Cognos(R) Reports Third Quarter Fiscal Year 2008 Financial Results



    OTTAWA & BURLINGTON, MASS., December 20 /CNW/ - Cognos Incorporated
(NASDAQ:   COGN; TSX: CSN) (all figures in U.S. dollars), the world leader in
business intelligence (BI) and performance management solutions, today
announced financial results for its third quarter of fiscal year 2008, ended
November 30, 2007.

    Revenue in the quarter on a U.S. GAAP basis was $288.2 million, compared
with $247.8 million for the same period last fiscal year, an increase of 16
percent. Revenue on a non-GAAP basis (excluding write-down of deferred revenue
in connection with the acquisition of Applix) in the quarter was $290.0
million. License revenue was $108.9 million in the quarter, compared with
$94.0 million in the third quarter of last fiscal year, an increase of 16
percent.

    Net income in the quarter on a U.S. GAAP basis was $31.0 million or $0.37
per diluted share, compared with $16.5 million or $0.18 per diluted share for
the same period last fiscal year. Net income on a non-GAAP basis (excluding
write-down of deferred revenue, amortization of acquisition-related intangible
assets, stock-based compensation expense and restructuring charges) in the
quarter was $43.1 million or $0.51 per diluted share, compared with $43.1
million or $0.48 per diluted share for the same period last fiscal year.

    Third Quarter Highlights:

    --  18 contracts greater than $1 million in the third quarter, up from 11
one year ago

    --  Revenue growth across all three revenue categories: license (16%),
support (15%), and professional services (19%)

    --  441 sales representatives at the end of the third quarter, an
increase of 30 from the prior quarter and 77 from a year ago

    --  Completed acquisition of Applix

    --  Entered into agreement to be acquired by IBM

    Revenue on a U.S. GAAP basis for the first nine months of fiscal year
2008, ended November 30, 2007, was $777.3 million, compared with $694.7
million for the same period last fiscal year. Revenue on a non-GAAP basis
(excluding write-down of deferred revenue in connection with the acquisition
of Applix) for the first nine months was $779.1 million. Net income on a U.S.
GAAP basis in the nine-month period was $79.9 million or $0.92 per diluted
share, compared with $54.8 million or $0.61 per diluted share for the same
period last fiscal year. Net income on a non-GAAP basis (excluding write-down
of deferred revenue, amortization of acquisition-related intangible assets,
stock-based compensation expense and restructuring charges) for the nine-month
period was $107.0 million or $1.23 per share, compared with $93.0 million or
$1.03 per diluted share for the same period last fiscal year.

    Third quarter operating cash flow was $6.6 million. The Company exited
the quarter with $167.5 million in cash, cash equivalents, and short-term
investments. Days sales outstanding (DSOs) for accounts receivable were 70
days in the quarter.

    Third quarter non-GAAP net earnings differ from U.S. GAAP net earnings as
they exclude $1.8 million of write-down of deferred revenue, $3.3 million of
amortization of acquisition-related intangible assets, and $12.1 million of
stock-based compensation expense, before taxes, respectively. This is an
increase of $0.14 per share, in the aggregate, after the effect of taxes.
Non-GAAP net earnings for the first nine months differ from U.S. GAAP net
earnings as they exclude $1.8 million of write-down of deferred revenue, $6.9
million of amortization of acquisition-related intangible assets, and $27.5
million of stock-based compensation expense, before taxes, respectively. This
is an increase of $0.31 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.

    Definitive Agreement for IBM to Acquire Cognos

    On November 12, 2007, IBM and Cognos jointly announced that the two
companies had entered into a definitive agreement for IBM to acquire Cognos in
an all-cash transaction at a price of approximately $5 billion or $58 per
share, with a net transaction value of $4.9 billion. Additionally, on December
14, 2007, Cognos furnished a Notice of Special Meeting of Shareholders and
Management Proxy Circular with the Securities and Exchange Commission and has
also filed these materials with the Canadian Securities Regulatory
Authorities. This press release and proxy circular are available on Cognos'
web site (www.cognos.com), the SEC website (www.sec.gov) as well as the
Canadian SEDAR website (www.sedar.com). The transaction remains subject to the
receipt of Cognos shareholder approval, court approval, other regulatory
clearances, and other customary closing conditions.

