- Second quarter revenue and earnings exceed company's preliminary
estimates - OTTAWA, and BURLINGTON, Mass., Sept. 21
/PRNewswire-FirstCall/ -- 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 second quarter of fiscal year
2007, ended August 31, 2006. Revenue for the second quarter was
$229.9 million, compared with $212.0 million for the same period
last fiscal year. License revenue was $78.0 million, compared with
$78.6 million in the second quarter of last fiscal year. Net income
on a U.S. GAAP basis in the quarter was $23.8 million or $0.26 per
diluted share, compared with $24.9 million or $0.27 per diluted
share for the same period last fiscal year. Net income on a
non-GAAP basis (excluding amortization of acquisition-related
intangible assets and stock-based compensation expense) for the
quarter was $30.0 million or $0.33 per diluted share, compared with
$29.9 million or $0.32 per diluted share for the same period last
fiscal year. Revenue for the first six months of fiscal year 2007,
ended August 31, 2006, was $446.9 million, compared with $412.1
million for the same period last fiscal year. Net income on a U.S.
GAAP basis in the first six months was $38.3 million or $0.42 per
diluted share, compared with $45.3 million or $0.48 per diluted
share for the same period last fiscal year. Net income on a
non-GAAP basis (excluding amortization of acquisition-related
intangible assets and stock-based compensation expense) for the
first six months of this fiscal year was $49.8 million or $0.55 per
share, compared with $54.9 million or $0.59 per diluted share for
the same period last fiscal year. Second quarter non-GAAP results
differ from results measured under U.S. GAAP as they exclude $1.7
million and $5.7 million of amortization of acquisition-related
intangible assets and stock-based compensation expense, before
taxes, respectively. This is an increase of $0.07 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 $3.4 million and $10.8 million of amortization of
acquisition-related intangible assets and stock-based compensation
expense, before taxes, respectively. This is an increase of $0.13
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. "I am pleased with these results," said
Cognos president and chief executive officer, Rob Ashe. "Our
solutions are strong. We have increased our sales capacity and
taken action to streamline our organization. I believe we are very
well positioned for the second half of the year and beyond." Recent
Highlights: * 10 contracts greater than $1 million in the second
quarter, reflecting continued strong large deal performance * 366
sales representatives at the end of the second quarter, an increase
of 23 from the end of the first quarter * Strong balance sheet
performance -- Second quarter operating cash flow of $16.1 million;
Days sales outstanding (DSOs) for accounts receivable were 57 days;
$618.1 million in cash, cash equivalents, and short-term
investments as of the end of the quarter * Announced operating
margin improvement plan on September 7, 2006 that will generate
annualized pre-tax savings of approximately $28 million Mr. Ashe
continued, "Our priorities for the second half of the year are to
deliver improved revenue performance, margins and customer success
as a result of the action we took on September 7." Business Outlook
The company's outlook for the third quarter and full fiscal year
2007 assumes no significant changes in the economy, a U.S. GAAP tax
rate of 24% and a Canadian dollar of $0.89 U.S. and a Euro of $1.27
U.S. for the year. It also includes third quarter restructuring
charges of approximately $28 million, before taxes, associated with
the company's operating margin improvement plan announced September
7, 2006. Management offers the following outlook for the third
quarter of fiscal year 2007 ending November 30, 2006: * Revenue is
expected to be in the range of $237 million to $245 million * U.S.
