
10,681
|
|
|
$
|
(94
|
)
|
|
$
|
10,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Class A Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Total
|
|||||||||||||
|
Shares
|
|
Amount
|
|
|||||||||||||||||||
Balance, December 31, 2016
|
|
608
|
|
|
$
|
6
|
|
|
$
|
358
|
|
|
$
|
10,478
|
|
|
$
|
(114
|
)
|
|
$
|
10,728
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,027
|
|
|
—
|
|
|
1,027
|
|
|||||
Other comprehensive income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
147
|
|
|||||
Common stock issued, stock-based compensation plans
|
|
4
|
|
|
—
|
|
|
105
|
|
|
—
|
|
|
—
|
|
|
105
|
|
|||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|||||
Repurchases of common stock
|
|
(22
|
)
|
|
—
|
|
|
(444
|
)
|
|
(1,100
|
)
|
|
—
|
|
|
(1,544
|
)
|
|||||
Dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
—
|
|
|
(89
|
)
|
|||||
Balance, June 30, 2017
|
|
590
|
|
|
$
|
6
|
|
|
$
|
128
|
|
|
$
|
10,316
|
|
|
$
|
33
|
|
|
$
|
10,483
|
|
(1)
|
Reflects the adoption of accounting standards as described in
Note 1
.
|
|
For the Six Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
976
|
|
|
$
|
1,027
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
240
|
|
|
207
|
|
||
Provision for doubtful accounts
|
4
|
|
|
17
|
|
||
Deferred income taxes
|
51
|
|
|
8
|
|
||
Stock-based compensation expense
|
130
|
|
|
109
|
|
||
Other
|
100
|
|
|
(63
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Trade accounts receivable
|
(330
|
)
|
|
(103
|
)
|
||
Other current assets
|
296
|
|
|
(81
|
)
|
||
Other noncurrent assets
|
(159
|
)
|
|
(46
|
)
|
||
Accounts payable
|
(3
|
)
|
|
2
|
|
||
Deferred revenues, current and noncurrent
|
(47
|
)
|
|
10
|
|
||
Other current and noncurrent liabilities
|
(230
|
)
|
|
(289
|
)
|
||
Net cash provided by operating activities
|
1,028
|
|
|
798
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(187
|
)
|
|
(126
|
)
|
||
Purchases of available-for-sale investment securities
|
(806
|
)
|
|
(1,622
|
)
|
||
Proceeds from maturity or sale of available-for-sale investment securities
|
906
|
|
|
1,936
|
|
||
Purchases of held-to-maturity investment securities
|
(519
|
)
|
|
(662
|
)
|
||
Proceeds from maturity of held-to-maturity investment securities
|
386
|
|
|
50
|
|
||
Purchases of other investments
|
(318
|
)
|
|
(213
|
)
|
||
Proceeds from maturity or sale of other investments
|
205
|
|
|
345
|
|
||
Payments for business combinations, net of cash acquired
|
(478
|
)
|
|
(6
|
)
|
||
Net cash (used in) investing activities
|
(811
|
)
|
|
(298
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Issuance of common stock under stock-based compensation plans
|
102
|
|
|
104
|
|
||
Repurchases of common stock
|
(949
|
)
|
|
(1,544
|
)
|
||
Repayment of term loan borrowings and capital lease obligations
|
(64
|
)
|
|
(42
|
)
|
||
Net change in notes outstanding under the revolving credit facility
|
(75
|
)
|
|
150
|
|
||
Dividends paid
|
(236
|
)
|
|
(89
|
)
|
||
Net cash (used in) financing activities
|
(1,222
|
)
|
|
(1,421
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(19
|
)
|
|
44
|
|
||
(Decrease) in cash and cash equivalents
|
(1,024
|
)
|
|
(877
|
)
|
||
Cash and cash equivalents, beginning of year
|
1,925
|
|
|
2,034
|
|
||
Cash and cash equivalents, end of period
|
$
|
901
|
|
|
$
|
1,157
|
|
Note 1 — Interim Consolidated Financial Statements
|
Date Issued and Topic
|
Date Adopted and Method
|
Description
|
Impact
|
May 2014
Revenue |
January 1, 2018
Modified Retrospective
|
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.
|
See
Note 3
for the impact of adoption of this standard.
|
November 2016
Statement of Cash Flows
|
January 1, 2018
Retrospective
|
This update requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. It also requires a reconciliation of such totals to the amounts on the statement of financial position and disclosure as to the nature of the restrictions.
|
There were no restricted cash balances as of June 30, 2018. The adoption of this update had no impact on our financial statements for the three and six months ended June 30, 2018.
|
February 2018
Income Statement - Reporting Comprehensive Income |
January 1, 2018
In the period of adoption
|
This update provides an option for entities to reclassify stranded tax effects caused by the newly-enacted Tax Cuts and Jobs Act, or Tax Reform Act, from accumulated other comprehensive income to retained earnings.
|
We have early adopted this update as of January 1, 2018. The adoption resulted in a decrease of $1 million in accumulated other comprehensive income and a corresponding increase of $1 million to opening retained earnings.
|
Note 2 — Internal Investigation and Related Matters
|
Note 3 — Revenues
|
|
|
June 30, 2018
|
||||||||||
|
|
As Reported
|
|
Pro-forma Amounts
|
|
Impacts of the New Revenue Standard
|
||||||
|
|
(in millions)
|
||||||||||
Assets:
|
|
|
|
|
|
|
||||||
Trade accounts receivable, net
(1), (2)
|
|
$
|
3,204
|
|
|
$
|
3,082
|
|
|
$
|
122
|
|
Unbilled accounts receivable
(1), (3)
|
|
—
|
|
|
416
|
|
|
(416
|
)
|
|||
Other current assets
(2), (3)
|
|
852
|
|
|
534
|
|
|
318
|
|
|||
Total current assets
|
|
|
|
|
|
24
|
|
|||||
Other noncurrent assets
(4)
|
|
615
|
|
|
565
|
|
|
50
|
|
|||
Total assets
|
|
|
|
|
|
$
|
74
|
|
||||
Liabilities:
|
|
|
|
|
|
|
||||||
Deferred revenue
(2)
|
|
$
|
308
|
|
|
$
|
451
|
|
|
$
|
(143
|
)
|
Total current liabilities
|
|
|
|
|
|
(143
|
)
|
|||||
Deferred revenue, noncurrent
(2)
|
|
77
|
|
|
86
|
|
|
(9
|
)
|
|||
Deferred income tax liabilities, net
(5)
|
|
145
|
|
|
95
|
|
|
50
|
|
|||
Total liabilities
|
|
|
|
|
|
(102
|
)
|
|||||
Stockholders’ equity:
|
|
|
|
|
|
|
||||||
Retained earnings
|
|
10,681
|
|
|
10,505
|
|
|
176
|
|
|||
Total stockholders’ equity
|
|
|
|
|
|
176
|
|
|||||
Total liabilities and stockholders’ equity
|
|
|
|
|
|
$
|
74
|
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
|
|
As Reported
|
|
Pro-forma Amounts
|
|
Impacts of the New Revenue Standard
|
|
As Reported
|
|
Pro-forma Amounts
|
|
Impacts of the New Revenue Standard
|
||||||||||||
|
|
(in millions)
|
|
(in millions)
|
||||||||||||||||||||
Revenues
(2)
|
|
$
|
4,006
|
|
|
$
|
3,975
|
|
|
$
|
31
|
|
|
$
|
7,918
|
|
|
$
|
7,866
|
|
|
$
|
52
|
|
Cost of revenues
(4)
|
|
2,417
|
|
|
2,424
|
|
|
(7
|
)
|
|
4,818
|
|
|
4,833
|
|
|
(15
|
)
|
||||||
Selling, general and administrative expenses
|
|
805
|
|
|
805
|
|
|
—
|
|
|
1,516
|
|
|
1,516
|
|
|
—
|
|
||||||
Depreciation and amortization expense
|
|
114
|
|
|
114
|
|
|
—
|
|
|
221
|
|
|
221
|
|
|
—
|
|
||||||
Income from operations
|
|
670
|
|
|
632
|
|
|
38
|
|
|
1,363
|
|
|
1,296
|
|
|
67
|
|
||||||
Other income (expense), net
|
|
(47
|
)
|
|
(47
|
)
|
|
—
|
|
|
(43
|
)
|
|
(43
|
)
|
|
—
|
|
||||||
Income before provision for income taxes
(5)
|
|
623
|
|
|
585
|
|
|
38
|
|
|
1,320
|
|
|
1,253
|
|
|
67
|
|
||||||
Provision for income taxes
|
|
(168
|
)
|
|
(161
|
)
|
|
(7
|
)
|
|
(345
|
)
|
|
(332
|
)
|
|
(13
|
)
|
||||||
Income (loss) from equity method investment
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||
Net income
|
|
$
|
456
|
|
|
$
|
425
|
|
|
$
|
31
|
|
|
$
|
976
|
|
|
$
|
922
|
|
|
$
|
54
|
|
Basic earnings per share
|
|
$
|
0.78
|
|
|
$
|
0.73
|
|
|
$
|
0.05
|
|
|
$
|
1.67
|
|
|
$
|
1.57
|
|
|
$
|
0.10
|
|
Diluted earnings per share
|
|
$
|
0.78
|
|
|
$
|
0.73
|
|
|
$
|
0.05
|
|
|
$
|
1.66
|
|
|
$
|
1.57
|
|
|
$
|
0.09
|
|
(1)
|
Reflects the reclassification of balances representing receivables, as defined by the New Revenue Standard, from Unbilled accounts receivable to Trade accounts receivable, net.
|
(2)
|
Reflects the impact of changes in the method used to measure progress on our fixed-price application maintenance, consulting and business process services contracts and the timing of revenue recognition and allocation of purchase price on our software license contracts.