    Safe Harbor for Forward-Looking Statements

    Certain statements in this press release not based on historical
information are forward-looking statements made within the meaning of Section
21E of the Securities Exchange Act of 1934 and forward-looking information
within the meaning of Section 138.4(9) of the Ontario Securities Act
(collectively, forward-looking statements). Any statements that are not
statements of historical fact (including statements containing the words
"believes," "plans," "anticipates," "expects," "estimates" and similar
expressions) should also be considered forward-looking statements. A number of
important factors could cause actual results or events to differ materially
from those indicated by such forward-looking statements, including but 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 and the
international marketplace on the company's business; 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 ability of IBM and Cognos to consummate the transaction; the conditions to
the completion of the transaction, including the receipt of shareholder
approval, court approval or the regulatory clearances required for the
transaction may not be obtained on the terms expected or on the anticipated
schedule; the parties' ability to meet expectations regarding the timing,
completion and accounting and tax treatments of the transaction; Cognos is
subject to intense competition and increased competition is expected in the
future; fluctuations in foreign currencies could result in transaction losses
and increased expenses; and the other factors described in Cognos' Annual
Report on Form 10-K for the fiscal year ended February 28, 2007 and in its
most recent quarterly report filed with the SEC. 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. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date hereof.

    Additional Information and Where to Find It

    This communication may be deemed to be solicitation material in respect
of the proposed acquisition of Cognos by IBM. In connection with the proposed
acquisition, Cognos has furnished relevant materials to the SEC, and filed
these materials with the Canadian Securities Regulatory Authorities including
Cognos' proxy circular. SHAREHOLDERS OF COGNOS ARE URGED TO READ ALL RELEVANT
DOCUMENTS FURNISHED TO THE SEC, AND FILED WITH CANADIAN SECURITIES REGULATORY
AUTHORITIES, INCLUDING COGNOS' PROXY CIRCULAR, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders are able to obtain the documents free of charge at the SEC's web site
(www.sec.gov) or the Canadian SEDAR web site (www.sedar.com). Cognos
shareholders may obtain copies of these documents free of charge by contacting
Cognos' proxy solicitation agent, Georgeson, toll-free at 1-888-605-8414.

    Participants in Solicitation

    IBM and its directors and executive officers, and Cognos and its
directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of Cognos common shares in respect of
the proposed transaction. Information about the directors and executive
officers of IBM is set forth in the proxy statement for IBM's 2007 Annual
Meeting of Stockholders, which was filed with the SEC on April 2, 2007.
Information about the directors and executive officers of Cognos is set forth
in the proxy statement for Cognos' 2007 Annual and Special Meeting of
Shareholders, which was filed with the SEC on May 24, 2007. Investors may
obtain additional information regarding the interest of such participants by
reading the proxy circular regarding the acquisition.

    Discussion of Non-GAAP Financial Measures

    In addition to our GAAP results, Cognos discloses adjusted revenues,
operating margin percentage, net income and net income per diluted share,
referred to respectively as "non-GAAP revenues", "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, the amortization of acquisition-related intangible assets, the
restructuring charges related to our margin improvement plan, and the impact
on revenue of the write-down of acquired deferred revenue to fair value, as
required by GAAP upon the acquisition of Applix, Inc., (collectively "Excluded
Items") as these items 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, gains
and losses 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, gains and losses. 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. Management has excluded the effect of the deferred revenue
adjustment to fair value upon the acquisition of Applix, Inc. as the
adjustment will reduce the comparability of future periods performance when
renewals occur, which will drive operating income. The Excluded Items are
removed from our core operating performance because the decisions which gave
rise to these revenues and 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 2007, management also began excluding
amortization of acquisition-related intangible assets when assessing
appropriate adjustments for non-GAAP presentations. When we acquired Applix,
Inc. in the third quarter of fiscal 2008 management began excluding the impact
of charges relating to the write-down of deferred revenue when presenting our
Non-GAAP Measures. While all of these items affect GAAP net income, management
does not use them to assess the business' operational performance for any
particular period, and management's short term compensation is not based on
them because: each item affects multiple periods and is unrelated to business
performance in a particular period; management is not able to change the items
in any particular period; and the items do not contribute to the operational
performance of the business for any particular period, or in the case of
excluding the write-down of deferred revenue, the exclusion helps the user
understand the future ongoing operational performance when the support is
renewed.

