Answer To: BUILDING A FINANCIAL MODEL FOR COGNIZANT Goals of the Homework: The goal of the homework is to: ·...
Yash answered on Oct 02 2021
Model
Cognizant financial model
($ in millions, except per share data)
HISTORICAL FINANCIAL STATEMENTS PROJECTED FINANCIAL STATEMENTS
Fiscal Year Ending December 31, Fiscal Year Ending December 31,
2011A 2012A 2013A 2014A 2015A 2016P 2017P 2018P 2019P 2020P
Income Statement
Revenues
John Basilici: John Basilici:
Segment revenues as per " Segment Information" in the notes to respective 10-Ks
Financial Services $3,717.6 $4,285.6 $5,002.9
Healthcare $2,264.8 $2,689.4 $3,667.5
Manufacturing/Retail/Logistics $1,868.3 $2,093.6 $2,343.9
Other $992.5 $1,194.1 $1,401.7
Total revenues $8,843.2 $10,262.7 $12,416.0
% Growth 16.1% 21.0%
Cost of revenues (1) $5,265.5 $6,141.1 $7,440.2
Cost of revenues as % of Revenues 59.5% 59.8% 59.9%
Gross profit $3,577.7 $4,121.6 $4,975.8
Gross profit margin % 40.5% 40.2% 40.1%
Selling, general and administrative expenses $1,727.6 $2,037.0 $2,508.6
SG&A as % of Revenue 19.5% 19.8% 20.2%
Depreciation and amortization expense related to P&E $155.7 $172.1 $233.1
Basilici, John P. (TDBB): John Basilici:
Note 4 — Property and Equipment, net
"Depreciation and amortization expense related to property and equipment"
Amortization of intangible assets $24.2 $36.0 $96.9
Basilici, John P. (TDBB): John Basilici:
Note 5 — Goodwill and Intangible Assets, net
"Amortization of
intangible assets"
Amortization recorded as a reduction of revenues ($7.7) ($8.4) ($4.8)
Basilici, John P. (TDBB): John Basilici:
Note 5 — Goodwill and Intangible Assets, net
"Amortization...relating to customer relationship intangible assets was recorded as a reduction of revenues."
Total depreciation and amortization expense $172.2 $199.7 $325.2
Income from operations / EBIT
John Basilici: John Basilici:
Segment Operating Profit as per " Segment Information" in the notes to respective 10-Ks
Financial Services $1,212.1 $1,320.1 $1,641.9
Healthcare $829.9 $851.0 $1,200.0
Manufacturing/Retail/Logistics $630.3 $685.7 $802.7
Other $318.3 $391.9 $453.7
Unallocated costs ($1,312.7) ($1,363.8) ($1,956.3)
Total income from operations 1,677.9 1,884.9 2,142.0
EBIT margin % 19.0% 18.4% 17.3%
EBITDA $1,850.1 $2,084.6 $2,467.2
EBITDA margin % 20.9% 20.3% 19.9%
EBITDA growth 12.7% 18.4%
Other income / (expense), net
Interest income $48.9 $62.4 $83.7
Interest expense $0.0 ($2.5) ($17.7)
Foreign currency exchange gains (losses), net ($41.1) ($20.4) ($42.6)
Other, net $2.2 ($0.4) ($1.8)
Total other income $10.0 $39.1 $21.6
Pretax income $1,687.9 $1,924.0 $2,163.6
Taxes $459.3 $484.7 $540.0
Tax Rate 27.2% 25.2% 25.0%
Net income $1,228.6 $1,439.3 $1,623.6
Net Margin % 13.9% 14.0% 13.1%
Net Income Growth 17.1% 12.8%
Earnings per share
Weighted average number of common shares outstanding—Basic 604.0 608.1 609.1
Dilutive effect of stock-based compensation plans 5.7 4.4 4.2
Weighted average number of common shares outstanding—Diluted 609.7 612.5 613.3
Basic earnings per share $2.03 $2.37 $2.67
Diluted earnings per share $2.02 $2.35 $2.65
Reconciliation of Non-GAAP Financial measures
GAAP income from operations / EBIT 1,677.9 1,884.9 2,142.0
Add: Stock-based compensation expense $118.8 $134.8 $192.0
Add: Acquisition-related charges
Basilici, John P. (TDBB): John Basilici:
2015 10-K, PDF pg. 46:
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. $24.0 $48.4 $115.8
Non-GAAP income from operations / EBIT $1,820.7 $2,068.1 $2,449.8
Non-GAAP EBIT margin %
Basilici, John P. (TDBB): John Basilici:
Non-GAAP operating margin target range of 19-20% (confirmed in the 3Q16 press release) 20.6% 20.2% 19.7%
GAAP diluted earnings per share 2.02 2.35 2.65
Effect of above operating adjustments, net of tax $0.17 $0.23 $0.35
Effect of non-operating FX gains and losses, net of tax
Basilici, John P. (TDBB): John Basilici:
2015 10-K, PDF pg. 46:
Non-operating foreign currency exchange gains and losses are inclusive of gains and losses on related foreign exchange forward contracts not
designated as hedging instruments for accounting purposes.
$0.08 $0.02 $0.07
Non-GAAP diluted earnings per share $2.27 $2.60 $3.07
(1) Excludes depreciation and amortization
Balance Sheet
Assets
Cash and cash equivalents 2010.1 $2,125.2
Short-term investments $1,764.6 $2,824.3
Trade accounts receivable, gross $2,005.6 $2,291.6
Allowance for doubtful...