|
(3)
|
Reflects the reclassification of balances representing contract assets, as defined by the New Revenue Standard, from Unbilled accounts receivable to Other current assets.
|
(4)
|
Reflects the impact of a longer period of amortization for costs to fulfill a contract.
|
(5)
|
Reflects the income tax impact of the above items.
|
|
|
Costs to Fulfill
|
||
|
|
(in millions)
|
||
Balance - January 1, 2018
|
|
$
|
303
|
|
Amortization expense
|
|
(32
|
)
|
|
Costs capitalized
|
|
85
|
|
|
Other
|
|
(3
|
)
|
|
Balance - June 30, 2018
|
|
$
|
353
|
|
|
|
Contract Assets
|
||
|
|
(in millions)
|
||
Balance - January 1, 2018
|
|
$
|
306
|
|
Revenues recognized during the period but not billed
|
|
259
|
|
|
Amounts reclassified to accounts receivable
|
|
(247
|
)
|
|
Balance - June 30, 2018
|
|
$
|
318
|
|
|
|
Deferred Revenue
|
||
|
|
(in millions)
|
||
Balance - January 1, 2018
|
|
$
|
431
|
|
Amounts billed but not recognized as revenues
|
|
119
|
|
|
Revenues recognized related to the opening balance of deferred revenue
|
|
(163
|
)
|
|
Other
|
|
(2
|
)
|
|
Balance - June 30, 2018
|
|
$
|
385
|
|
(1)
|
contracts with an original duration of one year or less, including contracts that can be terminated for convenience without a substantive penalty,
|
(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
|
(4)
|
variable consideration in the form of a sales-based or usage based royalty promised in exchange for a license of intellectual property.
|
|
|
Three Months Ended
|
||||||||||||||||||
|
|
June 30, 2018
|
||||||||||||||||||
|
|
Financial Services
|
|
Healthcare
|
|
Products and Resources
|
|
Communications, Media and Technology
|
|
Total
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Geography:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
|
$
|
1,056
|
|
|
$
|
1,060
|
|
|
$
|
585
|
|
|
$
|
366
|
|
|
$
|
3,067
|
|
United Kingdom
|
|
114
|
|
|
22
|
|
|
89
|
|
|
84
|
|
|
309
|
|
|||||
Rest of Europe
|
|
165
|
|
|
61
|
|
|
109
|
|
|
46
|
|
|
381
|
|
|||||
Europe - Total
|
|
279
|
|
|
83
|
|
|
198
|
|
|
130
|
|
|
690
|
|
|||||
Rest of World
|
|
134
|
|
|
13
|
|
|
57
|
|
|
45
|
|
|
249
|
|
|||||
Total
|
|
$
|
1,469
|
|
|
$
|
1,156
|
|
|
$
|
840
|
|
|
$
|
541
|
|
|
$
|
4,006
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Service line:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consulting and technology services
|
|
$
|
885
|
|
|
$
|
613
|
|
|
$
|
499
|
|
|
$
|
289
|
|
|
$
|
2,286
|
|
Outsourcing services
|
|
584
|
|
|
543
|
|
|
341
|
|
|
252
|
|
|
1,720
|
|
|||||
Total
|
|
$
|
1,469
|
|
|
$
|
1,156
|
|
|
$
|
840
|
|
|
$
|
541
|
|
|
$
|
4,006
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Type of contract:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Time and materials
|
|
$
|
953
|
|
|
$
|
452
|
|
|
$
|
379
|
|
|
$
|
335
|
|
|
$
|
2,119
|
|
Fixed-price
|
|
460
|
|
|
443
|
|
|
367
|
|
|
179
|
|
|
1,449
|
|
|||||
Transaction or volume-based
|
|
56
|
|
|
261
|
|
|
94
|
|
|
27
|
|
|
438
|
|
|||||
Total
|
|
$
|
1,469
|
|
|
$
|
1,156
|
|
|
$
|
840
|
|
|
$
|
541
|
|
|
$
|
4,006
|
|
|
|
Six Months Ended
|
||||||||||||||||||
|
|
June 30, 2018
|
||||||||||||||||||
|
|
Financial Services
|
|
Healthcare
|
|
Products and Resources
|
|
Communications, Media and Technology
|
|
Total
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Geography:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
|
$
|
2,100
|
|
|
$
|
2,083
|
|
|
$
|
1,157
|
|
|
$
|
702
|
|
|
$
|
6,042
|
|
United Kingdom
|
|
230
|
|
|
45
|
|
|
176
|
|
|
168
|
|
|
619
|
|
|||||
Rest of Europe
|
|
327
|
|
|
122
|
|
|
218
|
|
|
88
|
|
|
755
|
|
|||||
Europe - Total
|
|
557
|
|
|
167
|
|
|
394
|
|
|
256
|
|
|
1,374
|
|
|||||
Rest of World
|
|
273
|
|
|
27
|
|
|
110
|
|
|
92
|
|
|
502
|
|
|||||
Total
|
|
$
|
2,930
|
|
|
$
|
2,277
|
|
|
$
|
1,661
|
|
|
$
|
1,050
|
|
|
$
|
7,918
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Service line:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Consulting and technology services
|
|
$
|
1,756
|
|
|
$
|
1,251
|
|
|
$
|
980
|
|
|
$
|
567
|
|
|
$
|
4,554
|
|
Outsourcing services
|
|
1,174
|
|
|
1,026
|
|
|
681
|
|
|
483
|
|
|
3,364
|
|
|||||
Total
|
|
$
|
2,930
|
|
|
$
|
2,277
|
|
|
$
|
1,661
|
|
|
$
|
1,050
|
|
|
$
|
7,918
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Type of contract:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Time and materials
|
|
$
|
1,888
|
|
|
$
|
900
|
|
|
$
|
748
|
|
|
$
|
641
|
|
|
$
|
4,177
|
|
Fixed-price
|
|
931
|
|
|
954
|
|
|
728
|
|
|
358
|
|
|
2,971
|
|
|||||
Transaction or volume-based
|
|
111
|
|
|
423
|
|
|
185
|
|
|
51
|
|
|
770
|
|
|||||
Total
|
|
$
|
2,930
|
|
|
$
|
2,277
|
|
|
$
|
1,661
|
|
|
$
|
1,050
|
|
|
$
|
7,918
|
|
Note 4 — Business Combinations
|
|
Six Months Ended
June 30, 2018 |
||||
|
Fair Value
|
|
Weighted Average Useful Life
|
||
|
(in millions)
|
|
|
||
Cash
|
$
|
10
|
|
|
|
Current assets
|
37
|
|
|
|
|
Property, plant and equipment and other noncurrent assets
|
10
|
|
|
|
|
Non-deductible goodwill
(1)
|
340
|
|
|
|
|
Customer relationship intangible assets
|
123
|
|
|
9.7 years
|
|
Other intangible assets
|
26
|
|
|
2.4 years
|
|
Current liabilities
|
(15
|
)
|
|
|
|
Noncurrent liabilities
|
(39
|
)
|
|
|
|
Purchase price
|
$
|
492
|
|
|
|
Note 5 — Realignment Charges
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Employee separations
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
39
|
|
Advisory fees
|
—
|
|
|
1
|
|
|
—
|
|
|
10
|
|
||||
Lease termination costs
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Total realignment costs
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
1
|
|
|
$
|
50
|
|
Note 6 — Investments
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in millions)
|
||||||
Short-term investments:
|
|
|
|
||||
Equity investment securities
|
$
|
25
|
|
|
$
|
25
|
|
Available-for-sale investment securities
|
1,862
|
|
|
1,972
|
|
||
Held-to-maturity investment securities
|
987
|
|
|
745
|
|
||
Time deposits
|
472
|
|
(1)
|
389
|
|
||
Total short-term investments
|
$
|
3,346
|
|
|
$
|
3,131
|
|
Long-term investments:
|
|
|
|
||||
Equity and cost method investments
|
$
|
74
|
|
|
$
|
74
|
|
Held-to-maturity investment securities
|
6
|
|
|
161
|
|
||
Total long-term investments
|
$
|
80
|
|
|
$
|
235
|
|
(1)
|
Includes
$419 million
in restricted time deposits as of June 30, 2018. See
Note 9
.
