Cognos(R) Reports Record Second Quarter Fiscal Year 2008 Financial Results



    - Delivers 12% license revenue growth and 19% EPS growth -

    OTTAWA & BURLINGTON, MASS., September 27 /CNW/ - Cognos(R) 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 second quarter of fiscal year 2008, ended August 31, 2007.

    Revenue for the second quarter was $252.4 million, compared with $229.9
million for the same period last fiscal year, an increase of 10 percent.
License revenue was $87.0 million, compared with $78.0 million in the second
quarter of last fiscal year, an increase of 12 percent.

    Net income on a U.S. GAAP basis in the quarter was $26.5 million,
compared with $23.8 million for the same period last fiscal year, an increase
of 12 percent. Net income on a non-GAAP basis (excluding amortization of
acquisition-related intangible assets and stock-based compensation expense)
for the quarter was $34.7 million, compared with $30.0 million for the same
period last fiscal year, an increase of 15 percent. Earnings per diluted share
(EPS) on a U.S. GAAP basis for the quarter was $0.31, compared with $0.26 for
the same period last fiscal year, an increase of 19 percent. EPS on a non-GAAP
basis (excluding amortization of acquisition-related intangible assets and
stock-based compensation expense) for the quarter was $0.40, compared with
$0.33 for the same period last fiscal year, an increase of 21 percent.

    "I am pleased with our performance in the second quarter," said Cognos
president and chief executive officer, Rob Ashe. "We saw solid growth across
both our Cognos 8 BI and Financial Performance Management solutions. On the
strength of our growth, a continuing strong product cycle going forward, a
healthy market and significantly increased sales and customer service
capacity, we are heading into the seasonally strong second half of our fiscal
year with confidence.

    "As the independent leader in performance management, our focus is to
deliver innovation and expertise for our customers. The current momentum of
our solution offering reflects continued emphasis of these themes, with recent
announcements of Cognos 8 BI Analysis for Excel, the Cognos 8 Version 8.3 beta
cycle, our recently expanded relationship with Informatica, and new solution
offerings with IBM. This momentum grew even stronger with our announcement of
a definitive agreement to purchase Applix. Response from customers and the
market to this announcement has been extremely positive, as customers see the
combined value of this important acquisition."

    Recent Highlights:

    --  9 contracts greater than $1 million in the second quarter

    --  411 sales representatives, the highest level ever - an increase of 21
from the end of the first quarter and 45 from Q2 of last fiscal year

    --  Signed worldwide reseller agreement with Informatica for its data
quality software

    --  Appointed Phillip Beniac President, Cognos Asia-Pacific

    --  Announced the execution of a definitive agreement to acquire Applix

    Revenue for the first six months of fiscal year 2008, ended August 31,
2007, was $489.0 million, compared with $446.9 million for the same period
last fiscal year, an increase of 9 percent. Net income on a U.S. GAAP basis
for the first six months was $48.9 million, compared with $38.3 million for
the same period last fiscal year, an increase of 28 percent. Net income on a
non-GAAP basis (excluding amortization of acquisition-related intangible
assets and stock-based compensation expense) for the first six months was
$63.9 million, compared with $49.8 million for the same period last fiscal
year, an increase of 28 percent. Earnings per diluted share (EPS) on a U.S.
GAAP basis for the first six months was $0.55, compared with $0.42 for the
same period last fiscal year, an increase of 31 percent. EPS on a non-GAAP
basis (excluding amortization of acquisition-related intangible assets and
stock-based compensation expense) for the first six months was $0.72, compared
with $0.55 for the same period last fiscal year, an increase of 31 percent.

    Cognos' balance sheet remains strong. Second quarter operating cash flow
was $22.3 million. The company exited the quarter with $439.4 million in cash,
cash equivalents, and short-term investments. Days sales outstanding for
accounts receivable was 57 days in the quarter.

    Second 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 $7.9 million of stock-based compensation expense, before
taxes. Compared to the GAAP results, this is an increase of $0.09 per share,
in the aggregate, after the effect of taxes. Non-GAAP results for the first
six months differ from results measured under U.S. GAAP as they exclude $3.6
million of amortization of acquisition-related intangible assets and $15.4
million of stock-based compensation expense before taxes. Compared to the GAAP
results, this is an increase of $0.17 per share, in the aggregate, after the
effect of taxes. A reconciliation of U.S. GAAP to non-GAAP results is included
at the end of this press release.