    In the case of stock-based compensation, as disclosed in our Annual
Report on Form 10-K, Item 11, (which incorporates by reference the
Corporation's Proxy Statement, specifically the Compensation Discussion and
Analysis) 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.

    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 Corporation'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 views the impact of the write-down of acquired deferred
revenue to fair value, due to purchase accounting, as a non-recurring
acquisition only adjustment, and it is not consistent with the method used by
management to value the entity when it is acquired. This has the effect of
increasing support revenue to the amounts that would have been recorded in the
absence of the purchase accounting adjustments required by GAAP. Management's
view is that to exclude deferred revenue because of purchase accounting
adversely impacts the ability to make comparisons between past and future
reports of financial results, as the revenue reduction related to acquired
deferred revenue will not recur when related annual software maintenance
contracts are renewed in future periods. Management believes that the
inclusion of the amount will render the financial statements easier for
investors to understand.

    Management also uses these Non-GAAP Measures to operate the business
because the Excluded Items 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, acquisition-related deferred support
revenue write-down 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, acquisition-related deferred support revenue write-down
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, the Excluded Items 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 adjusting revenues, expenses,
gains and losses 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 the Excluded Items that are largely unrelated to the
performance of our underlying revenue-generating operations during the period
in which they 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.


             -- The company excludes the effect of the deferred support
              revenue write-down associated with the Applix acquisition,
              which is a required fair value purchase accounting
              adjustment under GAAP, as management believes that its
              exclusion is reflective of ongoing operating results. Thus
              non-GAAP revenues and non-GAAP net income include a
              significant revenue adjustment.
    

    --  Excluded expenses for stock-based compensation and amortization of
acquisition-related intangible assets will recur and will impact our GAAP
results. While adjustments to revenue for acquired deferred maintenance and
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 Businesswire's site at www.businesswire.com

    
    SUPPLEMENTARY INFORMATION (unaudited):

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

    Total License Revenue
     ($000s)                  93,994  130,477   75,692   87,020   108,920

    Year-Over-Year License
     Revenue Growth               24%      11%       3%      12%       16%

    Geographic Distribution:
    Total Revenue ($000s)
    Americas                 140,783  161,448  135,208  150,164   159,361
    Europe                    85,788  101,724   82,833   82,332   103,275
    Asia/Pacific              21,228   21,363   18,613   19,871    25,608
    % of Total
    Americas                      56%      57%      57%      59%       55%
    Europe                        35%      36%      35%      33%       36%
    Asia/Pacific                   9%       7%       8%       8%        9%
    Year-Over-Year Revenue
     Growth -Total
    Americas                      15%       9%       4%       9%       13%
    Europe                        18%      16%      15%      14%       20%
    Asia/Pacific                  24%      18%      25%      (3)%      21%
    Year-Over-Year Revenue
     Growth - In Local
     Currency
    Americas                      15%      10%       4%       9%       11%
    Europe                         8%       6%       7%       7%        9%
    Asia/Pacific                  20%      14%      18%      (8)%       9%

    Orders (License, Support,
     Services)
    greater than $ 1M             11       25        7        9        18
    greater than $200K           140      285      127      129       196
    greater than $ 50K           806    1,437      761      787       983

    Average Selling Price
     (License Orders Only)
     ($000s)
    greater than $ 50K           222      198      200      205       205

    New vs Existing License
     Revenue - % of Total
    New                           23%      29%      28%      32%       26%
    Existing                      77%      71%      72%      68%       74%

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

    Other Statistics
    Cash, cash equivalents,
     and
    short-term investments
     ($000s)                 599,273  691,893  654,020  439,417   167,504
    Days sales outstanding        61       70       63       57        70
    Total employees            3,494    3,557    3,636    3,749     4,006
    

