Cognos(R) Reports First Quarter Results



    54 percent growth in earnings

    OTTAWA & BURLINGTON, MASS., June 21 /CNW/ - Cognos Incorporated (Nasdaq:  
COGN; TSX: CSN - all figures in U.S. dollars and in accordance with U.S. GAAP
unless otherwise stated), the world leader in business intelligence (BI) and
performance management solutions, today announced financial results for its
first quarter of fiscal year 2008, ended May 31, 2007.

    Revenue for the first quarter was $236.7 million, compared with $217.0
million for the same period of last fiscal year, an increase of 9 percent.
License revenue was $75.7 million, compared with $73.7 million a year ago.

    Net income on a U.S. GAAP basis in the quarter was $22.4 million,
compared with $14.5 million for the same period last fiscal year, an increase
of 54 percent. Net income on a non-GAAP basis (excluding amortization of
acquisition-related intangible assets and stock-based compensation expense)
for the quarter was $29.2 million, compared with $19.8 million for the same
period last fiscal year, an increase of 48 percent. Earnings per diluted share
(EPS) on a U.S. GAAP basis for the quarter was $0.25, compared with $0.16 for
the same period last fiscal year. EPS on a non-GAAP basis (excluding
amortization of acquisition-related intangible assets and stock-based
compensation expense) for the quarter was $0.32, compared with $0.22 in the
first quarter of last fiscal year.

    First quarter non-GAAP results differ from results measured under U.S.
GAAP as they exclude $1.8 million of amortization of acquisition-related
intangible assets and $7.5 million of stock-based compensation expense, before
taxes. Compared to the GAAP results, this is an increase of $0.07 per share,
in the aggregate, after the effect of taxes.

    "I am pleased with our overall performance this quarter. We enter our
second quarter, and the remainder of the year, with a strong product line-up
and a healthy market opportunity," said Rob Ashe, Cognos president and chief
executive officer. "We achieved over 50 percent growth in earnings, despite
the recent strength of the Canadian dollar. In our seasonally toughest
quarter, Cognos 8 BI and our financial applications performed very well.

    "Customer and partner commitment to Cognos is very strong, as
demonstrated by the record attendance at our recent Cognos Forum user
conference. Our industry-leading product portfolio continues to expand with
recent innovations such as Cognos 8 BI version 8.2, Cognos Now!, Cognos 8 Go!
Mobile, and Cognos 8 Controller version 8.2. Our sales capacity of 390 sales
representatives at the end of the quarter is our largest ever. On the strength
of our solid business fundamentals, industry-leading products and expanding
sales capacity, I feel very confident about our opportunity for the remainder
of fiscal year 2008."

    Cognos' balance sheet remains strong. First quarter operating cash flow
was $29.9 million. The company exited the quarter with $654.0 million in cash,
cash equivalents, and short-term investments. Days sales outstanding for
accounts receivable was 63 days in the quarter, compared with 58 days for the
same period last year.

    Business Outlook

    The company's outlook for the second quarter and full fiscal year 2008
assumes no significant changes in the economy, a U.S. GAAP tax rate of 22
percent, a Canadian dollar of $0.94 U.S., and a Euro of $1.33 U.S. for the
year.

    Management offers the following outlook for the second quarter of fiscal
year 2008 ending August 31, 2007:

    --  Revenue is expected to be in the range of $245 million to $255
million

    --  U.S. GAAP diluted earnings per share are expected to be in the range
of $0.25 to $0.30

    --  Non-GAAP diluted earnings per share are expected to be in the range
of $0.34 to $0.39

    Expected non-GAAP diluted earnings per share for the quarter ending
August 31, 2007 exclude approximately $1.8 million of amortization of
acquisition-related intangible assets and approximately $9.0 million of
stock-based compensation expense, before taxes. This is an increase of
approximately $0.09 per share, in the aggregate, after the effect of taxes.