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value |
||||||||
|
(in millions)
|
||||||||||||||
U.S. Treasury and agency debt securities
|
$
|
647
|
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
637
|
|
Corporate and other debt securities
|
440
|
|
|
—
|
|
|
(5
|
)
|
|
435
|
|
||||
Certificates of deposit and commercial paper
|
377
|
|
|
—
|
|
|
—
|
|
|
377
|
|
||||
Asset-backed securities
|
306
|
|
|
—
|
|
|
(3
|
)
|
|
303
|
|
||||
Municipal debt securities
|
111
|
|
|
—
|
|
|
(1
|
)
|
|
110
|
|
||||
Total available-for-sale investment securities
|
$
|
1,881
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
1,862
|
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
U.S. Treasury and agency debt securities
|
$
|
667
|
|
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
661
|
|
Corporate and other debt securities
|
439
|
|
|
—
|
|
|
(2
|
)
|
|
437
|
|
||||
Certificates of deposit and commercial paper
|
450
|
|
|
—
|
|
|
—
|
|
|
450
|
|
||||
Asset-backed securities
|
297
|
|
|
—
|
|
|
(2
|
)
|
|
295
|
|
||||
Municipal debt securities
|
130
|
|
|
—
|
|
|
(1
|
)
|
|
129
|
|
||||
Total available-for-sale investment securities
|
$
|
1,983
|
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
1,972
|
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
U.S. Treasury and agency debt securities
|
$
|
517
|
|
|
$
|
(8
|
)
|
|
$
|
86
|
|
|
$
|
(2
|
)
|
|
$
|
603
|
|
|
$
|
(10
|
)
|
Corporate and other debt securities
|
321
|
|
|
(4
|
)
|
|
97
|
|
|
(1
|
)
|
|
418
|
|
|
(5
|
)
|
||||||
Certificates of deposit and commercial paper
|
99
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
99
|
|
|
—
|
|
||||||
Asset-backed securities
|
212
|
|
|
(2
|
)
|
|
78
|
|
|
(1
|
)
|
|
290
|
|
|
(3
|
)
|
||||||
Municipal debt securities
|
86
|
|
|
(1
|
)
|
|
16
|
|
|
—
|
|
|
102
|
|
|
(1
|
)
|
||||||
Total
|
$
|
1,235
|
|
|
$
|
(15
|
)
|
|
$
|
277
|
|
|
$
|
(4
|
)
|
|
$
|
1,512
|
|
|
$
|
(19
|
)
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
U.S. Treasury and agency debt securities
|
$
|
519
|
|
|
$
|
(4
|
)
|
|
$
|
124
|
|
|
$
|
(2
|
)
|
|
$
|
643
|
|
|
$
|
(6
|
)
|
Corporate and other debt securities
|
297
|
|
|
(1
|
)
|
|
126
|
|
|
(1
|
)
|
|
423
|
|
|
(2
|
)
|
||||||
Certificates of deposit and commercial paper
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
||||||
Asset-backed securities
|
193
|
|
|
(1
|
)
|
|
94
|
|
|
(1
|
)
|
|
287
|
|
|
(2
|
)
|
||||||
Municipal debt securities
|
107
|
|
|
(1
|
)
|
|
18
|
|
|
—
|
|
|
125
|
|
|
(1
|
)
|
||||||
Total
|
$
|
1,165
|
|
|
$
|
(7
|
)
|
|
$
|
362
|
|
|
$
|
(4
|
)
|
|
$
|
1,527
|
|
|
$
|
(11
|
)
|
|
Amortized
Cost
|
|
Fair
Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
536
|
|
|
$
|
535
|
|
Due after one year up to two years
|
526
|
|
|
518
|
|
||
Due after two years up to three years
|
468
|
|
|
461
|
|
||
Due after three years
|
45
|
|
|
45
|
|
||
Asset-backed securities
|
306
|
|
|
303
|
|
||
Total available-for-sale investment securities
|
$
|
1,881
|
|
|
$
|
1,862
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Proceeds from sales of available-for-sale investment securities
|
$
|
434
|
|
|
$
|
397
|
|
|
$
|
559
|
|
|
$
|
1,645
|
|
|
|
|
|
|
|
|
|
||||||||
Gross gains
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Gross losses
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
||||
Net realized (losses) on sales of available-for-sale investment securities
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
Amortized
Cost |
|
Unrealized
Gains |
|
Unrealized
Losses |
|
Fair
Value |
||||||||
|
(in millions)
|
||||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
$
|
599
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
597
|
|
Commercial paper
|
388
|
|
|
—
|
|
|
(1
|
)
|
|
387
|
|
||||
Total short-term held-to-maturity investments
|
987
|
|
|
—
|
|
|
(3
|
)
|
|
984
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
Total held-to-maturity investment securities
|
$
|
993
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
990
|
|
|
Amortized
Cost |
|
Unrealized
Gains |
|
Unrealized
Losses |
|
Fair
Value |
||||||||
|
(in millions)
|
||||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
$
|
346
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
345
|
|
Commercial paper
|
399
|
|
|
—
|
|
|
(2
|
)
|
|
397
|
|
||||
Total short-term held-to-maturity investments
|
745
|
|
|
—
|
|
|
(3
|
)
|
|
742
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
161
|
|
|
—
|
|
|
(1
|
)
|
|
160
|
|
||||
Total held-to-maturity investment securities
|
$
|
906
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
902
|
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Corporate and other debt securities
|
$
|
485
|
|
|
$
|
(2
|
)
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
516
|
|
|
$
|
(2
|
)
|
Commercial paper
|
387
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
387
|
|
|
(1
|
)
|
||||||
Total
|
$
|
872
|
|
|
$
|
(3
|
)
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
903
|
|
|
$
|
(3
|
)
|
|
Less than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Corporate and other debt securities
|
$
|
473
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
473
|
|
|
$
|
(2
|
)
|
Commercial paper
|
394
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
394
|
|
|
(2
|
)
|
||||||
Total
|
$
|
867
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
867
|
|
|
$
|
(4
|
)
|
|
Amortized
Cost
|
|
Fair
Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
987
|
|
|
$
|
984
|
|
Due after two years
|
6
|
|
|
6
|
|
||
Total held-to-maturity investment securities
|
$
|
993
|
|
|
$
|
990
|
|
Note 7 — Accrued Expenses and Other Current Liabilities
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in millions)
|
||||||
Compensation and benefits
|
$
|
928
|
|
|
$
|
1,272
|
|
Income taxes
|
174
|
|
|
48
|
|
||
Professional fees
|
113
|
|
|
100
|
|
||
Travel and entertainment
|
45
|
|
|
32
|
|
||
Customer volume and other incentives
|
312
|
|
|
289
|
|
||
Derivative financial instruments
|
18
|
|
|
5
|
|
||
Other
|
322
|
|
|
325
|
|
||
Total accrued expenses and other current liabilities
|
$
|
1,912
|
|
|
$
|
2,071
|
|
Note 8 — Debt
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
|
(in millions)
|
||||||
Notes outstanding under revolving credit facility
|
|
$
|
—
|
|
|
$
|
75
|
|
Term loan - current maturities
|
|
100
|
|
|
100
|
|
||
Total short-term debt
|
|
$
|
100
|
|
|
$
|
175
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
|
(in millions)
|
||||||
Term loan, due November 2019
|
|
$
|
750
|
|
|
$
|
800
|
|
Less:
|
|
|
|
|
||||
Current maturities
|
|
(100
|
)
|
|
(100
|
)
|
||
Deferred financing costs
|
|
(1
|
)
|
|
(2
|
)
|
||
Long-term debt, net of current maturities
|
|
$
|
649
|
|
|
$
|
698
|
|
Note 9 — Income Taxes
|
•
|
reducing the U.S. federal statutory corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017;
|
•
|
implementing a modified territorial tax system that includes a one-time transition tax on all accumulated undistributed earnings of foreign subsidiaries;
|
•
|
providing for a full deduction on future dividends received from foreign affiliates; and
|
•
|
imposing a U.S. income tax on global intangible low-taxed income, or GILTI.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Effective income tax rate
|
27.0
|
%
|
|
26.0
|
%
|
|
26.1
|
%
|
|
20.0
|
%
|
Note 10 — Derivative Financial Instruments
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
Designation of Derivatives
|
|
Location on Statements of
Financial Position
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
|
|
|
(in millions)
|
||||||||||||||
Foreign exchange forward contracts – Designated as cash flow hedging instruments
|
|
Other current assets
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
134
|
|
|
$
|
—
|
|
|
|
Other noncurrent assets
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||
|
|
Accrued expenses and other current liabilities
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
||||
|
|
Other noncurrent liabilities
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
||||
|
|
Total
|
|
36
|
|
|
43
|
|
|
154
|
|
|
—
|
|
||||
Foreign exchange forward contracts – Not designated as hedging instruments
|
|
Other current assets
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
|
Accrued expenses and other current liabilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
|
|
Total
|
|
4
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
Total
|
|
|
|
$
|
40
|
|
|
$
|
43
|
|
|
$
|
154
|
|
|
$
|
5
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in millions)
|
||||||
2018
|
$
|
690
|
|
|
$
|
1,185
|
|
2019
|
1,050
|
|
|
720
|
|
||
2020
|
315
|
|
|
—
|
|
||
Total notional value of contracts outstanding
|
$
|
2,055
|
|
|
$
|
1,905
|
|
Net unrealized (losses) gains included in accumulated other comprehensive income (loss), net of taxes
|
$
|
(8
|
)
|
|
$
|
115
|
|
|
Change in
Derivative Gains/Losses Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)
|
|
Location of Net Derivative Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
|
|
Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
|
||||||||||||
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||||
Foreign exchange forward contracts – Designated as cash flow hedging instruments
|
$
|
(91
|
)
|
|
$
|
35
|
|
|
Cost of revenues
|
|
$
|
18
|
|
|
$
|
29
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
3
|
|
|
6
|
|
||||||
|
|
|
|
|
Total
|
|
$
|
21
|
|
|
$
|
35
|
|
|
Change in
Derivative Gains/Losses Recognized
in Accumulated Other
Comprehensive Income (Loss)
(effective portion)
|
|
Location of Net Derivative Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
|
|
Net Gains Reclassified
from Accumulated Other
Comprehensive Income (Loss)
into Income
(effective portion)
|
||||||||||||
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||||
Foreign exchange forward contracts – Designated as cash flow hedging instruments
|
$
|
(105
|
)
|
|
$
|
159
|
|
|
Cost of revenues
|
|
$
|
48
|
|
|
$
|
46
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
8
|
|
|
9
|
|
||||||
|
|
|
|
|
Total
|
|
$
|
56
|
|
|
$
|
55
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
Notional
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Contracts outstanding
|
$
|
432
|
|
|
$
|
4
|
|
|
$
|
255
|
|
|
$
|
(5
|
)
|
|
Location of Net Gains (Losses) on
Derivative Instruments
|
|
Amount of Net Gains (Losses) on Derivative Instruments
|
||||||||||||||
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
(in millions)
|
||||||||||||||
Foreign exchange forward contracts – Not designated as hedging instruments
|
Foreign currency exchange gains (losses), net
|
|
$
|
18
|
|
|
$
|
(3
|
)
|
|
$
|
20
|
|
|
$
|
(13
|
)
|
Note 11 — Fair Value Measurements
|
•
|
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.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
300
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300
|
|
Certificates of deposit and commercial paper
|
—
|
|
|
81
|
|
|
—
|
|
|
81
|
|
||||
Total cash equivalents
|
300
|
|
|
81
|
|
|
—
|
|
|
381
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Time deposits
(1)
|
—
|
|
|
472
|
|
|
—
|
|
|
472
|
|
||||
Available-for-sale investment securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency debt securities
|
572
|
|
|
65
|
|
|
—
|
|
|
637
|
|
||||
Corporate and other debt securities
|
—
|
|
|
435
|
|
|
—
|
|
|
435
|
|
||||
Certificates of deposit and commercial paper
|
—
|
|
|
377
|
|
|
—
|
|
|
377
|
|
||||
Asset-backed securities
|
—
|
|
|
303
|
|
|
—
|
|
|
303
|
|
||||
Municipal debt securities
|
—
|
|
|
110
|
|
|
—
|
|
|
110
|
|
||||
Total available-for-sale investment securities
|
572
|
|
|
1,290
|
|
|
—
|
|
|
1,862
|
|
||||
Held-to-maturity investment securities:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
387
|
|
|
—
|
|
|
387
|
|
||||
Corporate and other debt securities
|
—
|
|
|
597
|
|
|
—
|
|
|
597
|
|
||||
Total short-term held-to-maturity investment securities
|
—
|
|
|
984
|
|
|
—
|
|
|
984
|
|
||||
Total short-term investments
(2)
|
572
|
|
|
2,746
|
|
|
—
|
|
|
3,318
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity investment securities:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Total long-term held-to-maturity investment securities
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Total long-term investments
(3)
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Derivative financial instruments - foreign exchange forward contracts:
|
|
|
|
|
|
|
|
||||||||
Other current assets
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
||||
Accrued expenses and other current liabilities
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
||||
Other noncurrent liabilities
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
(25
|
)
|
||||
Total
|
$
|
872
|
|
|
$
|
2,830
|
|
|
$
|
—
|
|
|
$
|
3,702
|
|
(1)
|
Includes
$419 million
in restricted time deposits. See
Note 9
.