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

                                      Three months ended Nine months ended
                                         November 30,      November 30,
    ---------------------------------------------------- -----------------
                                          2007      2006     2007     2006
    ------------------------------------------- -------- -------- --------
    Revenue
     Product license                  $108,920  $ 93,994 $271,632 $245,734
     Product support                   124,422   107,771  353,037  311,214
     Services                           54,902    46,034  152,596  137,781
    ------------------------------------------- -------- -------- --------
    Total revenue                      288,244   247,799  777,265  694,729
    ------------------------------------------- -------- -------- --------
    Cost of revenue
     Cost of product license             1,850     1,773    4,813    4,975
     Cost of product support            11,905    12,977   35,150   35,588
     Cost of services                   41,365    44,586  121,809  121,907
     Amortization of acquired
      technology                         2,599     1,396    5,542    4,188
    ------------------------------------------- -------- -------- --------
    Total cost of revenue               57,719    60,732  167,314  166,658
    ------------------------------------------- -------- -------- --------

    ------------------------------------------- -------- -------- --------
    Gross margin                       230,525   187,067  609,951  528,071
    ------------------------------------------- -------- -------- --------
    Operating expenses
     Selling, general, and
      administrative                   162,398   137,663  423,135  373,236
     Research and development           38,845    36,436  109,058  103,584
     Amortization of acquisition-
      related intangible assets            740       305    1,404      916
    ------------------------------------------- -------- -------- --------
    Total operating expenses           201,983   174,404  533,597  477,736
    ------------------------------------------- -------- -------- --------
    Operating income                    28,542    12,663   76,354   50,335
    Interest and other income, net       1,529     6,567   16,004   17,794
    ------------------------------------------- -------- -------- --------
    Income before taxes                 30,071    19,230   92,358   68,129
    Income tax provision                  (885)    2,687   12,471   13,288
    ------------------------------------------- -------- -------- --------
    Net income                        $ 30,956  $ 16,543 $ 79,887 $ 54,841
    ------------------------------------------- -------- -------- --------
    Net income per share
     Basic                            $   0.37  $   0.19 $   0.93 $   0.61
    ------------------------------------------- -------- -------- --------
     Diluted                          $   0.37  $   0.18 $   0.92 $   0.61
    ------------------------------------------- -------- -------- --------
    Weighted average number of shares
     (000s)
     Basic                              83,596    89,373   86,226   89,662
    ------------------------------------------- -------- -------- --------
     Diluted                            84,692    90,187   87,027   90,412
    ------------------------------------------- -------- -------- --------
    

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

                                                     November    February
                                                           30,         28,
                                                          2007        2007
    ----------------------------------------------------------------------
    Assets
    Current assets
     Cash and cash equivalents                     $  167,504  $  376,762
     Short-term investments                                 -     315,131
     Accounts receivable                              224,554     221,393
     Income taxes receivable                           12,429       2,274
     Prepaid expenses and other current assets         27,675      29,724
     Deferred tax assets                               19,366      13,768
    ----------------------------------------------------------------------
                                                      451,528     959,052
    Fixed assets, net                                  86,995      72,256
    Intangible assets, net                             79,082      17,767
    Other assets                                       25,316       5,642
    Non-current income tax receivable                   2,125           -
    Deferred tax assets                                22,441       5,950
    Goodwill                                          485,557     232,094
    ----------------------------------------------------------------------
                                                   $1,153,044  $1,292,761
    ----------------------------------------------------------------------
    Liabilities
    Current liabilities
     Short term borrowings                         $   19,893  $        -
     Accounts payable                                  48,436      36,970
     Accrued charges                                   48,874      36,628
     Salaries, commissions, and related items          85,936      96,970
     Income taxes payable                               6,329       8,743
     Deferred income taxes                             11,648       6,363
     Deferred revenue                                 236,550     284,896
    ----------------------------------------------------------------------
                                                      457,666     470,570
    Non-current income tax payable                     56,806           -
    Deferred income taxes                              25,164      30,751
    ----------------------------------------------------------------------
                                                      539,636     501,321
    ----------------------------------------------------------------------
    Stockholders' Equity
    Capital stock
     Common shares and additional paid-in capital
     (November 30, 2007 - 84,075,356; February 28,
      2007 - 89,725,774)                              581,605     535,589
     Treasury shares
     (November 30, 2007 - 1,130,409; February 28,
      2007 - 617,369)                                 (44,004)    (22,064)
    Retained earnings                                  81,452     273,575
    Accumulated other comprehensive income             (5,645)      4,340
    ----------------------------------------------------------------------
                                                      613,408     791,440
    ----------------------------------------------------------------------
                                                   $1,153,044  $1,292,761
    ----------------------------------------------------------------------
    