    Management offers the following outlook for the full fiscal year 2008
ending February 29, 2008:

    --  Revenue is expected to be in the range of $1.065 billion to $1.085
billion

    --  U.S. GAAP diluted earnings per share are expected to be in the range
of $1.66 to $1.73

    --  Non-GAAP diluted earnings per share are expected to be in the range
of $1.98 to $2.05

    Expected non-GAAP diluted earnings per share for fiscal year 2008 ending
February 29, 2008, exclude approximately $6.8 million of amortization of
acquisition-related intangible assets and approximately $31.5 million of
stock-based compensation expense, before taxes. This is an increase of
approximately $0.32 per share, in the aggregate, after the effect of taxes.

    Cognos management will host a conference call to present results for the
first quarter and business outlook at 5:15 p.m. Eastern Time, today, June 21,
2007.

    Listeners can access the conference call at 416-640-1907 or via Webcast
at http://www.cognos.com/company/investor/events/fy08q1. Presentation slides
for the call can be accessed at the Investor Relations area of the Cognos Web
site approximately 15 minutes prior to the start of the call.

    An archive of the Webcast can be accessed at
http://www.cognos.com/company/investor/events/fy08q1 following the conference
call.

    A replay of the conference call will be available from June 21 at 8:15
p.m. Eastern Time until July 5 at 11:59 p.m. Eastern Time. The replay can be
accessed at 416-640-1917. The passcode for the replay is 21235249#.

    Safe Harbor for Forward-Looking Statements

    Certain statements made in this press release that are not based on
historical information (including those in the section entitled "Business
Outlook ") are forward-looking statements which are made pursuant to the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934 and
Section 138.4(9) of the Ontario Securities Act. Such forward-looking
statements relate to, among other things, the company's expectations with
respect to revenue and earnings per share (on both a GAAP and non-GAAP basis)
for the second quarter of fiscal year 2008 and the full fiscal year 2008; the
assumptions set out in the " Business Outlook " including those relating to
the economy, U.S. GAAP tax rate, the exchange rate for the Canadian dollar and
Euro in U.S. currency; the amount and impact of amortization of
acquisition-related intangible assets, stock-based compensation before taxes;
and other matters. Certain assumptions were applied in making the
forward-looking statements, such as the business outlook, and material
assumptions are set out above in the section entitled "Business Outlook. "

    These forward-looking statements are neither promises nor guarantees, but
involve risks, factors and uncertainties that may cause actual results to
differ materially from those in the forward-looking statements. Factors that
may cause such differences include, but are not limited to: a continuing
increase in the number of larger customer transactions and the related
lengthening of sales cycles and challenges in executing on these sales
opportunities; intense competition in Cognos' industry and its ability to
successfully compete; Cognos' transition to Cognos 8 and customer acceptance
and implementation of Cognos 8; the incursion of enterprise resource planning
and other major software companies into the BI market; continued BI and
software market consolidation and other competitive changes in the BI and
software market; currency fluctuations; the company's ability to identify,
hire, train, motivate, and retain highly qualified management/other key
personnel (including sales personnel) and its ability to manage changes and
transitions in management/other key personnel; the company's ability to
identify, pursue, and complete acquisitions with desired business results; the
impact of the implementation of new accounting pronouncements; the company's
ability to develop, introduce and implement new products as well as
enhancements or improvements for existing products that respond to
customer/product requirements and rapid technological change; the impact of
global economic conditions on the company's business; the company's ability to
maintain or accurately forecast revenue or to anticipate and accurately
forecast a decline in revenue from any of its products or services; the
company's ability to select and implement appropriate business models, plans
and strategies and to execute on them; fluctuations in the company's tax
exposure; unauthorized use or misappropriation of the company's intellectual
property; claims by third parties that the company's software infringes their
intellectual property; the risks inherent in international operations, such as
the impact of the laws, regulations, rules and pronouncements of foreign
jurisdictions and their interpretation by foreign courts, tribunals,
regulatory and similar bodies; the existence of regulatory barriers to
integration; as well as the risk factors discussed in the company's most
recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, filed
with the United States Securities and Exchange Commission ("SEC") and the
Canadian Securities Administrators ("CSA"), as well as other periodic reports
filed with the SEC and the CSA. Readers should not place undue reliance on any
such forward-looking statements, which speak only as of the date they are
made. The company disclaims any obligation to publicly update or revise any
such statements to reflect any change in its expectations or in events,
conditions, or circumstances on which any such statements may be based, or
that may affect the likelihood that actual results will differ from those
contained in the forward-looking statements.