    Business Outlook

    The company's outlook for the third quarter and full fiscal year 2008
assumes no significant changes in the economy, a U.S. GAAP tax rate of 21
percent, a Canadian dollar of $1.00 U.S., and a Euro of $1.42 U.S. for the
remainder of the year. This outlook does not reflect the impact of the pending
acquisition of Applix.

    Management offers the following outlook for the third quarter of fiscal
year 2008 ending November 30, 2007:

    --  Revenue is expected to be in the range of $270 million to $285
million

    --  U.S. GAAP diluted earnings per share are expected to be in the range
of $0.36 to $0.44

    --  Non-GAAP diluted earnings per share are expected to be in the range
of $0.45 to $0.53

    Expected non-GAAP diluted earnings per share for the quarter ending
November 30, 2007 exclude approximately $1.8 million of amortization of
acquisition-related intangible assets and approximately $7.8 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 $1.075 billion to $1.100
billion

    --  U.S. GAAP diluted earnings per share are expected to be in the range
of $1.66 to $1.76

    --  Non-GAAP diluted earnings per share are expected to be in the range
of $2.00 to $2.10

    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 $31.1 million of
stock-based compensation expense, before taxes. This is an increase of
approximately $0.34 per share, in the aggregate, after the effect of taxes.

    Cognos management will host a conference call to present results for the
second quarter and business outlook at 5:15 p.m. Eastern Time, today,
September 27, 2007.

    Listeners can access the conference call at 416-640-1907 or via Webcast
at http://www.cognos.com/company/investor/events/fy08q2. 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/fy08q2 following the conference
call. A replay of the conference call will be available from September 27 at
8:15 p.m. Eastern Time until October 11 at 11:59 p.m. Eastern Time. The replay
can be accessed at 416-640-1917. The passcode for the replay is 21245645#.

    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 third 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 outcome of litigation
against the company; 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 at motivating or rewarding
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, we have measured
operating margin achievement 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 reflected 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 was intended
to align our business model and expense structure to our position in the
market we were experiencing, and expect to continue 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 these 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
                                   ----------------------- ---------------
                                     Q2      Q3      Q4      Q1      Q2
                                   ------- ------- ------- ------- -------

    Total License Revenue ($000s)   78,005  93,994 130,477  75,692  87,020

    Year-Over-Year License Revenue
     Growth                           (1)%    24 %    11 %     3 %    12 %

    Geographic Distribution:
    Total Revenue ($000s)
    Americas                       137,155 140,783 161,448 135,208 150,164
    Europe                          72,311  85,788 101,724  82,833  82,332
    Asia/Pacific                    20,424  21,228  21,363  18,613  19,871
    % of Total
    Americas                          60 %    56 %    57 %    57 %    59 %
    Europe                            31 %    35 %    36 %    35 %    33 %
    Asia/Pacific                       9 %     9 %     7 %     8 %     8 %
    Year-Over-Year Revenue Growth
     -Total
    Americas                          12 %    15 %     9 %     4 %     9 %
    Europe                             7 %    18 %    16 %    15 %    14 %
    Asia/Pacific                      (7)%    24 %    18 %    25 %    (3)%
    Year-Over-Year Revenue Growth -
     In Local Currency
    Americas                          11 %    15 %    10 %     4 %     9 %
    Europe                             2 %     8 %     6 %     7 %     7 %
    Asia/Pacific                      (7)%    20 %    14 %    18 %    (8)%
    Orders (License, Support,
     Services)
    greater than $ 1M                   10      11      25       7       9
    greater than $200K                 120     140     285     127     129
    greater than $ 50K                 819     806   1,437     761     787
    Average Selling Price (License
          Orders Only) ($000s)
    greater than $ 50K                 181     222     198     200     205

    New vs Existing License Revenue
     - % of Total
    New                                31%    23 %    29 %    28 %    32 %
    Existing                           69%    77 %    71 %    72 %    68 %
    Channel - License Revenue - %
     of Total
    Direct                             72%    73 %    70 %    74 %    74 %
    Third Party                        28%    27 %    30 %    26 %    26 %

    Other Statistics
    Cash, cash equivalents, and
    short-term investments ($000s) 618,084 599,273 691,893 654,020 439,417
    Days sales outstanding              57      61      70      63      57
    Total employees                  3,662   3,494   3,557   3,636   3,749
    