GAAP diluted earnings per share are expected to be in the range of
$0.10 to $0.14 * Non-GAAP diluted earnings per share are expected
to be in the range of $0.40 to $0.44 Expected non-GAAP diluted
earnings per share for the quarter ending November 30, 2006 exclude
approximately $1.7 million of amortization of acquisition-related
intangible assets, approximately $5.9 million of stock-based
compensation expense, and approximately $28.0 million of
restructuring charges related to the company's operating margin
improvement plan announced September 7, 2006, before taxes. This is
an increase of approximately $0.30 per share, in the aggregate,
after the effect of taxes. Management offers the following outlook
for the full fiscal year 2007 ending February 28, 2007: * Revenue
is expected to be in the range of $950 million to $970 million *
U.S. GAAP diluted earnings per share are expected to be in the
range of $1.08 to $1.15 * Non-GAAP diluted earnings per share are
expected to be in the range of $1.58 to $1.65 Expected non-GAAP
diluted earnings per share for fiscal year 2007 ending February 28,
2007, exclude approximately $6.8 million of amortization of
acquisition-related intangible assets, approximately $23.3 million
of stock-based compensation expense, and approximately $28.0
million of restructuring charges related to the company's operating
margin improvement plan announced September 7, 2006, before taxes.
This is an increase of approximately $0.50 per share, in the
aggregate, after the effect of taxes. Cognos management will host a
conference call to present results for the second quarter of fiscal
year 2007 and business outlook at 5:15 p.m. Eastern Time, today,
September 21, 2006. Listeners can access the conference call at
416-640-1907 or via Webcast at
http://www.cognos.com/company/investor/events/fy07q2. 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/fy07q2 following the
conference call. A replay of the conference call will be available
from September 21 at 8:15 p.m. Eastern Time until October 5 at
11:59 p.m. Eastern Time. The replay can be accessed at
416-640-1917. The passcode for the replay is 21201976#. 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 2007 and the full fiscal year 2007; 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, and third quarter restructuring
charges; the amount and impact of amortization of
acquisition-related intangible assets, stock-based compensation and
restructuring charges related to our margin improvement plan; the
company's position and priorities for the second half of its fiscal
year and beyond; the future modification of Non-GAAP Measures, as
defined in "Discussion of Non-GAAP Financial Measures"; the
exclusion of restructuring charges as part of Non-GAAP Measures in
our fiscal third quarter ending November 30, 2006 and fiscal year
ending February 28, 2007; 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:
the impact on Cognos' business of the delay in filing its annual
and quarterly reports; Cognos' transition to Cognos 8 and customer
acceptance and implementation of Cognos 8; 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; 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
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 impact of the implementation of
SFAS No. 123R; the company's ability to predict the impact of its
margin improvement plan on expenses, employee retention and other
matters; 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 compete in an intensely competitive
market; new product introductions and enhancements by competitors;
the company's ability to select and implement appropriate business
models, plans and strategies and to execute on them; fluctuations
in the company's quarterly and annual operating results;
fluctuations in the company's tax exposure; the impact of natural
disasters on the overall economic condition of North America;
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 company's ability to identify, pursue, and
complete acquisitions with desired business results; the existence
of regulatory barriers to integration; the impact of the
implementation of changes in the application of accounting
pronouncements and interpretations; 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 statement 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. 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 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 excluding these expenses and
gains. For example, the charges related to the restructuring plan
announced September 7, 2006 will be excluded as part of Non-GAAP
Measures for our fiscal third quarter ending November 30, 2006 and
fiscal year ending February 28, 2007. This has also been excluded
in our Non-GAAP guidance issued as part of this release. 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. Non-cash stock-based compensation and
amortization of acquisition-related intangible assets are excluded
from the Company's 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 the long term benefit
of the Company over multiple periods. While strategic decisions,
such as the decisions to issue stock-based compensation or to
acquire a company, are made to further the Company's 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 either item 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 Financial Accounting Standards Board Statement 123
Revised "Share-based Payment" ("FAS 123R") on March 1, 2006, the
beginning of the Company's 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 current fiscal year, 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 the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 2006 ("2006 Form 10-K"), the Company's compensation
strategy is to use stock-based compensation "as a key tool for
ensuring that key employees and executives are engaged and
motivated to remain at the Company for the long term." It is aimed
at long term employee retention, rather than to motivate or reward
operational performance for any particular period. Thus,
stock-based compensation expense varies for reasons that are
generally unrelated to operational performance in any particular
period. As further discussed in the 2006 Form 10-K, the Company
uses annual cash bonus payouts for executives and other employees
to motivate and reward annual operational performance in the areas
of revenue and operating margin achievement. Since the beginning of
fiscal year 2007, operating margin achievement has been measured on
a non-GAAP basis, excluding stock-based compensation and
amortization of acquisition-related intangible assets 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 restructuring
plan reflects a fundamental realignment of our business, including
significant personnel reductions within higher levels of
management. The restructuring charges are excluded in our Non-GAAP
measures because they are significantly different in magnitude and
character from routine personnel adjustments that management makes
when monitoring and conducting the Company's core operations. The
restructuring decision and related expenses are not related to
operating performance for any particular period, and are not
controllable by our operating managers in any particular period.