    Discussion of Non-GAAP Financial Measures

    In addition to our GAAP results, Cognos discloses adjusted operating
margin percentage, net income and net income per share, referred to
respectively as "non-GAAP operating margin percentage," "non-GAAP net income,"
and "non-GAAP net income per diluted share." These items, which are
collectively referred to as "Non-GAAP Measures", exclude the impact of
stock-based compensation and the amortization of acquisition-related
intangible assets. The Non-GAAP measures also exclude the restructuring
charges related to our margin improvement plan implemented in the third
quarter of fiscal 2007, as these charges are considered non-recurring. From
time to time, subject to the review and approval of the audit committee of the
Board of Directors, management may make other adjustments for revenues,
expenses and gains that it does not consider reflective of core operating
performance in a particular period and may modify the Non-GAAP Measures by
adjusting these revenues, expenses and gains. Management makes these
adjustments so that core operating performance reflects management's business
activities as well as changes within the software industry.

    Management defines its core operating performance to be the revenues
recorded in a particular period and the expenses incurred within that period
which management has the capability of directly affecting in order to drive
operating income. Stock-based compensation, amortization of
acquisition-related intangible assets and restructuring charges are excluded
from our core operating performance because the decisions, which gave rise to
these expenses, were not made to drive revenue in a particular period, but
rather were made for our long-term benefit over multiple periods. While
strategic decisions, such as the decisions to issue stock-based compensation,
to acquire a company or to restructure the organization, are made to further
our long-term strategic objectives and do impact our income statement under
GAAP, these items affect multiple periods and management is not able to change
or affect these items within any particular period. Therefore, management
excludes these impacts in its planning, monitoring, evaluation and reporting
of our underlying revenue-generating operations for a particular period.

    Prior to the adoption of FAS 123R on March 1, 2006, the beginning of our
fiscal year 2007, management's practice was to exclude stock-based
compensation internally to evaluate performance. With the adoption of FAS
123R, management concluded that the Non-GAAP Measures could provide relevant
disclosure to investors as contemplated by Staff Accounting Bulletin 107. As
of the beginning of our fiscal year 2007, management also began excluding
amortization of acquisition-related intangible assets when assessing
appropriate adjustments for non-GAAP presentations. While both of these items
are recurring and affect GAAP net income, management does not use them to
assess the business' operational performance for any particular period
because: each item affects multiple periods and is unrelated to business
performance in a particular period; management is not able to change either
item in any particular period; and neither item contributes to the operational
performance of the business for any particular period.

    In the case of stock-based compensation, as disclosed in our Annual
Report on Form 10-K item 11, for the fiscal year ended February 28, 2007
("2007 Form 10-K"), our compensation strategy is to use stock-based
compensation as a key tool to align management "to make strategic decisions
and to manage Cognos with a view to increasing shareholder value through an
increase in Cognos' share price over the medium and long-term." Whether the
grant of stock options or Restricted Share Units are part of a Key Employee
grant, are merit-based or are granted based on meeting specific performance
criteria in a measurement period, these grants vest over time and are aimed at
long-term employee retention, rather than to motivate or reward operational
performance for any particular period. Thus, stock-based compensation expense
varies for reasons that are generally unrelated to operational performance in
any particular period. We use annual cash bonus payouts for executives and
other employees to motivate and reward annual operational performance in the
areas of revenue and operating margin achievement. Since the beginning of
fiscal year 2007, operating margin achievement has been measured on a non-GAAP
basis, excluding stock-based compensation and amortization of
acquisition-related intangible asset expenses.