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

                                      Three months ended  Six months ended
                                              August 31,        August 31,
    -------------------------------- ------------------- -----------------
                                           2007     2006     2007     2006
    -------------------------------- ---------- -------- -------- --------
    Revenue
     Product license                   $ 87,020 $ 78,005 $162,712 $151,740
     Product support                    115,177  103,262  228,615  203,443
     Services                            50,170   48,623   97,694   91,747
    -------------------------------- ---------- -------- -------- --------
    Total revenue                       252,367  229,890  489,021  446,930
    -------------------------------- ---------- -------- -------- --------
    Cost of revenue
     Cost of product license              1,530    1,445    2,963    3,202
     Cost of product support             11,448   11,384   23,245   22,611
     Cost of services                    39,863   39,805   80,444   77,321
    -------------------------------- ---------- -------- -------- --------
    Total cost of revenue                52,841   52,634  106,652  103,134
    -------------------------------- ---------- -------- -------- --------

    -------------------------------- ---------- -------- -------- --------
    Gross margin                        199,526  177,256  382,369  343,796
    -------------------------------- ---------- -------- -------- --------
    Operating expenses
     Selling, general, and
      administrative                    135,310  117,981  260,737  235,573
     Research and development            35,283   33,869   70,213   67,148
     Amortization of acquisition-
      related intangible assets           1,805    1,702    3,607    3,403
    -------------------------------- ---------- -------- -------- --------
    Total operating expenses            172,398  153,552  334,557  306,124
    -------------------------------- ---------- -------- -------- --------
    Operating income                     27,128   23,704   47,812   37,672
    Interest and other income, net        6,210    6,216   14,475   11,227
    -------------------------------- ---------- -------- -------- --------
    Income before taxes                  33,338   29,920   62,287   48,899
    Income tax provision                  6,793    6,160   13,356   10,601
    -------------------------------- ---------- -------- -------- --------
    Net income                         $ 26,545 $ 23,760 $ 48,931 $ 38,298
    -------------------------------- ---------- -------- -------- --------
    Net income per share
     Basic                             $   0.31 $   0.26 $   0.56 $   0.43
    -------------------------------- ---------- -------- -------- --------
     Diluted                           $   0.31 $   0.26 $   0.55 $   0.42
    -------------------------------- ---------- -------- -------- --------
    Weighted average number of
     shares (000s)
     Basic                               85,747   89,718   87,527   89,805
    -------------------------------- ---------- -------- -------- --------
     Diluted                             86,202   90,221   88,180   90,523
    -------------------------------- ---------- -------- -------- --------
    

    
                             COGNOS INCORPORATED
                         CONSOLIDATED BALANCE SHEETS
                             (US$000s, U.S. GAAP)
                                 (Unaudited)
                                                       August    February
                                                           31,         28,
                                                          2007        2007
    ---------------------------------------------------------- -----------
    Assets
    Current assets
     Cash and cash equivalents                       $379,078  $  376,762
     Short-term investments                            60,339     315,131
     Accounts receivable                              158,920     221,393
     Income taxes receivable                            6,708       2,274
     Prepaid expenses and other current assets         32,562      29,724
     Deferred tax assets                               14,256      13,768
    ---------------------------------------------------------- -----------
                                                      651,863     959,052
    Fixed assets, net                                  79,615      72,256
    Intangible assets, net                             14,362      17,767
    Other assets                                        8,640       5,642
    Deferred tax assets                                10,292       5,950
    Goodwill                                          226,455     232,094
    ---------------------------------------------------------- -----------
                                                     $991,227  $1,292,761
    ---------------------------------------------------------- -----------
    Liabilities
    Current liabilities
     Accounts payable                                $ 31,166  $   36,970
     Accrued charges                                   38,711      36,628
     Salaries, commissions, and related items          66,931      96,970
     Income taxes payable                               9,578       8,743
     Deferred income taxes                              4,065       6,363
     Deferred revenue                                 238,473     284,896
    ---------------------------------------------------------- -----------
                                                      388,924     470,570
    Non-current income tax payable                     52,272           -
    Deferred income taxes                               3,185      30,751
    ---------------------------------------------------------- -----------
                                                      444,381     501,321
    ---------------------------------------------------------- -----------
    Stockholders' Equity
    Capital stock
     Common shares and additional paid-in capital
     (August 31, 2007 - 83,213,184; February 28, 2007
      - 89,725,774)                                   536,711     535,589
     Treasury shares
     (August 31, 2007 - 1,202,901; February 28, 2007
      - 617,369)                                      (47,193)    (22,064)
    Retained earnings                                  50,496     273,575
    Accumulated other comprehensive income              6,832       4,340
    ---------------------------------------------------------- -----------
                                                      546,846     791,440
    ---------------------------------------------------------- -----------
                                                     $991,227  $1,292,761
    ---------------------------------------------------------- -----------
    