|
(2)
|
Excludes an equity security invested in a mutual fund valued at
$25 million
based on the NAV of the fund.
|
(3)
|
Excludes equity and cost method investments of
$74 million
, which are accounted for using the equity method of accounting and at cost, respectively.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
334
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
334
|
|
Bank deposits
|
—
|
|
|
80
|
|
|
—
|
|
|
80
|
|
||||
Commercial paper
|
—
|
|
|
386
|
|
|
—
|
|
|
386
|
|
||||
Total cash equivalents
|
334
|
|
|
466
|
|
|
—
|
|
|
800
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
||||||||
Time deposits
|
—
|
|
|
389
|
|
|
—
|
|
|
389
|
|
||||
Available-for-sale investment securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency debt securities
|
585
|
|
|
76
|
|
|
—
|
|
|
661
|
|
||||
Corporate and other debt securities
|
—
|
|
|
437
|
|
|
—
|
|
|
437
|
|
||||
Certificates of deposit and commercial paper
|
—
|
|
|
450
|
|
|
—
|
|
|
450
|
|
||||
Asset-backed securities
|
—
|
|
|
295
|
|
|
—
|
|
|
295
|
|
||||
Municipal debt securities
|
—
|
|
|
129
|
|
|
—
|
|
|
129
|
|
||||
Total available-for-sale investment securities
|
585
|
|
|
1,387
|
|
|
—
|
|
|
1,972
|
|
||||
Held-to-maturity investment securities:
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
—
|
|
|
397
|
|
|
—
|
|
|
397
|
|
||||
Corporate and other debt securities
|
—
|
|
|
345
|
|
|
—
|
|
|
345
|
|
||||
Total held-to-maturity investment securities
|
—
|
|
|
742
|
|
|
—
|
|
|
742
|
|
||||
Total short-term investments
(1)
|
585
|
|
|
2,518
|
|
|
—
|
|
|
3,103
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
||||||||
Held-to-maturity investment securities:
|
|
|
|
|
|
|
|
||||||||
Corporate and other debt securities
|
—
|
|
|
160
|
|
|
—
|
|
|
160
|
|
||||
Total held-to-maturity investment securities
|
—
|
|
|
160
|
|
|
—
|
|
|
160
|
|
||||
Total long-term investments
(2)
|
—
|
|
|
160
|
|
|
—
|
|
|
160
|
|
||||
Derivative financial instruments - foreign exchange forward contracts:
|
|
|
|
|
|
|
|
||||||||
Other current assets
|
—
|
|
|
134
|
|
|
—
|
|
|
134
|
|
||||
Accrued expenses and other current liabilities
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||
Other noncurrent assets
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||
Total
|
$
|
919
|
|
|
$
|
3,293
|
|
|
$
|
—
|
|
|
$
|
4,212
|
|
(1)
|
Excludes an equity security invested in a mutual fund valued at
$25 million
based on the NAV of the fund.
|
(2)
|
Excludes equity and cost method investments of
$74 million
, which are accounted for using the equity method of accounting and at cost, respectively.
|
Note 12 — Stockholders' Equity
|
|
|
Purchase Period End Date
|
|
Number of Shares
|
|
Average Repurchase Price per Share
|
|
ASR Amount
|
|||||
|
|
|
|
(in millions)
|
|
|
|
(in millions)
|
|||||
June 2018 ASR
|
|
(1)
|
|
6.5
|
|
(1)
|
(1)
|
|
$
|
600
|
|
||
March 2018 ASR
|
|
May 2018
|
|
3.7
|
|
(2)
|
$
|
79.95
|
|
|
$
|
300
|
|
December 2017 ASR
|
|
March 2018
|
|
4.0
|
|
(3)
|
$
|
75.75
|
|
|
$
|
300
|
|
March 2017 ASR
|
|
August 2017
|
|
23.7
|
|
|
$
|
63.19
|
|
|
$
|
1,500
|
|
(1)
|
Under the terms of the June 2018 ASR and in exchange for up-front payments of
$600 million
, the financial institution initially delivered
6.5 million
shares, a portion of the Company's total expected shares to be repurchased under the June 2018 ASR. The total number of shares ultimately delivered, and therefore the average price paid per share, will be determined at the end of the purchase period, which is scheduled to end during the third quarter of 2018, based on the volume-weighted average price of the Company's common stock during that period.
|
(2)
|
Includes
3.0 million
shares initially delivered in March 2018 and
0.7
million shares delivered in May 2018 upon the final settlement of the ASR.
|
(3)
|
Includes
3.6 million
shares initially delivered in December 2017 and
0.4 million
shares delivered in March 2018 upon the final settlement of the ASR.
|
|
|
Dividends per Share
|
|
Amount
|
||||
|
|
|
|
(in millions)
|
||||
2018:
|
|
|
|
|
||||
Three months ended March 31, 2018
|
|
$
|
0.20
|
|
|
$
|
119
|
|
Three months ended June 30, 2018
|
|
0.20
|
|
|
119
|
|
||
Six months ended June 30, 2018
|
|
|
|
$
|
238
|
|
||
2017:
|
|
|
|
|
||||
Three months ended June 30, 2017
|
|
$
|
0.15
|
|
|
$
|
89
|
|
Three months ended September 30, 2017
|
|
0.15
|
|
|
90
|
|
||
Three months ended December 31, 2017
|
|
0.15
|
|
|
89
|
|
||
Year ended December 31, 2017
|
|
|
|
$
|
268
|
|
|
Three Months
|
|
Six Months
|
||||||||||||||||||||
|
Before Tax
Amount
|
|
Tax
Effect
|
|
Net of Tax
Amount
|
|
Before Tax
Amount |
|
Tax
Effect |
|
Net of Tax
Amount |
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
3
|
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
$
|
(38
|
)
|
|
$
|
—
|
|
|
$
|
(38
|
)
|
Change in foreign currency translation adjustments
|
(82
|
)
|
|
11
|
|
|
(71
|
)
|
|
(41
|
)
|
|
7
|
|
|
(34
|
)
|
||||||
Ending balance
|
$
|
(79
|
)
|
|
$
|
7
|
|
|
$
|
(72
|
)
|
|
$
|
(79
|
)
|
|
$
|
7
|
|
|
$
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized (losses) on available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
(19
|
)
|
|
$
|
4
|
|
|
$
|
(15
|
)
|
|
$
|
(11
|
)
|
|
$
|
4
|
|
|
$
|
(7
|
)
|
Cumulative effect of change in accounting principle
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Net unrealized (losses) arising during the period
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
(10
|
)
|
|
2
|
|
|
(8
|
)
|
||||||
Reclassification of net losses to Other, net
|
1
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Net change
|
—
|
|
|
1
|
|
|
1
|
|
|
(8
|
)
|
|
1
|
|
|
(7
|
)
|
||||||
Ending balance
|
$
|
(19
|
)
|
|
$
|
5
|
|
|
$
|
(14
|
)
|
|
$
|
(19
|
)
|
|
$
|
5
|
|
|
$
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
105
|
|
|
$
|
(26
|
)
|
|
$
|
79
|
|
|
$
|
154
|
|
|
$
|
(39
|
)
|
|
$
|
115
|
|
Unrealized (losses) arising during the period
|
(91
|
)
|
|
19
|
|
|
(72
|
)
|
|
(105
|
)
|
|
24
|
|
|
(81
|
)
|
||||||
Reclassifications of net (gains) to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of revenues
|
(18
|
)
|
|
5
|
|
|
(13
|
)
|
|
(48
|
)
|
|
12
|
|
|
(36
|
)
|
||||||
Selling, general and administrative expenses
|
(3
|
)
|
|
1
|
|
|
(2
|
)
|
|
(8
|
)
|
|
2
|
|
|
(6
|
)
|
||||||
Net change
|
(112
|
)
|
|
25
|
|
|
(87
|
)
|
|
(161
|
)
|
|
38
|
|
|
(123
|
)
|
||||||
Ending balance
|
$
|
(7
|
)
|
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
|
$
|
(7
|
)
|
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
89
|
|
|
$
|
(26
|
)
|
|
$
|
63
|
|
|
$
|
105
|
|
|
$
|
(35
|
)
|
|
$
|
70
|
|
Other comprehensive income (loss)
|
(194
|
)
|
|
37
|
|
|
(157
|
)
|
|
(210
|
)
|
|
46
|
|
|
(164
|
)
|
||||||
Ending balance
|
$
|
(105
|
)
|
|
$
|
11
|
|
|
$
|
(94
|
)
|
|
$
|
(105
|
)
|
|
$
|
11
|
|
|
$
|
(94
|
)
|
(1)
|
Reflects the adoption of accounting standards as described in
Note 1
.