    Management views amortization of acquisition-related intangible assets,
such as the amortization of an acquired company's research and development
efforts, customer lists and customer relationships, as items arising during
the time that preceded the acquisition. It is a cost that is determined at the
time of the acquisition. While it is continually viewed for impairment,
amortization of the cost is a static expense, one that is typically not
affected by operations during any particular period, and does not contribute
to operational performance in any particular period.

    The margin improvement plan reflects a fundamental realignment of our
business, including significant personnel reductions within higher levels of
management. The restructuring charges are excluded in our Non-GAAP Measures
because they are significantly different in magnitude and character from
routine personnel adjustments that management makes when monitoring and
conducting the Company's core operations during any particular period. The
restructuring decision and related expenses are not related to operating
performance for any particular period, and are not subject to change by
management in any particular period. Instead, the restructuring is intended to
align our business model and expense structure to our position in the market
we are experiencing, and expect to experience, over the long term.

    Management also uses these Non-GAAP Measures to operate the business
because the excluded expenses are not under the control of, and, accordingly,
not used in evaluating the performance of, operations personnel within their
respective areas of responsibility. In the case of stock-based compensation
expense, the award of stock options is governed by the Human Resources and
Compensation Committee of the Board of Directors. With respect to
acquisition-related intangible assets and charges associated with the margin
improvement plan, these charges arise from acquisitions and a restructuring
that are the result of strategic decisions which are not the responsibility of
most levels of operational management. The restructuring charges, like our
stock-based compensation charges and amortization of acquisition-related
intangible assets, are excluded in management's internal evaluations of our
operating results and are not considered for management compensation purposes.

    Ultimately, stock-based compensation, amortization of acquisition-related
intangible assets and restructuring expenses are incurred to further our
long-term strategic objectives, rather than to achieve operational performance
objectives for any particular period. As such, supplementing GAAP disclosure
with non-GAAP disclosure using the Non-GAAP Measures provides management with
an additional view of operational performance by excluding adjusting revenues,
expenses and gains that are not directly related to performance in any
particular period. Further, management considers this supplemental information
to be beneficial to shareholders because it shows our operating performance
without the impact of charges that are largely unrelated to the performance of
our underlying revenue-generating operations during the period in which the
charges are recorded. Including such disclosure in our filings also provides
investors with greater transparency on period-to-period performance and the
manner in which management views, conducts and evaluates the business.

    Because the Non-GAAP Measures are not calculated in accordance with GAAP,
they are used by management as a supplement to, and not an alternative to, or
superior to, financial measures calculated in accordance with GAAP. There are
a number of limitations on the Non-GAAP Measures, including the following:

    --  The Non-GAAP Measures do not have standardized meanings and may not
be comparable to similar non-GAAP measures used or reported by other software
companies.

    --  The Non-GAAP Measures do not reflect all costs associated with our
operations determined in accordance with GAAP. For example:

    
        -- Non-GAAP operating margin performance and non-GAAP net income
           do not include stock-based compensation expense related to
           equity awards granted to our workforce. Cognos' stock incentive
           plans are important components of our employee incentive
           compensation arrangements and are reflected as expenses in our
           GAAP results under FAS 123R. While we include the dilutive
           impact of such equity awards in weighted average shares
           outstanding, the expense associated with stock-based awards is
           excluded from our Non-GAAP Measures.

        -- While amortization of acquisition-related intangible assets
           does not directly impact our current cash position, such
           expense represents the declining value of the technology or
           other intangible assets that we have acquired. These assets are
           amortized over their respective expected economic lives or
           impaired, if appropriate. The expense associated with this
           decline in value is excluded from our non-GAAP disclosures and
           therefore our Non-GAAP Measures do not include the costs of
           acquired intangible assets that supplement our research and
           development.