    
                             COGNOS INCORPORATED
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (US$000s, U.S. GAAP)
                                 (Unaudited)
                                 Three months ended      Six months ended
                                         August 31,            August 31,
    ------------------------- --------------------- ---------------------
                                   2007       2006       2007       2006
    ------------------------- ---------- ---------- ---------- ----------
    Cash flows from operating
     activities
     Net income               $  26,545  $  23,760  $  48,931  $  38,298
     Non-cash items
       Depreciation and
        amortization              7,524      7,360     14,853     14,600
       Stock-based
        compensation              7,493      4,586     15,127      9,743
       Deferred income taxes     (2,958)      (413)    (2,564)     4,768
       Non-current income
        taxes                     2,187          -      4,323          -
       Loss on disposal of
        fixed assets                  3        377         56        516
    Change in non-cash
     working capital
     Decrease (increase) in
      accounts receivable         8,469     (4,865)    65,909     76,275
     Increase in income tax
      receivable                    (61)    (1,485)    (4,423)    (5,792)
     Decrease (increase) in
      prepaid expenses and
      other current assets       (2,178)       522     (1,266)     7,413
     Decrease in accounts
      payable                    (5,371)    (2,969)    (7,448)    (9,996)
     Increase (decrease) in
      accrued charges             2,783       (352)     1,238      1,258
     Increase (decrease) in
      salaries, commissions,
      and related items            (144)     6,230    (32,031)    (8,595)
     Increase in income taxes
      payable                       702      4,206      1,190        851
     Decrease in deferred
      revenue                   (22,667)   (20,836)   (51,687)   (40,568)
    ------------------------- ---------- ---------- ---------- ----------
    Net cash provided by
     operating activities        22,327     16,121     52,208     88,771
    ------------------------- ---------- ---------- ---------- ----------
    Cash flows from investing
     activities
     Maturity of short-term
      investments               164,432    264,354    460,273    376,969
     Purchase of short-term
      investments               (60,344)  (191,486)  (203,863)  (424,122)
     Additions to fixed
      assets                     (6,504)    (4,544)   (12,493)   (10,915)
     Additions to intangible
      assets                       (496)      (370)      (785)      (696)
     Increase in other assets    (3,466)      (488)    (3,328)      (219)
    ------------------------- ---------- ---------- ---------- ----------
    Net cash provided by
     (used in) investing
     activities                  93,622     67,466    239,804    (58,983)
    ------------------------- ---------- ---------- ---------- ----------
    Cash flows from financing
     activities
     Issue of common shares       2,741        576      9,897     13,511
     Purchase of treasury
      shares                       (583)    (2,545)   (26,408)    (2,545)
     Repurchase of shares      (231,027)         -   (279,046)   (24,998)
    ------------------------- ---------- ---------- ---------- ----------
    Net cash used in
     financing activities      (228,869)    (1,969)  (295,557)   (14,032)
    ------------------------- ---------- ---------- ---------- ----------
    Effect of exchange rate
     changes on cash              1,284     (1,297)     5,861      3,109
    ------------------------- ---------- ---------- ---------- ----------
    Net increase (decrease)
     in cash and cash
     equivalents               (111,636)    80,321      2,316     18,865
    Cash and cash
     equivalents, beginning
     of period                  490,714    337,178    376,762    398,634
    ------------------------- ---------- ---------- ---------- ----------
    Cash and cash
     equivalents, end of
     period                     379,078    417,499    379,078    417,499
    Short-term investments,
     end of period               60,339    200,585     60,339    200,585
    ------------------------- ---------- ---------- ---------- ----------
    Cash, cash equivalents,
     and short-term
     investments, end of
     period                   $ 439,417  $ 618,084  $ 439,417  $ 618,084
    ------------------------- ---------- ---------- ---------- ----------
    