|
|
Three Months
|
|
Six Months
|
||||||||||||||||||||
|
Before Tax
Amount
|
|
Tax
Effect
|
|
Net of Tax
Amount
|
|
Before Tax
Amount |
|
Tax
Effect |
|
Net of Tax
Amount |
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
(132
|
)
|
|
$
|
—
|
|
|
$
|
(132
|
)
|
|
$
|
(149
|
)
|
|
$
|
—
|
|
|
$
|
(149
|
)
|
Change in foreign currency translation adjustments
|
50
|
|
|
—
|
|
|
50
|
|
|
67
|
|
|
—
|
|
|
67
|
|
||||||
Ending balance
|
$
|
(82
|
)
|
|
$
|
—
|
|
|
$
|
(82
|
)
|
|
$
|
(82
|
)
|
|
$
|
—
|
|
|
$
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains (losses) on available-for-sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
(4
|
)
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
2
|
|
|
$
|
(4
|
)
|
Net unrealized gains arising during the period
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
(1
|
)
|
|
2
|
|
||||||
Reclassification of net (gains) to Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net change
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
(1
|
)
|
|
2
|
|
||||||
Ending balance
|
$
|
(3
|
)
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
155
|
|
|
$
|
(37
|
)
|
|
$
|
118
|
|
|
$
|
51
|
|
|
$
|
(12
|
)
|
|
$
|
39
|
|
Unrealized gains arising during the period
|
35
|
|
|
(9
|
)
|
|
26
|
|
|
159
|
|
|
(39
|
)
|
|
120
|
|
||||||
Reclassifications of net (gains) to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of revenues
|
(29
|
)
|
|
7
|
|
|
(22
|
)
|
|
(46
|
)
|
|
11
|
|
|
(35
|
)
|
||||||
Selling, general and administrative expenses
|
(6
|
)
|
|
1
|
|
|
(5
|
)
|
|
(9
|
)
|
|
2
|
|
|
(7
|
)
|
||||||
Net change
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
104
|
|
|
(26
|
)
|
|
78
|
|
||||||
Ending balance
|
$
|
155
|
|
|
$
|
(38
|
)
|
|
$
|
117
|
|
|
$
|
155
|
|
|
$
|
(38
|
)
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Beginning balance
|
$
|
19
|
|
|
$
|
(36
|
)
|
|
$
|
(17
|
)
|
|
$
|
(104
|
)
|
|
$
|
(10
|
)
|
|
$
|
(114
|
)
|
Other comprehensive income (loss)
|
51
|
|
|
(1
|
)
|
|
50
|
|
|
174
|
|
|
(27
|
)
|
|
147
|
|
||||||
Ending balance
|
$
|
70
|
|
|
$
|
(37
|
)
|
|
$
|
33
|
|
|
$
|
70
|
|
|
$
|
(37
|
)
|
|
$
|
33
|
|
Note 13 — Commitments and Contingencies
|
Note 14 — Related Party Transactions
|
Note 15 — Segment Information
|
•
|
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 and logistics, travel and hospitality, and energy and utilities operating segments; and
|
•
|
Communications, Media and Technology, which includes our communications and media operating segment and our technology operating segment.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Financial Services
|
$
|
1,469
|
|
|
$
|
1,406
|
|
|
$
|
2,930
|
|
|
$
|
2,782
|
|
Healthcare
|
1,156
|
|
|
1,050
|
|
|
2,277
|
|
|
2,053
|
|
||||
Products and Resources
|
840
|
|
|
747
|
|
|
1,661
|
|
|
1,484
|
|
||||
Communications, Media and Technology
|
541
|
|
|
467
|
|
|
1,050
|
|
|
897
|
|
||||
Total revenues
|
$
|
4,006
|
|
|
$
|
3,670
|
|
|
$
|
7,918
|
|
|
$
|
7,216
|
|
|
|
|
|
|
|
|
|
||||||||
Segment Operating Profit:
|
|
|
|
|
|
|
|
||||||||
Financial Services
|
$
|
462
|
|
|
$
|
445
|
|
|
$
|
909
|
|
|
$
|
872
|
|
Healthcare
|
357
|
|
|
345
|
|
|
695
|
|
|
619
|
|
||||
Products and Resources
|
258
|
|
|
230
|
|
|
514
|
|
|
447
|
|
||||
Communications, Media and Technology
|
179
|
|
|
156
|
|
|
338
|
|
|
291
|
|
||||
Total segment operating profit
|
1,256
|
|
|
1,176
|
|
|
2,456
|
|
|
2,229
|
|
||||
Less: unallocated costs
(1)
|
586
|
|
|
570
|
|
|
1,093
|
|
|
1,053
|
|
||||
Income from operations
|
$
|
670
|
|
|
$
|
606
|
|
|
$
|
1,363
|
|
|
$
|
1,176
|
|
(1)
|
In the second quarter of 2018, we provided
$100 million
of initial funding to Cognizant U.S. Foundation, which is focused on science, technology, engineering and math (or collectively, STEM) education in the United States. This charge was recorded in unallocated costs for the three and six months ended June 30, 2018.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues:
(1)
|
|
|
|
|
|
|
|
||||||||
North America
(2)
|
$
|
3,067
|
|
|
$
|
2,851
|
|
|
$
|
6,042
|
|
|
$
|
5,612
|
|
United Kingdom
|
309
|
|
|
288
|
|
|
619
|
|
|
562
|
|
||||
Rest of Europe
|
381
|
|
|
291
|
|
|
755
|
|
|
576
|
|
||||
Europe - Total
|
690
|
|
|
579
|
|
|
1,374
|
|
|
1,138
|
|
||||
Rest of World
(3)
|
249
|
|
|
240
|
|
|
502
|
|
|
466
|
|
||||
Total revenues
|
$
|
4,006
|
|
|
$
|
3,670
|
|
|
$
|
7,918
|
|
|
$
|
7,216
|
|
|
As of
|
||||||
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in millions)
|
||||||
Long-lived Assets:
(4)
|
|
|
|
||||
North America
(2)
|
$
|
403
|
|
|
$
|
360
|
|
Europe
|
82
|
|
|
63
|
|
||
Rest of World
(3)(5)
|
860
|
|
|
901
|
|
||
Total
|
$
|
1,345
|
|
|
$
|
1,324
|
|
(1)
|
Revenues are attributed to regions based upon customer location.
|
(2)
|
Substantially all relates to operations in the United States.
|
(3)
|
Includes our operations in Asia Pacific, the Middle East and Latin America.
|
(4)
|
Long-lived assets include property and equipment, net of accumulated depreciation and amortization.
|
(5)
|
Substantially all of these long-lived assets relate to our operations in India.
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Executive Summary
|
1
|
Non-GAAP 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.
|
|
|
|
|
|
|
|
|
Increase / Decrease
|
|||||||||||
|
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||||||
|
|
(Dollars in millions, except per share data)
|
|||||||||||||||||
Revenues
|
|
$
|
4,006
|
|
|
|
$
|
3,670
|
|
|
|
$
|
336
|
|
|
9.2
|
|
||
Income from operations and operating margin
|
|
670
|
|
16.7
|
%
|
|
606
|
|
16.5
|
%
|
|
64
|
|
|
10.6
|
|
|||
Net income
|
|
456
|
|
|
|
470
|
|
|
|
(14
|
)
|
|
(3.0
|
)
|
|||||
Diluted earnings per share
|
|
0.78
|
|
|
|
0.80
|
|
|
|
(0.02
|
)
|
|
|
|
|||||
Other Financial Information
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP income from operations and Non-GAAP operating margin
|
|
882
|
|
22.0
|
%
|
|
735
|
|
20.0
|
%
|
|
147
|
|
|
20.0
|
|
|||
Non-GAAP diluted earnings per share
|
|
1.19
|
|
|
|
0.93
|
|
|
|
0.26
|
|
|
|
|
•
|
Solid performance in our Communications, Media and Technology, Products and Resources and Healthcare segments;
|
•
|
Revenues in our Financial Services business segment grew below Company average as certain banking customers continue to optimize the cost of supporting their systems and operations as they shift their spend to transformation and digital services;
|
•
|
Sustained strength in the North American market;
|
•
|
Continued penetration of the European and Rest of World (primarily Asia Pacific) markets;
|
•
|
Revenues from our customers in Europe grew
19.2%
inclusive of a positive currency impact of 6.4%.
|
◦
|
Revenues from our Rest of Europe customers increased
30.9%
inclusive of a positive currency impact of 7.1% and revenues from a new strategic customer acquired in the third quarter of 2017.
|
◦
|
Revenues from our United Kingdom customers increased
7.3%
inclusive of a positive currency impact of 5.8%. Revenue growth in the United Kingdom continues to be negatively affected by weakness in the banking sector in that region;
|
•
|
Increased customer spending on discretionary projects;
|
•
|
Expansion of our service offerings, including consulting and digital services, next-generation IT solutions and platform-based solutions;
|
2
|
Non-GAAP income from operations, Non-GAAP operating margin and non-GAAP earnings per share are not measurements 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 measures.