        -- Restructuring charges primarily represent severance charges
           associated with our margin improvement plan, which was
           implemented in the third quarter of fiscal 2007. These charges
           are a significant expense from a GAAP perspective and the costs
           associated with the restructuring would be operational in
           nature absent the margin improvement plan. Most of the charges
           are cash expenditures which are excluded from our Non-GAAP
           Measures.
    

    --  Excluded expenses for stock-based compensation and amortization of
acquisition-related intangible assets will recur and will impact our GAAP
results. While restructuring costs are non-recurring activities, their
occasional occurrence will impact GAAP results. As such, the Non-GAAP Measures
should not be construed as an inference that the excluded items are unusual,
infrequent or non-recurring.

    Because of these limitations, management recognizes that the Non-GAAP
Measures should not be considered in isolation or as an alternative to our
results as reported under GAAP. Management compensates for theses limitations
by relying on the Non-GAAP Measures only as a supplement to our GAAP results.

    About Cognos:

    Cognos, the world leader in business intelligence and performance
management solutions, provides world-class enterprise planning and BI software
and services to help companies plan, understand and manage financial and
operational performance.

    Cognos brings together technology, analytical applications, best
practices, and a broad network of partners to give customers a complete
performance system. The Cognos performance system is an open and adaptive
solution that leverages an organization's ERP, packaged applications, and
database investments. It gives customers the ability to answer the questions -
How are we doing? Why are we on or off track? What should we do about it? -
and enables them to understand and monitor current performance while planning
future business strategies.

    Cognos serves more than 23,000 customers in more than 135 countries, and
its top 100 enterprise customers consistently outperform market indexes.
Cognos performance management solutions and services are also available from
more than 3,000 worldwide partners and resellers. For more information, visit
the Cognos Web site at http://www.cognos.com.

    Cognos and the Cognos logo are trademarks or registered trademarks of
Cognos Incorporated in the United States and/or other countries. All other
names are trademarks or registered trademarks of their respective companies.

    Note to Editors: Copies of previous Cognos press releases and Corporate
and product information are available on the Cognos Web site at
www.cognos.com, and at Business Wire's site at www.businesswire.com

    
    SUPPLEMENTARY INFORMATION (unaudited):

                                            FY 2007               FY 2008
                              ----------------------------------- --------
                                 Q1       Q2       Q3       Q4       Q1
                              -------- -------- -------- -------- --------

    Total License Revenue
     ($000s)                   73,735   78,005   93,994  130,477   75,692

    Year-Over-Year License
     Revenue Growth                4 %     (1)%     24 %     11 %      3 %

    Geographic Distribution:
    Total Revenue ($000s)
    Americas                  129,913  137,155  140,783  161,448  135,208
    Europe                     72,225   72,311   85,788  101,724   82,833
    Asia/Pacific               14,902   20,424   21,228   21,363   18,613
    % of Total
    Americas                      60 %     60 %     56 %     57 %     57 %
    Europe                        33 %     31 %     35 %     36 %     35 %
    Asia/Pacific                   7 %      9 %      9 %      7 %      8 %
    Year-Over-Year Revenue
     Growth -Total
    Americas                      12 %     12 %     15 %      9 %      4 %
    Europe                         9 %      7 %     18 %     16 %     15 %
    Asia/Pacific                 (18)%     (7)%     24 %     18 %     25 %
    Year-Over-Year Revenue
     Growth - In Local
     Currency
    Americas                      11 %     11 %     15 %     10 %      4 %
    Europe                        11 %      2 %      8 %      6 %      7 %
    Asia/Pacific                 (15)%     (7)%     20 %     14 %     18 %

    Orders (License, Support,
     Services)
    greater than $ 1M              13       10       11       25        7
    greater than $200K            118      120      140      285      127
    greater than $ 50K            728      819      806    1,437      761

    Average Selling Price
     (License Orders Only)
     ($000s)
    greater than $ 50K            186      181      222      198      200

    New vs Existing License
     Revenue - % of Total
    New                           29 %     31 %     23 %     29 %     28 %
    Existing                      71 %     69 %     77 %     71 %     72 %