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

                                    Three months ended   Nine months ended
                                          November 30,        November 30,
    ----------------------------------------------------------------------
                                       2007      2006      2007      2006
    ----------------------------------------------------------------------
    Cash flows from operating
     activities
     Net income                   $  30,956 $  16,543 $  79,887 $  54,841
     Non-cash items
       Depreciation and
        amortization                  9,472     8,101    24,325    22,701
       Stock-based compensation       9,378     5,523    24,505    15,266
       Deferred income taxes          1,034     1,669    (1,530)    6,437
       Non-current income taxes       1,745         -     6,068         -
       Loss (gain) on disposal of
        fixed assets                     28      (200)       84       316
    Change in non-cash working
     capital
     Decrease (increase) in
      accounts receivable           (47,891)  (23,191)   18,018    53,084
     Increase in income tax
      receivable                     (5,712)     (184)  (10,135)   (5,976)
     Decrease in prepaid expenses
      and other current assets        7,519     3,206     6,253    10,619
     Increase (decrease) in
      accounts payable                7,708     3,313       260    (6,683)
     Increase in accrued charges      4,855     4,444     6,093     5,702
     Increase (decrease) in
      salaries, commissions, and
      related items                   7,527    23,517   (24,504)   14,922
     Decrease in income taxes
      payable                        (4,052)   (2,439)   (2,862)   (1,588)
     Decrease in deferred revenue   (16,000)  (16,846)  (67,687)  (57,414)
    ----------------------------------------------------------------------
    Net cash provided by operating
     activities                       6,567    23,456    58,775   112,227
    ----------------------------------------------------------------------
    Cash flows from investing
     activities
     Maturity of short-term
      investments                    70,778   142,608   531,051   519,577
     Purchase of short-term
      investments                   (10,000) (281,429) (213,863) (705,551)
     Additions to fixed assets       (8,183)   (4,263)  (20,676)  (15,178)
     Additions to intangible
      assets                           (504)     (366)   (1,289)   (1,062)
     Decrease (increase) in other
      assets                        (15,447)       87   (18,775)     (132)
     Acquisition costs, net of
      cash and cash equivalents    (297,397)        -  (297,397)        -
    ----------------------------------------------------------------------
    Net cash used in investing
     activities                    (260,753) (143,363)  (20,949) (202,346)
    ----------------------------------------------------------------------
    Cash flows from financing
     activities
     Increase in short-term
      borrowings                     19,893         -    19,893         -
     Issue of common shares          34,868    27,298    44,765    40,809
     Purchase of treasury shares     (1,789)  (15,913)  (28,197)  (18,458)
     Repurchase of shares                 -   (50,075) (279,046)  (75,073)
    ----------------------------------------------------------------------
    Net cash provided by (used in)
     financing activities            52,972   (38,690) (242,585)  (52,722)
    ----------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                (10,360)     (625)   (4,499)    2,484
    ----------------------------------------------------------------------
    Net decrease in cash and cash
     equivalents                   (211,574) (159,222) (209,258) (140,357)
    Cash and cash equivalents,
     beginning of period            379,078   417,499   376,762   398,634
    ----------------------------------------------------------------------
    Cash and cash equivalents, end
     of period                      167,504   258,277   167,504   258,277
    Short-term investments, end of
     period                               -   340,996         -   340,996
    ----------------------------------------------------------------------
    Cash, cash equivalents, and
     short-term investments, end
     of period                    $ 167,504 $ 599,273 $ 167,504 $ 599,273
    ----------------------------------------------------------------------
    