Instead, the restructuring is intended to align our business model
and expense structure to our position in the market we are
experiencing, and expect to experience, over the long term.
Management also uses these Non-GAAP Measures to operate the
business because the excluded expenses are not under the control
of, and accordingly are 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 restructuring plan, these charges arise from acquisitions and
reorganizations which 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 the Company's
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 expenses 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 the Company's 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 the Company's 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: *
These 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 the Company's 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. * Although
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. * The restructuring charges primarily
represent severance charges associated with our "operating margin
improvement plan" announced September 7, 2006. These charges are a
significant expense from a GAAP perspective and the costs
associated with the restructuring would be operational in nature
absent the restructuring 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
the Company's GAAP results. The Non-GAAP Measures should not be
construed as an inference that the excluded items are unusual,
infrequent or non-recurring. As a result of these limitations,
management recognizes that the Non-GAAP Measures should not be
considered in isolation or as an alternative to the Company's
results as reported under GAAP. Management compensates for theses
limitations by relying on the Non-GAAP Measures only as a
supplement to the Company's 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. SUPPLEMENTARY INFORMATION (unaudited): FY 2006 FY 2007
Q2 Q3 Q4 Q1 Q2 Total License Revenue ($000s) 78,649 75,510 117,942
73,735 78,005 Year-Over-Year License Revenue Growth 4% (18)% (9)% 4
% (1)% Geographic Distribution: Total Revenue ($000s) Americas
122,593 122,171 147,560 129,913 137,155 Europe 67,596 72,972 87,474
72,225 72,311 Asia/Pacific 21,853 17,111 18,095 14,902 20,424 % of
Total Americas 58% 58 % 58 % 60 % 60 % Europe 32% 34 % 35 % 33 % 31
% Asia/Pacific 10% 8 % 7 % 7 % 9 % Year-Over-Year Revenue Growth -
Total Americas 11% 1 % 5 % 12 % 12 % Europe 17% 5 % (7)% 9 % 7 %
Asia/Pacific 28% (12)% (14)% (18)% (7)% Pro Forma Year- Over-Year
Revenue Growth - In Local Currency Americas 10% 0 % 3 % 11 % 11 %
Europe 17% 14 % 4 % 11 % 2 % Asia/Pacific 22% (10)% (9)% (15)% (7)%
Orders (License, Support, Services) > $ 1M 9 7 18 13 10 >
$200K 124 115 242 118 120 > $ 50K 754 737 1,241 728 819 Average
Selling Price (License Orders Only) ($000s) > $ 50K 172 157 192
186 181 New vs Existing License Revenue - % of Total New 31% 29%
27% 29% 31% Existing 69% 71% 73% 71% 69% Channel - License Revenue
- % of Total Direct 74% 72% 77% 70% 72% Third Party 26% 28% 23% 30%
28% Other Statistics Cash, cash equivalents, and short-term
investments ($000s) 501,252 483,259 551,002 610,184 618,084 Days
sales outstanding 60 66 77 58 57 Total employees 3,453 3,566 3,574
3,622 3,662 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, 2006 2005 2006 2005
