10-KPeriod: FY2001

COGNIZANT TECHNOLOGY SOLUTIONS CORP Annual Report, Year Ended Dec 31, 2001

Filed March 11, 2002For Securities:CTSH

Summary

Cognizant Technology Solutions Corporation (CTSH) filed its annual report on Form 10-K for the fiscal year ended December 31, 2001. The filing reveals a company experiencing consistent revenue growth and expanding operational capabilities, particularly with its significant employee base in India. The company emphasizes its focus on providing comprehensive software development and maintenance solutions, leveraging a combination of on-site and offshore teams to serve a diverse client base, primarily in North America and Europe. Financially, CTSH demonstrates robust top-line growth, with total revenues increasing year-over-year. The company's operational efficiency is reflected in its gross profit margins, and it continues to invest in property and equipment to support its expansion. Despite some concentration in its customer base, Cognizant is effectively managing its operations and financial performance, positioning itself for continued growth in the IT services sector.

Key Highlights

  • 1Total revenues grew from $137.0 million in 2000 to $177.8 million in 2001, indicating strong year-over-year expansion.
  • 2The company generated $22.16 million in net income for the year ended December 31, 2001, up from $17.68 million in 2000.
  • 3Cognizant's operations are heavily concentrated in India, with a substantial majority of its employees located there, enabling cost-effective service delivery.
  • 4The company experienced growth in both its North American and European segments, with North America being the dominant revenue generator.
  • 5Significant investment in property and equipment is noted, with net property and equipment increasing from $15.9 million in 2000 to $24.3 million in 2001.
  • 6The customer base shows some concentration, with the top ten customers accounting for 53.0% of revenues in 2001, down from 59.1% in 2000.
  • 7The company continues to utilize stock-based compensation plans, with a significant number of options outstanding and exercisable.

Frequently Asked Questions

Cognizant Technology Solutions Corporation primarily provides high-quality, cost-effective, full life cycle software development and maintenance solutions. The company leverages a global delivery model with a significant operational presence and employee base in India, serving clients mainly in North America and Europe.

The company demonstrated strong financial performance, with total revenues increasing to $177.8 million from $137.0 million in the prior year. Net income also saw a healthy increase, reaching $22.16 million compared to $17.68 million in 2000. Gross profit and operating income also showed positive growth.

A significant risk noted is the concentration of operations in India, exposing the company to foreign currency fluctuations and international operational risks. Additionally, the company faces risks related to customer concentration, with a substantial portion of revenue derived from its top customers. There's also a general risk of substantial damage claims arising from errors or failures in its services, despite contractual liability limitations and insurance coverage.

The company operates subsidiaries in India, the UK, Germany, and Canada. For its Canadian and European subsidiaries, assets and liabilities are translated at current exchange rates, and revenues and expenses at average rates, with translation adjustments recorded in equity. However, for its Indian subsidiary, the functional currency is the U.S. dollar due to its primary sales in the U.S. and significant intercompany transactions in U.S. dollars. The company has not engaged in significant hedging transactions to mitigate foreign currency exchange rate risks.