    Channel - License Revenue
     - % of Total
    Direct                        70 %     72 %     73 %     70 %     74 %
    Third Party                   30 %     28 %     27 %     30 %     26 %

    Other Statistics
    Cash, cash equivalents,
     and short-term
     investments ($000s)      610,184  618,084  599,273  691,893  654,020
    Days sales outstanding         58       57       61       70       63
    Total employees             3,622    3,662    3,494    3,557    3,636
    

    
                             COGNOS INCORPORATED

                      CONSOLIDATED STATEMENTS OF INCOME
                  (US$000s except share amounts, U.S. GAAP)
                                 (Unaudited)

                                                Three months ended May 31,
                                                    2007          2006
    ------------------------------------------- ------------- ------------
    Revenue
      Product license                           $     75,692  $    73,735
      Product support                                113,438      100,181
      Services                                        47,524       43,124
    ------------------------------------------- ------------- ------------
    Total revenue                                    236,654      217,040
    ------------------------------------------- ------------- ------------
    Cost of revenue
      Cost of product license                          1,433        1,757
      Cost of product support                         11,797       11,227
      Cost of services                                40,581       37,516
    ------------------------------------------- ------------- ------------
    Total cost of revenue                             53,811       50,500
    ------------------------------------------- ------------- ------------
    Gross margin                                     182,843      166,540
    ------------------------------------------- ------------- ------------
    Operating expenses
      Selling, general, and administrative           125,427      117,592
      Research and development                        34,930       33,279
      Amortization of acquisition-related
       intangible assets                               1,802        1,701
    ------------------------------------------- ------------- ------------
    Total operating expenses                         162,159      152,572
    ------------------------------------------- ------------- ------------
    Operating income                                  20,684       13,968
    Interest and other income, net                     8,265        5,011
    ------------------------------------------- ------------- ------------
    Income before taxes                               28,949       18,979
    Income tax provision                               6,563        4,441
    ------------------------------------------- ------------- ------------
    Net income                                  $     22,386  $    14,538
    ------------------------------------------- ------------- ------------
    Net income per share
     Basic                                      $       0.25  $      0.16
    ------------------------------------------- ------------- ------------
     Diluted                                    $       0.25  $      0.16
    ------------------------------------------- ------------- ------------
    Weighted average number of shares (000s)
     Basic                                            89,306       89,893
    ------------------------------------------- ------------- ------------
     Diluted                                          90,158       90,825
    ------------------------------------------- ------------- ------------
    

    
                             COGNOS INCORPORATED

                         CONSOLIDATED BALANCE SHEETS
                             (US$000s, U.S. GAAP)
                                 (Unaudited)

                                                    May 31,   February 28,
                                                     2007         2007
    --------------------------------------------- ----------- ------------
    Assets
    Current assets
     Cash and cash equivalents                    $  490,714  $   376,762
     Short-term investments                          163,306      315,131
     Accounts receivable                             166,682      221,393
     Income taxes receivable                           6,641        2,274
     Prepaid expenses and other current assets        30,091       29,724
     Deferred tax assets                              13,791       13,768
    --------------------------------------------- ----------- ------------
                                                     871,225      959,052
    Fixed assets, net                                 77,634       72,256
    Intangible assets, net                            15,973       17,767
    Other assets                                       5,161        5,642
    Deferred tax assets                                9,949        5,950
    Goodwill                                         226,455      232,094
    --------------------------------------------- ----------- ------------
                                                  $1,206,397  $ 1,292,761
    --------------------------------------------- ----------- ------------
    Liabilities
    Current liabilities
     Accounts payable                             $   36,283  $    36,970
     Accrued charges                                  35,713       36,628
     Salaries, commissions, and related items         66,837       96,970
     Income taxes payable                              8,823        8,743
     Deferred income taxes                             6,054        6,363
     Deferred revenue                                259,671      284,896
    --------------------------------------------- ----------- ------------
                                                     413,381      470,570
    Non-current income tax payable                    50,085            -
    Deferred income taxes                              3,412       30,751
    --------------------------------------------- ----------- ------------
                                                     466,878      501,321
    --------------------------------------------- ----------- ------------
    Stockholders' Equity
    Capital stock
     Common shares and additional paid-in capital
     (May 31, 2007 - 88,840,628; February 28,
      2007 - 89,725,774)                             547,232      535,589
     Treasury shares (May 31, 2007 - 1,190,035;
      February 28, 2007 - 617,369)                   (46,694)     (22,064)
    Retained earnings                                233,925      273,575
    Accumulated other comprehensive income             5,056        4,340
    --------------------------------------------- ----------- ------------
                                                     739,519      791,440
    --------------------------------------------- ----------- ------------
                                                  $1,206,397  $ 1,292,761
    --------------------------------------------- ----------- ------------
    