|
•
|
Continued expansion of the market for global delivery of technology and business process services; and
|
•
|
Increased penetration at existing customers, including strategic customers.
|
3
|
Non-GAAP income from operations, non-GAAP operating margin and non-GAAP earnings per share are not measurements 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 measures.
|
•
|
Demand from our customers for digital services;
|
•
|
Our customers' dual mandate of simultaneously achieving cost savings while investing in transformation and innovation;
|
•
|
Continued focus by customers on directing technology spending towards cost containment projects;
|
•
|
Secular changes driven by evolving digital technologies and regulatory changes, including potential regulatory changes with respect to immigration and taxes;
|
•
|
Demand from our healthcare customers may continue to be affected by the uncertainty in the regulatory and secular environments;
|
•
|
Demand from certain banking customers may continue to be negatively affected by their ongoing efforts to optimize the cost of supporting their systems and operations as they shift their spend to transformation and digital services;
|
•
|
Discretionary spending by our retail customers may continue to be affected by weakness in the retail sector;
|
•
|
Legal fees and other expenses related to the internal investigation and related matters as described above; and
|
•
|
Volatility in foreign currency rates.
|
•
|
Continue to invest in our digital practice areas of focus across industries and geographies;
|
•
|
Continue to invest in our talent base, including through local hiring and re-skilling, and new service offerings, including digital technologies and new delivery models;
|
•
|
Partner with our existing customers to garner an increased portion of our customers’ overall spend by providing innovative solutions;
|
•
|
Focus on growing our business in Europe, the Middle East, Asia Pacific and Latin America, where we believe there are opportunities to gain market share;
|
•
|
Increase our strategic customer base across all of our business segments;
|
•
|
Pursue strategic acquisition opportunities that we believe add new technologies, including digital technologies, or platforms that complement our existing services, improve our overall service delivery capabilities, and/or expand our geographic presence; and
|
•
|
Focus on operating discipline in order to appropriately manage our cost structure.
|
Business Segments
|
•
|
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 and logistics, travel and hospitality, and energy and utilities operating segments; and
|
•
|
Communications, Media and Technology, which includes our communications and media operating segment and our technology operating segment.
|
Results of Operations
|
|
|
|
% of
|
|
|
|
% of
|
|
Increase / Decrease
(1)
|
|||||||||
|
2018
(1)
|
|
Revenues
|
|
2017
(1)
|
|
Revenues
|
|
$
|
|
%
|
|||||||
|
(Dollars in millions, except per share data)
|
|||||||||||||||||
Revenues
|
$
|
4,006
|
|
|
100.0
|
|
$
|
3,670
|
|
|
100.0
|
|
$
|
336
|
|
|
9.2
|
|
Cost of revenues
(2)
|
2,417
|
|
|
60.3
|
|
2,261
|
|
|
61.6
|
|
156
|
|
|
6.9
|
|
|||
Selling, general and administrative expenses
(2)
|
805
|
|
|
20.1
|
|
709
|
|
|
19.3
|
|
96
|
|
|
13.5
|
|
|||
Depreciation and amortization expense
|
114
|
|
|
2.8
|
|
94
|
|
|
2.6
|
|
20
|
|
|
21.3
|
|
|||
Income from operations
|
670
|
|
|
16.7
|
|
606
|
|
|
16.5
|
|
64
|
|
|
10.6
|
|
|||
Other income (expense), net
|
(47
|
)
|
|
|
|
29
|
|
|
|
|
(76
|
)
|
|
(262.1
|
)
|
|||
Income before provision for income taxes
|
623
|
|
|
15.6
|
|
635
|
|
|
17.3
|
|
(12
|
)
|
|
(1.9
|
)
|
|||
Provision for income taxes
|
(168
|
)
|
|
|
|
(165
|
)
|
|
|
|
(3
|
)
|
|
1.8
|
|
|||
Income from equity method investments
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
|||
Net income
|
$
|
456
|
|
|
11.4
|
|
$
|
470
|
|
|
12.8
|
|
$
|
(14
|
)
|
|
(3.0
|
)
|
Diluted earnings per share
|
$
|
0.78
|
|
|
|
|
$
|
0.80
|
|
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Financial Information
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP income from operations and non-GAAP operating margin
|
$
|
882
|
|
|
22.0
|
|
$
|
735
|
|
|
20.0
|
|
$
|
147
|
|
|
20.0
|
|
Non-GAAP diluted earnings per share
|
$
|
1.19
|
|
|
|
|
$
|
0.93
|
|
|
|
|
$
|
0.26
|
|
|
|
(1)
|
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting periods beginning 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 historic accounting policies. For the three months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of
$31 million
, income from operations of
$38 million
and diluted earnings per share of
$0.05
per share. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
(2)
|
Exclusive of depreciation and amortization expense.
|
(3)
|
Non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share are not measurements 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.
|
|
|
2018
|
|
2017
|
|
Increase
|
||||||||
$
|
|
%
|
||||||||||||
|
|
(Dollars in millions)
|
||||||||||||
Financial Services
|
|
$
|
1,469
|
|
|
$
|
1,406
|
|
|
$
|
63
|
|
|
4.5
|
Healthcare
|
|
1,156
|
|
|
1,050
|
|
|
106
|
|
|
10.1
|
|||
Products and Resources
|
|
840
|
|
|
747
|
|
|
93
|
|
|
12.4
|
|||
Communications, Media and Technology
|
|
541
|
|
|
467
|
|
|
74
|
|
|
15.8
|
|||
Total revenues
(1)
|
|
$
|
4,006
|
|
|
$
|
3,670
|
|
|
$
|
336
|
|
|
9.2
|
(1)
|
Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
|
|
2018
|
|
2017
|
|
Increase
|
||||||||
|
$
|
|
%
|
|||||||||||
|
|
(Dollars in millions)
|
||||||||||||
North America
|
|
$
|
3,067
|
|
|
$
|
2,851
|
|
|
$
|
216
|
|
|
7.6
|
United Kingdom
|
|
309
|
|
|
288
|
|
|
21
|
|
|
7.3
|
|||
Rest of Europe
|
|
381
|
|
|
291
|
|
|
90
|
|
|
30.9
|
|||
Europe - Total
|
|
690
|
|
|
579
|
|
|
111
|
|
|
19.2
|
|||
Rest of World
|
|
249
|
|
|
240
|
|
|
9
|
|
|
3.8
|
|||
Total revenues
(1)
|
|
$
|
4,006
|
|
|
$
|
3,670
|
|
|
$
|
336
|
|
|
9.2
|
(1)
|
Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
4
|
Non-GAAP 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.
|
|
|
|
|
|
Increase
|
||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
||||||
|
(Dollars in millions)
|
||||||||||||
Financial Services
|
$
|
462
|
|
|
$
|
445
|
|
|
$
|
17
|
|
|
3.8
|
Healthcare
|
357
|
|
|
345
|
|
|
12
|
|
|
3.5
|
|||
Products and Resources
|
258
|
|
|
230
|
|
|
28
|
|
|
12.2
|
|||
Communications, Media and Technology
|
179
|
|
|
156
|
|
|
23
|
|
|
14.7
|
|||
Total segment operating profit
|
1,256
|
|
|
1,176
|
|
|
80
|
|
|
6.8
|
|||
Less: unallocated costs
|
586
|
|
|
570
|
|
|
16
|
|
|
2.8
|
|||
Income from operations
|
$
|
670
|
|
|
$
|
606
|
|
|
$
|
64
|
|
|
10.6
|
|
2018
|
|
2017
|
|
Increase/
Decrease
|
||||||
|
(in millions)
|
||||||||||
Foreign currency exchange (losses) gains
|
$
|
(98
|
)
|
|
$
|
8
|
|
|
$
|
(106
|
)
|
Gains (losses) on foreign exchange forward contracts not designated as hedging instruments
|
18
|
|
|
(3
|
)
|
|
21
|
|
|||
Net foreign currency exchange (losses) gains
|
(80
|
)
|
|
5
|
|
|
(85
|
)
|
|||
Interest income
|
40
|
|
|
31
|
|
|
9
|
|
|||
Interest expense
|
(7
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|||
Other, net
|
—
|
|
|
(1
|
)
|
|
1
|
|
|||
Total other (expense) income, net
|
$
|
(47
|
)
|
|
$
|
29
|
|
|
$
|
(76
|
)
|
|
2018
|
|
% of
Revenues
|
|
2017
|
|
% of
Revenues
|
||||
|
(Dollars in millions, except per share amounts)
|
||||||||||
GAAP income from operations and operating margin
|
$
|
670
|
|
|
16.7
|
|
$
|
606
|
|
|
16.5
|
Add: Stock-based compensation expense
(1)
|
71
|
|
|
1.8
|
|
55
|
|
|
1.5
|
||
Add: Acquisition-related charges
(2)
|
41
|
|
|
1.0
|
|
35
|
|
|
1.0
|
||
Add: Realignment charges
(3)
|
—
|
|
|
—
|
|
39
|
|
|
1.0
|
||
Add: Initial funding of Cognizant U.S. Foundation
(4)
|
100
|
|
|
2.5
|
|
—
|
|
|
—
|
||
Non-GAAP income from operations and non-GAAP operating margin
|
$
|
882
|
|
|
22.0
|
|
$
|
735
|
|
|
20.0
|
|
|
|
|
|
|
|
|
||||
GAAP diluted earnings per share
|
$
|
0.78
|
|
|
|
|
$
|
0.80
|
|
|
|
Effect of above operating adjustments, pre-tax
|
0.36
|
|
|
|
|
0.22
|
|
|
|
||
Effect of non-operating foreign currency exchange (gains) losses, pre-tax
(5)
|
0.14
|
|
|
|
|
(0.01
|
)
|
|
|
||
Tax effect of non-GAAP adjustments to pre-tax income
(6)
|
(0.09
|
)
|
|
|
|
(0.08
|
)
|
|
|
||
Non-GAAP diluted earnings per share
|
$
|
1.19
|
|
|
|
|
$
|
0.93
|
|
|
|
(1)
|
Stock-based compensation expense reported in:
|
|
Three Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Cost of revenues
|
$
|
16
|
|
|
$
|
13
|
|
Selling, general and administrative expenses
|
55
|
|
|
42
|
|
(2)
|
Acquisition-related charges include, when applicable, amortization of purchased intangible assets included in the depreciation and amortization expense line on our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.