Revenue Product license $ 78,005 $ 78,649 $151,740 $149,795 Product
support 103,262 92,062 203,443 180,567 Services 48,623 41,331
91,747 81,755 Total revenue 229,890 212,042 446,930 412,117 Cost of
revenue Cost of product license 1,445 1,409 3,202 2,631 Cost of
product support 11,384 8,914 22,611 17,910 Cost of services 39,805
32,705 77,321 65,002 Total cost of revenue 52,634 43,028 103,134
85,543 Gross margin 177,256 169,014 343,796 326,574 Operating
expenses Selling, general, and administrative 117,981 109,327
235,573 215,042 Research and development 33,869 29,520 67,148
59,285 Amortization of acquisition-related intangible assets 1,702
1,637 3,403 3,274 Total operating expenses 153,552 140,484 306,124
277,601 Operating income 23,704 28,530 37,672 48,973 Interest and
other income, net 6,216 3,051 11,227 5,831 Income before taxes
29,920 31,581 48,899 54,804 Income tax provision 6,160 6,681 10,601
9,532 Net income $ 23,760 $ 24,900 $ 38,298 $ 45,272 Net income per
share Basic $0.26 $0.27 $0.43 $0.50 Diluted $0.26 $0.27 $0.42 $0.48
Weighted average number of shares (000s) Basic 89,718 90,740 89,805
90,909 Diluted 90,221 92,806 90,523 93,350 COGNOS INCORPORATED
CONSOLIDATED BALANCE SHEETS (US$000s, U.S. GAAP) (Unaudited) August
31, February 28, 2006 2006 Assets Current assets Cash and cash
equivalents $ 417,499 $ 398,634 Short-term investments 200,585
152,368 Accounts receivable 144,598 216,850 Income taxes receivable
7,162 1,363 Prepaid expenses and other current assets 25,604 31,978
Deferred tax assets 11,828 12,936 807,276 814,129 Fixed assets, net
77,963 75,821 Intangible assets, net 18,928 22,125 Other assets
6,356 6,096 Deferred tax assets 6,780 6,928 Goodwill 225,709
225,709 $1,143,012 $1,150,808 Liabilities Current liabilities
Accounts payable $ 24,603 $ 33,975 Accrued charges 33,112 30,799
Salaries, commissions, and related items 66,827 73,229 Income taxes
payable 7,173 6,009 Deferred income taxes 5,908 4,118 Deferred
revenue 212,473 246,562 350,096 394,692 Deferred income taxes
32,676 30,344 382,772 425,036 Stockholders' Equity Capital stock
Common shares and additional paid-in capital (August 31, 2006 -
89,729,851; February 28, 2006 - 89,826,706) 460,536 439,680
Treasury shares (August 31, 2006 - 124,854; February 28, 2006 -
55,970) (3,705) (1,563) Retained earnings 298,463 283,168
Accumulated other comprehensive income 4,946 4,487 760,240 725,772
$1,143,012 $1,150,808 COGNOS INCORPORATED CONSOLIDATED STATEMENTS
OF CASH FLOWS (US$000s, U.S. GAAP) (Unaudited) Three months ended
Six months ended August 31, August 31, 2006 2005 2006 2005 Cash
flows from operating activities Net income $ 23,760 $ 24,900 $
38,298 $ 45,272 Non-cash items Depreciation and amortization 7,360
7,240 14,600 14,405 Amortization of deferred stock-based
compensation 4,586 4,558 9,743 8,640 Deferred income taxes (413)
1,735 4,768 (2,092) Loss on disposal of fixed assets 377 186 516
273 35,670 38,619 67,925 66,498 Change in non-cash working capital
Decrease (increase) in accounts receivable (4,865) (1,871) 76,275
44,964 Increase in income tax receivable (1,485) (4,307) (5,792)
(6,309) Decrease (increase) in prepaid expenses and other current
assets 522 (586) 7,413 837 Decrease in accounts payable (2,969)
(981) (9,996) (9,024) Increase (decrease) in accrued charges (352)
2,629 1,258 (5,374) Increase (decrease) in salaries, commissions,