    
                             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  Six months ended
                                              August 31,        August 31,
                                     ------------------- -----------------
                                         2007      2006     2007     2006
                                     --------- --------- -------- --------
    Operating Income
    GAAP Operating Income            $ 27,128  $ 23,704  $47,812  $37,672
    Plus:
     Amortization of acquisition-
      related intangible assets         1,805     1,702    3,607    3,403
     Stock-based compensation expense   7,897     5,757   15,403   10,835
     Restructuring charge                 (49)        -     (312)       -
                                     --------- --------- -------- --------
    Non-GAAP Operating Income        $ 36,781  $ 31,163  $66,510  $51,910
                                     --------- --------- -------- --------
    Operating Margin Percentage
    GAAP Operating Margin Percentage     10.7%     10.3%     9.8%     8.4%
    Plus:
     Amortization of acquisition-
      related intangible assets           0.8       0.8      0.7      0.8
     Stock-based compensation expense     3.1       2.5      3.2      2.4
     Restructuring charge                 0.0       0.0     (0.1)     0.0
                                     --------- --------- -------- --------
    Non-GAAP Operating Margin
     Percentage                          14.6%     13.6%    13.6%    11.6%
                                     --------- --------- -------- --------
    Net Income
    GAAP Net Income                  $ 26,545  $ 23,760  $48,931  $38,298
    Plus:
     Amortization of acquisition-
      related intangible assets         1,805     1,702    3,607    3,403
     Stock-based compensation expense   7,897     5,757   15,403   10,835
     Restructuring charge                 (49)        -     (312)       -
    Less:
      Income tax effect of
       amortization of acquisition-
       related intangible assets         (610)     (646)  (1,220)  (1,271)
      Income tax effect of stock-
       based compensation expense      (1,039)     (528)  (2,640)  (1,459)
      Income tax effect of
       restructuring charge               117         -      117        -
                                     --------- --------- -------- --------
    Non-GAAP Net Income              $ 34,666  $ 30,045  $63,886  $49,806
                                     --------- --------- -------- --------
    Net Income per diluted share
    GAAP Net Income per diluted share$   0.31  $   0.26  $  0.55  $  0.42
    Plus:
     Amortization of acquisition-
      related intangible assets          0.02      0.02     0.04     0.04
     Stock-based compensation expense    0.09      0.06     0.17     0.12
    Less:
      Income tax effect of
       amortization of acquisition-
       related intangible assets        (0.01)    (0.01)   (0.01)   (0.01)
      Income tax effect of stock-
       based compensation expense       (0.01)        -    (0.03)   (0.02)
                                     --------- --------- -------- --------
    Non-GAAP Net Income per diluted
     share                           $   0.40  $   0.33  $  0.72  $  0.55
                                     --------- --------- -------- --------
    Shares used in computing diluted
     net income per share              86,202    90,221   88,180   90,523
    

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

                                             Three months      Six months
                                                     ended           ended
                                                August 31,      August 31,
                                             ------------- ---------------
                                               2007   2006    2007    2006
                                             ------ ------ ------- -------
    Cost of Product Support                  $  146 $   65 $   256 $   161
    Cost of Services                            238    159     427     346
    Selling, General and Administrative       6,713  5,100  13,227   9,404
    Research and Development                    800    433   1,493     924
                                             ------ ------ ------- -------
    Total                                    $7,897 $5,757 $15,403 $10,835
                                             ------ ------ ------- -------
    

    

    The following table shows the classification of the restructuring
     charge:

                                      Three months ended  Six months ended
                                         August 31, 2007   August 31, 2007
                                      ------------------ -----------------
    Cost of Product Support            $             0     $          (12)
    Selling, General and
     Administrative                                (29)              (313)
    Research and Development                       (20)                13
                                      ------------------  ----------------
    Total                              $           (49)    $         (312)
                                      ------------------  ----------------
    

    

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

                                 Three Months ending Twelve Months ending
                                   November 30, 2007     February 29, 2008
                                 ------------------- ---------------------
    Projected US GAAP Diluted
     Earnings per Share           $    0.36 - $0.44    $     1.66 - $1.76
    Plus:
     Amortization of acquisition-
      related intangible assets                0.02                  0.08
     Stock-based compensation
      expense                                  0.09                  0.36
    Less:
     Income tax effect of non-
      GAAP adjustments                        (0.02)                (0.10)
                                 ------------------- ---------------------
    Projected non-GAAP Diluted
     Earnings per Share           $    0.45 - $0.53    $     2.00 - $2.10
                                 ------------------- ---------------------
    




For further information:

For further information: Cognos(R) Incorporated Media Relations: Carrie
Bendzsa, 613-738-1440 Carrie.bendzsa@cognos.com or Investor Relations: John
Lawlor, 613-738-3503 john.lawlor@cognos.com

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