|
(3)
|
Realignment charges include severance costs, lease termination costs, and advisory fees related to non-routine shareholder matters and to the development of our realignment and return of capital programs, as applicable. The total costs related to the realignment are reported in "Selling, general and administrative expenses" in our consolidated statements of operations.
|
(4)
|
In the second quarter of 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation, which is focused on STEM education in the United States.
|
(5)
|
Non-operating foreign currency exchange gains (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:
|
|
Three Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Non-GAAP income tax benefit (expense) related to:
|
|
|
|
||||
Stock-based compensation expense
|
$
|
19
|
|
|
$
|
20
|
|
Acquisition-related charges
|
11
|
|
|
12
|
|
||
Realignment charges
|
—
|
|
|
14
|
|
||
Foreign currency exchange gains (losses)
|
(8
|
)
|
|
—
|
|
||
Initial funding of Cognizant U.S. Foundation
|
28
|
|
|
—
|
|
|
|
|
% of
|
|
|
|
% of
|
|
Increase / Decrease
|
|||||||||
|
2018
(1)
|
|
Revenues
|
|
2017
(1)
|
|
Revenues
|
|
$
|
|
%
|
|||||||
|
(Dollars in millions, except per share data)
|
|||||||||||||||||
Revenues
|
$
|
7,918
|
|
|
100.0
|
|
$
|
7,216
|
|
|
100.0
|
|
$
|
702
|
|
|
9.7
|
|
Cost of revenues
(2)
|
4,818
|
|
|
60.8
|
|
4,455
|
|
|
61.7
|
|
363
|
|
|
8.1
|
|
|||
Selling, general and administrative expenses
(2)
|
1,516
|
|
|
19.1
|
|
1,395
|
|
|
19.3
|
|
121
|
|
|
8.7
|
|
|||
Depreciation and amortization expense
|
221
|
|
|
2.8
|
|
190
|
|
|
2.6
|
|
31
|
|
|
16.3
|
|
|||
Income from operations
|
1,363
|
|
|
17.2
|
|
1,176
|
|
|
16.3
|
|
187
|
|
|
15.9
|
|
|||
Other income (expense), net
|
(43
|
)
|
|
|
|
108
|
|
|
|
|
(151
|
)
|
|
(139.8
|
)
|
|||
Income before provision for income taxes
|
1,320
|
|
|
16.7
|
|
1,284
|
|
|
17.8
|
|
36
|
|
|
2.8
|
|
|||
Provision for income taxes
|
(345
|
)
|
|
|
|
(257
|
)
|
|
|
|
(88
|
)
|
|
34.2
|
|
|||
Income from equity method investments
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
||||
Net income
|
$
|
976
|
|
|
12.3
|
|
$
|
1,027
|
|
|
14.2
|
|
$
|
(51
|
)
|
|
(5.0
|
)
|
Diluted earnings per share
|
$
|
1.66
|
|
|
|
|
$
|
1.71
|
|
|
|
|
$
|
(0.05
|
)
|
|
|
|
Other Financial Information
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-GAAP income from operations and non-GAAP operating margin
|
$
|
1,676
|
|
|
21.2
|
|
$
|
1,404
|
|
|
19.5
|
|
$
|
272
|
|
|
19.4
|
|
Non-GAAP diluted earnings per share
|
$
|
2.25
|
|
|
|
|
$
|
1.76
|
|
|
|
|
$
|
0.49
|
|
|
|
(1)
|
On January 1, 2018, we adopted the New Revenue Standard using the modified retrospective method. Results for reporting periods beginning 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 historic accounting policies. For the six months ended June 30, 2018, adoption of the New Revenue Standard had a positive impact on revenue of
$52 million
, income from operations of
$67 million
and diluted earnings per share of
$0.09
per share. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
(2)
|
Exclusive of depreciation and amortization expense.
|
(3)
|
Non-GAAP income from operations, non-GAAP operating margin and non-GAAP diluted earnings per share are not measurements 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.
|
|
|
Six Months Ended June 30,
|
||||
|
|
2018
|
|
2017
|
||
Revenues from top five customers as a percentage of total revenues
|
|
8.6
|
%
|
|
8.9
|
%
|
Revenues from top ten customers as a percentage of total revenues
|
|
15.6
|
%
|
|
15.0
|
%
|
|
|
2018
|
|
2017
|
|
Increase
|
||||||||
$
|
|
%
|
||||||||||||
|
|
(Dollars in millions)
|
||||||||||||
Financial Services
|
|
$
|
2,930
|
|
|
$
|
2,782
|
|
|
$
|
148
|
|
|
5.3
|
Healthcare
|
|
2,277
|
|
|
2,053
|
|
|
224
|
|
|
10.9
|
|||
Products and Resources
|
|
1,661
|
|
|
1,484
|
|
|
177
|
|
|
11.9
|
|||
Communications, Media and Technology
|
|
1,050
|
|
|
897
|
|
|
153
|
|
|
17.1
|
|||
Total revenues
(1)
|
|
$
|
7,918
|
|
|
$
|
7,216
|
|
|
$
|
702
|
|
|
9.7
|
(1)
|
Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
||||||||
$
|
|
%
|
||||||||||||
|
|
(Dollars in millions)
|
||||||||||||
North America
|
|
$
|
6,042
|
|
|
$
|
5,612
|
|
|
$
|
430
|
|
|
7.7
|
United Kingdom
|
|
619
|
|
|
562
|
|
|
57
|
|
|
10.1
|
|||
Rest of Europe
|
|
755
|
|
|
576
|
|
|
179
|
|
|
31.1
|
|||
Europe - Total
|
|
1,374
|
|
|
1,138
|
|
|
236
|
|
|
20.7
|
|||
Rest of World
|
|
502
|
|
|
466
|
|
|
36
|
|
|
7.7
|
|||
Total revenues
(1)
|
|
$
|
7,918
|
|
|
$
|
7,216
|
|
|
$
|
702
|
|
|
9.7
|
(1)
|
Results for 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies. See
Note 3
to our unaudited consolidated financial statements for additional information.
|
|
|
|
|
|
Increase (Decrease)
|
||||||||
|
2018
|
|
2017
|
|
$
|
|
%
|
||||||
|
(Dollars in millions)
|
||||||||||||
Financial Services
|
$
|
909
|
|
|
$
|
872
|
|
|
$
|
37
|
|
|
4.2
|
Healthcare
|
695
|
|
|
619
|
|
|
76
|
|
|
12.3
|
|||
Products and Resources
|
514
|
|
|
447
|
|
|
67
|
|
|
15.0
|
|||
Communications, Media and Technology
|
338
|
|
|
291
|
|
|
47
|
|
|
16.2
|
|||
Total segment operating profit
|
2,456
|
|
|
2,229
|
|
|
227
|
|
|
10.2
|
|||
Less: unallocated costs
|
1,093
|
|
|
1,053
|
|
|
40
|
|
|
3.8
|
|||
Income from operations
|
$
|
1,363
|
|
|
$
|
1,176
|
|
|
$
|
187
|
|
|
15.9
|
5
|
Non-GAAP 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.
|
|
2018
|
|
2017
|
|
Increase/
Decrease
|
||||||
|
(in millions)
|
||||||||||
Foreign currency exchange (losses) gains
|
$
|
(131
|
)
|
|
$
|
70
|
|
|
$
|
(201
|
)
|
Gains (losses) on foreign exchange forward contracts not designated as hedging instruments
|
20
|
|
|
(13
|
)
|
|
33
|
|
|||
Foreign currency exchange (losses) gains, net
|
(111
|
)
|
|
57
|
|
|
(168
|
)
|
|||
Interest income
|
81
|
|
|
63
|
|
|
18
|
|
|||
Interest expense
|
(13
|
)
|
|
(12
|
)
|
|
(1
|
)
|
|||
Total other (expense) income, net
|
$
|
(43
|
)
|
|
$
|
108
|
|
|
$
|
(151
|
)
|
|
2018
|
|
% of
Revenues
|
|
2017
|
|
% of
Revenues
|
||||
|
(Dollars in millions, except per share amounts)
|
||||||||||
GAAP income from operations and operating margin
|
$
|
1,363
|
|
|
17.2
|
|
$
|
1,176
|
|
|
16.3
|
Add: Stock-based compensation expense
(1)
|
130
|
|
|
1.6
|
|
109
|
|
|
1.5
|
||
Add: Acquisition-related charges
(2)
|
82
|
|
|
1.1
|
|
69
|
|
|
1.0
|
||
Add: Realignment charges
(3)
|
1
|
|
|
—
|
|
50
|
|
|
0.7
|
||
Add: Initial funding of Cognizant U.S. Foundation
(4)
|
100
|
|
|
1.3
|
|
—
|
|
|
—
|
||
Non-GAAP income from operations and non-GAAP operating margin
|
$
|
1,676
|
|
|
21.2
|
|
$
|
1,404
|
|
|
19.5
|
|
|
|
|
|
|
|
|
||||
GAAP diluted earnings per share
|
$
|
1.66
|
|
|
|
|
$
|
1.71
|
|
|
|
Effect of above operating adjustments, pre-tax
|
0.53
|
|
|
|
|
0.38
|
|
|
|
||
Effect of non-operating foreign currency exchange losses (gains), pre-tax
(5)
|
0.19
|
|
|
|
|
(0.10
|
)
|
|
|
||
Tax effect of non-GAAP adjustments to pre-tax income
(6)
|
(0.13
|
)
|
|
|
|
(0.14
|
)
|
|
|
||
Effect of recognition of income tax benefit related to an uncertain tax position
(7)
|
—
|
|
|
|
|
(0.09
|
)
|
|
|
||
Non-GAAP diluted earnings per share
|
$
|
2.25
|
|
|
|
|
$
|
1.76
|
|
|
|
(1)
|
Stock-based compensation expense reported in:
|
|
Six Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Cost of revenues
|
$
|
31
|
|
|
$
|
28
|
|
Selling, general and administrative expenses
|
99
|
|
|
81
|
|
(2)
|
Acquisition-related charges include, when applicable, amortization of purchased intangible assets included in the depreciation and amortization expense line on our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs.