    
                             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   Nine months ended
                                      November 30,        November 30,
                                   ------------------- -------------------
                                       2007      2006      2007      2006
                                   --------- --------- --------- ---------
    Revenue
    GAAP Revenue                   $288,244  $247,799  $777,265  $694,729
    Plus:
     Deferred support revenue
      write-down                      1,798         -     1,798         -
                                   --------- --------- --------- ---------
    Non-GAAP Revenue               $290,042  $247,799  $779,063  $694,729
                                   --------- --------- --------- ---------
    Operating Income
    GAAP Operating Income          $ 28,542  $ 12,663  $ 76,354  $ 50,335
    Plus:
     Deferred support revenue
      write-down                      1,798         -     1,798         -
     Amortization of acquisition-
      related intangible assets       3,339     1,701     6,946     5,104
     Stock-based compensation
      expense                        12,142     7,126    27,544    17,961
     Restructuring charge                 -    26,898      (312)   26,898
                                   --------- --------- --------- ---------
    Non-GAAP Operating Income      $ 45,821  $ 48,388  $112,330  $100,298
                                   --------- --------- --------- ---------
    Operating Margin Percentage
    GAAP Operating Margin
     Percentage                         9.9%      5.1%      9.8%      7.2%
    Plus:
     Deferred support revenue
      write-down                        0.6       0.0       0.2       0.0
     Amortization of acquisition-
      related intangible assets         1.2       0.7       0.9       0.7
     Stock-based compensation
      expense                           4.2       2.9       3.5       2.6
     Restructuring charge               0.0      10.8       0.0       3.9
                                   --------- --------- --------- ---------
    Non-GAAP Operating Margin
     Percentage                        15.9%     19.5%     14.4%     14.4%
                                   --------- --------- --------- ---------
    Net Income
    GAAP Net Income                $ 30,956  $ 16,543  $ 79,887  $ 54,841
    Plus:
     Deferred support revenue
      write-down                      1,798         -     1,798         -
     Amortization of acquisition-
      related intangible assets       3,339     1,701     6,946     5,104
     Stock-based compensation
      expense                        12,142     7,126    27,544    17,961
     Restructuring charge                 -    26,898      (312)   26,898
    Less:
      Income tax effect of deferred
       support revenue write-down      (637)        -      (637)        -
      Income tax effect of
       amortization of acquisition-
       related intangible assets     (1,201)     (645)   (2,421)   (1,916)
      Income tax effect of stock-
       based compensation expense    (3,280)   (2,108)   (5,920)   (3,567)
      Income tax effect of
       restructuring charge               -    (6,371)      117    (6,371)
                                   --------- --------- --------- ---------
    Non-GAAP Net Income            $ 43,117  $ 43,144  $107,002  $ 92,950
                                   --------- --------- --------- ---------
    Net Income per diluted share
    GAAP Net Income per diluted
     share                         $   0.37  $   0.18  $   0.92  $   0.61
    Plus:
     Deferred support revenue
      write-down                       0.02         -      0.02         -
     Amortization of acquisition-
      related intangible assets        0.04      0.02      0.08      0.05
     Stock-based compensation
      expense                          0.14      0.08      0.32      0.20
     Restructuring charge                 -      0.30         -      0.30
    Less:
      Income tax effect of deferred
       support revenue write-down     (0.01)        -     (0.01)        -
      Income tax effect of
       amortization of acquisition-
       related intangible assets      (0.01)    (0.01)    (0.03)    (0.02)
      Income tax effect of stock-
       based compensation expense     (0.04)    (0.02)    (0.07)    (0.04)
      Income tax effect of
       restructuring charge               -     (0.07)        -     (0.07)
                                   --------- --------- --------- ---------
    Non-GAAP Net Income per diluted
     share                         $   0.51  $   0.48  $   1.23  $   1.03
                                   --------- --------- --------- ---------
    Shares used in computing
     diluted net income per share    84,692    90,187    87,027    90,412
    

    
    The following table shows the classification of stock-based
     compensation expense:
                                            Three months    Nine months
                                                 ended          ended
                                             November 30,   November 30,
                                            -------------- ---------------
                                               2007   2006    2007    2006
                                            ------- ------ ------- -------
    Cost of Product Support                 $   145 $   94 $   401 $   255
    Cost of Services                            222    214     649     560
    Selling, General and Administrative      10,974  6,311  24,201  15,716
    Research and Development                    801    507   2,293   1,430
                                            ------- ------ ------- -------
    Total                                   $12,142 $7,126 $27,544 $17,961
                                            ------- ------ ------- -------
    

    
    The following table shows the classification of the restructuring
     charge:
                                                             Nine months
                                                                 ended
                                                             November 30,
                                                            --------------
                                                             2007     2006
                                                            ------ -------
    Cost of Product Support                                 $ (12) $ 1,351
    Cost of Services                                            -    5,361
    Selling, General and Administrative                      (313)  15,256
    Research and Development                                   13    4,930
                                                            ------ -------
    Total                                                   $(312) $26,898
                                                            ------ -------
    




For further information:

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

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