    
                             COGNOS INCORPORATED

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (US$000s, U.S. GAAP)
                                 (Unaudited)

                                                      Three months ended
                                                            May 31,
    ------------------------------------------------ ---------------------
                                                        2007       2006
    ------------------------------------------------ ---------- ----------
    Cash flows from operating activities
     Net income                                      $  22,386  $  14,538
     Non-cash items
       Depreciation and amortization                     7,329      7,240
       Stock-based compensation                          7,634      5,157
       Deferred income taxes                               394      5,181
       Non-current income taxes                          2,136          -
       Loss on disposal of fixed assets                     53        139
     Change in non-cash working capital
       Decrease in accounts receivable                  57,440     81,140
       Increase in income tax receivable                (4,362)    (4,307)
       Decrease in prepaid expenses and other
        current assets                                     912      6,891
       Decrease in accounts payable                     (2,077)    (7,027)
       Increase (decrease) in accrued charges           (1,545)     1,600
       Decrease in salaries, commissions, and
        related items                                  (31,887)   (14,825)
       Increase (decrease) in income taxes payable         488     (3,355)
       Decrease in deferred revenue                    (29,020)   (19,732)
    ------------------------------------------------ ---------- ----------
    Net cash provided by operating activities           29,881     72,640
    ------------------------------------------------ ---------- ----------
    Cash flows from investing activities
     Maturity of short-term investments                295,841    112,615
     Purchase of short-term investments               (143,519)  (232,636)
     Additions to fixed assets                          (5,989)    (6,371)
     Additions to intangible assets                       (290)      (326)
     Decrease in other assets                              138        269
    ------------------------------------------------ ---------- ----------
    Net cash provided by (used in) investing
     activities                                        146,181   (126,449)
    ------------------------------------------------ ---------- ----------
    Cash flows from financing activities
     Issue of common shares                              7,156     12,935
     Purchase of treasury shares                       (25,825)         -
     Repurchase of shares                              (48,019)   (24,998)
    ------------------------------------------------ ---------- ----------
    Net cash used in financing activities              (66,688)   (12,063)
    ------------------------------------------------ ---------- ----------
    Effect of exchange rate changes on cash              4,578      4,416
    ------------------------------------------------ ---------- ----------
    Net increase (decrease) in cash and cash
     equivalents                                       113,952    (61,456)
    Cash and cash equivalents, beginning of period     376,762    398,634
    ------------------------------------------------ ---------- ----------
    Cash and cash equivalents, end of period           490,714    337,178
    Short-term investments, end of period              163,306    273,006
    ------------------------------------------------ ---------- ----------
    Cash, cash equivalents, and short-term
     investments, end of period                      $ 654,020  $ 610,184
    ------------------------------------------------ ---------- ----------
    

    
                             Cognos Incorporated
               Unaudited Reconciliation of Non-GAAP Adjustments
                  (US$000s except share amounts, U.S. GAAP)


    The following tables reflect selected Cognos' non-GAAP results
     reconciled to GAAP results:

                                                        Three months ended
                                                             May 31,
                                                        ------------------
                                                          2007      2006
                                                        --------- --------
    Operating Income
    GAAP Operating Income                               $ 20,684  $13,968
    Plus:
     Amortization of acquisition-related intangible
      assets                                               1,802    1,701
     Stock-based compensation expense                      7,506    5,078
     Restructuring charge                                   (263)       -
                                                        --------- --------
    Non-GAAP Operating Income                           $ 29,729  $20,747
                                                        --------- --------

    Operating Margin Percentage
    GAAP Operating Margin Percentage                        8.7 %    6.4 %
    Plus:
     Amortization of acquisition-related intangible
      assets                                                 0.8      0.8
     Stock-based compensation expense                        3.2      2.4
     Restructuring charge                                   (0.1)     0.0
                                                        --------- --------
    Non-GAAP Operating Margin Percentage                   12.6 %    9.6 %
                                                        --------- --------

    Net Income
    GAAP Net Income                                     $ 22,386  $14,538
    Plus:
      Amortization of acquisition-related intangible
       assets                                              1,802    1,701
      Stock-based compensation expense                     7,506    5,078
      Restructuring charge                                  (263)       -
    Less:
      Income tax effect of amortization of acquisition-
       related intangible assets                            (610)    (624)
      Income tax effect of stock-based compensation
       expense                                            (1,601)    (931)
                                                        --------- --------
    Non-GAAP Net Income                                 $ 29,220  $19,762
                                                        --------- --------

    Net Income per diluted share
    GAAP Net Income per diluted share                   $   0.25  $  0.16
    Plus:
      Amortization of acquisition-related intangible
       assets                                               0.02     0.02
      Stock-based compensation expense                      0.08     0.06
    Less:
      Income tax effect of amortization of acquisition-
       related intangible assets                           (0.01)   (0.01)
      Income tax effect of stock-based compensation
       expense                                             (0.02)   (0.01)
                                                        --------- --------
    Non-GAAP Net Income per diluted share               $   0.32  $  0.22
                                                        --------- --------

    Shares used in computing diluted net income per
     share                                                90,158   90,825
    

    The following table shows the classification of stock-based compensation
expense:

    
                                                       Three months ended
                                                            May 31,
                                                      --------------------
                                                         2007      2006
                                                      ---------- ---------
    Cost of Product Support                           $     110  $     96
    Cost of Services                                        189       187
    Selling, General and Administrative                   6,514     4,304
    Research and Development                                693       491
                                                      ---------- ---------
    Total                                             $   7,506  $  5,078
                                                      ---------- ---------
    

    The following table shows the classification of the restructuring charge:

    
                                                              Three months
                                                                 ended
                                                              May 31, 2007
                                                              ------------
    Cost of Product Support                                   $       (12)
    Cost of Services                                                    -
    Selling, General and Administrative                              (284)
    Research and Development                                           33
                                                              ------------
    Total                                                     $      (263)
                                                              ------------
    

    
                             COGNOS INCORPORATED
                    Reconciliation of US GAAP to Non-GAAP
               Diluted Earnings per Share for Business Outlook
                                 (Unaudited)

                                          Three Months     Twelve Months
                                             ending           ending
                                         August 31, 2007 February 29, 2008
                                         --------------- -----------------
    Projected US GAAP Diluted Earnings
     per Share                            $0.25 - $0.30     $1.66 - $1.73
    Plus:
     Amortization of acquisition-related
      intangible assets                            0.02              0.07
     Stock-based compensation expense              0.10              0.35
    Less:
     Income tax effect of non-GAAP
      adjustments                                 (0.03)            (0.10)
                                         --------------- -----------------
    Projected non-GAAP Diluted Earnings
     per Share                            $0.34 - $0.39     $1.98 - $2.05
                                         --------------- -----------------
    




For further information:

For further information: Investor Relations: Cognos John Lawlor,
613-738-3503 john.lawlor@cognos.com or Media Contacts: Cognos Carrie Bendzsa,
613-738-1440 Carrie.bendzsa@cognos.com or LP&P Jessica Sutera, 781-782-5789
Jessica_Sutera@lpp.com

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COGNOS

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