|
(3)
|
Realignment charges include severance costs, lease termination costs, and advisory fees related to non-routine shareholder matters and to the development of our realignment and return of capital programs, as applicable. The total costs related to the realignment are reported in "Selling, general and administrative expenses" in our consolidated statements of operations.
|
(4)
|
In the second quarter of 2018, we provided $100 million of initial funding to Cognizant U.S. Foundation, which is focused on STEM education in the United States.
|
(5)
|
Non-operating foreign currency exchange gains (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:
|
|
Six Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Non-GAAP income tax benefit (expense) related to:
|
|
|
|
||||
Stock-based compensation expense
|
$
|
38
|
|
|
$
|
41
|
|
Acquisition-related charges
|
20
|
|
|
24
|
|
||
Realignment charges
|
—
|
|
|
18
|
|
||
Foreign currency exchange gains (losses)
|
(9
|
)
|
|
5
|
|
||
Initial funding of Cognizant U.S. Foundation
|
28
|
|
|
—
|
|
(7)
|
During the three months ended March 31, 2017, we recognized an income tax benefit previously unrecognized in our consolidated financial statements related to a specific uncertain tax position of $55 million. The recognition of the benefit in the first quarter of 2017 was based on management’s reassessment regarding whether this unrecognized tax benefit met the more-likely-than-not threshold in light of the lapse in the statute of limitations as to a portion of such benefit.
|
Liquidity and Capital Resources
|
|
|
2018
|
|
2017
|
|
Increase / Decrease
|
||||||
|
|
(in millions)
|
||||||||||
Net cash provided by operating activities
|
|
$
|
1,028
|
|
|
$
|
798
|
|
|
$
|
230
|
|
Net cash (used in) investing activities
|
|
(811
|
)
|
|
(298
|
)
|
|
(513
|
)
|
|||
Net cash (used in) financing activities
|
|
(1,222
|
)
|
|
(1,421
|
)
|
|
199
|
|
Commitments and Contingencies
|
Off-Balance Sheet Arrangements
|
Critical Accounting Estimates
|
Recently Adopted and New Accounting Pronouncements
|
Forward Looking Statements
|
•
|
competition from other service providers;
|
•
|
the risk that we may not be able to achieve targeted improvements in our operating margin and level of profitability, or that our operating margin and profitability may decline;
|
•
|
the risk of liability or damage to our reputation resulting from security breaches or disclosure of sensitive data or failure to comply with data protection laws and regulations;
|
•
|
the risk that we may not be able to keep pace with the rapidly evolving technological environment;
|
•
|
the rate of growth in the use of technology in business and the type and level of technology spending by our customers;
|
•
|
mispricing of our services, especially on our fixed-price and transaction- or volume-based priced contracts;
|
•
|
risks associated with our ongoing internal investigation into possible violations of the FCPA and similar laws, including the cost of such investigation and any sanctions, fines or remedial measures that may be imposed by the DOJ or SEC, additional expenses related to remedial measures, the costs of defending and/or settling possible judgments against us that may result from associated lawsuits against us and any possible impact on our ability to timely file the required reports with the SEC;
|
•
|
our inability to successfully acquire or integrate target companies;
|
•
|
system failure or disruptions in our communications or information technology;
|
•
|
the risk that we may lose key executives and not be able to enforce non-competition agreements with them;
|
•
|
competition for hiring highly-skilled technical personnel;
|
•
|
possible failure to provide business solutions and deliver complex and large projects for our customers;
|
•
|
the risk of reputational harm to us;
|
•
|
the effect of our use of derivative instruments;
|
•
|
our revenues being highly dependent on customers concentrated in certain industries, including financial services and healthcare, and located primarily in the United States and Europe;
|
•
|
the risk that we may not be able to pay dividends or repurchase shares in accordance with our capital return plan, or at all;
|
•
|
risks relating to our global operations, including our operations in India;
|
•
|
the effects of fluctuations in the Indian rupee and other currency exchange rates;
|
•
|
the risk of war, terrorist activities, pandemics and natural disasters;
|
•
|
the Brexit Referendum and any negative effects on global economic conditions, financial markets and our business;
|
•
|
the risk that we may not be able to enforce or protect our intellectual property rights, or that we may infringe upon the intellectual property rights of others;
|
•
|
regulatory uncertainties, including in the areas of outsourcing, immigration and taxes;
|
•
|
increased regulation of the financial services and healthcare industries, as well as other industries in which our customers operate;
|
•
|
the possibility that we may be required to or choose to repatriate Indian earnings;
|
•
|
the possibility that we may lose certain tax benefits provided to companies in our industry by the Indian government, and any adverse outcome of our dispute with the ITD; and
|
•
|
The factors set forth in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2017
.
|
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
|
Item 4. Controls and Procedures.
|
Item 1. Legal Proceedings
|
Item 1A. Risk Factors
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
Month
|
|
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) |
||||||
April 1, 2018 - April 30, 2018
|
|
|
|
|
|
|
|
|
||||||
Open market and privately negotiated purchases
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,400
|
|
May 1, 2018 - May 31, 2018
|
|
|
|
|
|
|
|
|
||||||
Open market and privately negotiated purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
March 2018 ASR
|
|
708,984
|
|
|
(a)
|
|
|
708,984
|
|
|
1,400
|
|
||
June 1, 2018 - June 30, 2018
|
|
|
|
|
|
|
|
|
||||||
Open market and privately negotiated purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||
June 2018 ASR
|
|
6,492,680
|
|
|
(b)
|
|
|
6,492,680
|
|
|
800
|
|
||
Total
|
|
7,201,664
|
|
|
$
|
—
|
|
|
7,201,664
|
|
|
|
(a)
|
In March 2018, the Company entered into an ASR to purchase up to $300 million of the Company's Class A common stock. In May 2018, the purchase period for the ASR ended and an additional 0.7 million shares were delivered. In total, 3.7 million shares were delivered under the ASR at an average repurchase price of $79.95.
|
(b)
|
Under the terms of the June 2018 ASR and in exchange for up-front payments of $600 million, the financial institution initially delivered 6.5 million shares, a portion of the Company's total expected shares to be repurchased under the June 2018 ASR. The total number of shares ultimately delivered and therefore the average price paid per share, will be determined at the end of the purchase period, which is scheduled to end during the third quarter of 2018, based on the volume-weighted average price of the Company's common stock during that period.
|
Item 6. Exhibit Index
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Date
|
|
Filed or Furnished Herewith
|
|
3.1
|
|
|
8-K
|
|
000-24429
|
|
3.1
|
|
|
6/7/2018
|
|
|
|
3.2
|
|
|
8-K
|
|
000-24429
|
|
3.3
|
|
|
6/7/2018
|
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
Filed
|
||
31.1
|
|
|
|
|
|
|
|
|
|
|
Filed
|
||
31.2
|
|
|
|
|
|
|
|
|
|
|
Filed
|
||
32.1
|
|
|
|
|
|
|
|
|
|
|
Furnished
|
||
32.2
|
|
|
|
|
|
|
|
|
|
|
Furnished
|
||
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Cognizant Technology Solutions Corporation
|
|||
|
|
|
|
|
||
Date:
|
August 2, 2018
|
|
|
By:
|
|
/s/ F
RANCISCO
D’S
OUZA
|
|
|
|
|
|
|
Francisco D’Souza,
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
Date:
|
August 2, 2018
|
|
|
By:
|
|
/s/ K
AREN
M
C
L
OUGHLIN
|
|
|
|
|
|
|
Karen McLoughlin,
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
(Principal Financial Officer)
|
Cognizant
500 Frank W. Burr Blvd.
Teaneck, NJ 07666
USA
Phone: 201-801-0233
Fax: 201-801-0243
Toll Free: 888-937-3277
|
Very truly yours,
|
|
|
|
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
|
|
|
|
|
/s/ James P. Lennox
|
By:
|
James P. Lennox
|
Its:
|
Chief People Officer
|
/s/ Rajeev Mehta
|
|
Rajeev Mehta
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cognizant Technology Solutions Corporation;
|
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):
|
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.
|
|
|
|
|
|
Dated:
|
August 2, 2018
|
|
/s/ Francisco D’Souza
|
|
|
|
|
Francisco D’Souza,
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Cognizant Technology Solutions Corporation;
|
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):
|
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.
|
Dated:
|
August 2, 2018
|
|
/s/ Karen McLoughlin
|
|
|
|
|
Karen McLoughlin
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
Dated:
|
August 2, 2018
|
|
/s/ Francisco D’Souza
|
|
|
|
|
Francisco D’Souza,
|
|
|
|
|
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.
|
Dated:
|
August 2, 2018
|
|
/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.
|