and related items 6,230 5,615 (8,595) (30,518) Increase (decrease)
in income taxes payable 4,206 2,959 851 (12,982) Decrease in
deferred revenue (20,836) (12,821) (40,568) (23,646) Net cash
provided by operating activities 16,121 29,256 88,771 24,446 Cash
flows from investing activities Maturity of short-term investments
264,354 118,610 376,969 246,535 Purchase of short-term investments
(191,486) (96,140) (424,122) (198,123) Additions to fixed assets
(4,544) (6,161) (10,915) (10,917) Additions to intangible assets
(370) (196) (696) (441) Increase in other assets (488) (365) (219)
(120) Acquisition costs, net of cash and cash equivalents - - - 131
Net cash provided by (used in) investing activities 67,466 15,748
(58,983) 37,065 Cash flows from financing activities Issue of
common shares 576 5,802 13,511 17,586 Purchase of treasury shares
(2,545) (177) (2,545) (177) Repurchase of shares - (23,694)
(24,998) (48,948) Net cash used in financing activities (1,969)
(18,069) (14,032) (31,539) Effect of exchange rate changes on cash
(1,297) 751 3,109 (3,208) Net increase in cash and cash equivalents
80,321 27,686 18,865 26,764 Cash and cash equivalents, beginning of
period 337,178 377,426 398,634 378,348 Cash and cash equivalents,
end of period 417,499 405,112 417,499 405,112 Short-term
investments, end of period 200,585 96,140 200,585 96,140 Cash, cash
equivalents, and short-term investments, end of period $618,084
$501,252 $618,084 $501,252 COGNOS INCORPORATED RECONCILIATION OF
U.S. GAAP to Non-GAAP (US$000s except share amounts) (Unaudited)
Three months ended Six months ended August 31, August 31, 2006 2005
2006 2005 Operating Income GAAP Operating Income $23,704 $28,530
$37,672 $48,973 Plus: Amortization of acquisition-related
intangible assets 1,702 1,637 3,403 3,274 Stock-based compensation
expense 5,757 4,558 10,835 8,640 Non-GAAP Operating Income $31,163
$34,725 $51,910 $60,887 Operating Margin Percentage GAAP Operating
Margin Percentage 10.3% 13.5% 8.4% 11.9% Plus: Amortization of
acquisition-related intangible assets 0.8 0.8 0.8 0.8 Stock-based
compensation expense 2.5 2.1 2.4 2.1 Non-GAAP Operating Margin
Percentage 13.6% 16.4% 11.6% 14.8% Net Income GAAP Net Income
$23,760 $24,900 $38,298 $45,272 Plus: Amortization of
acquisition-related intangible assets 1,702 1,637 3,403 3,274
Stock-based compensation expense 5,757 4,558 10,835 8,640 Less:
Income tax effect of amortization of acquisition-related intangible
assets (646) (624) (1,271) (1,249) Income tax effect of stock-based
compensation expense (528) (572) (1,459) (1,033) Non-GAAP Net
Income $30,045 $29,899 $49,806 $54,904 Net Income per diluted share
GAAP Net Income per diluted share $0.26 $0.27 $0.42 $0.48 Plus:
Amortization of acquisition-related intangible assets 0.02 0.02
0.04 0.04 Stock-based compensation expense 0.06 0.05 0.12 0.09
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) (0.02) (0.01) Non-GAAP
Net Income per diluted share $0.33 $0.32 $0.55 $0.59 Shares used in
computing diluted net income per share 90,221 92,806 90,523 93,350
The following table shows the classification of stock-based
compensation expense: Three months ended Six months ended August
31, August 31, 2006 2005 2006 2005 ($000) Cost of Product Support $
65 $ 117 $ 161 $ 231 Cost of Services 159 194 346 401 Selling,
General and Administrative 5,100 3,253 9,404 6,123 Research and
Development 433 994 924 1,885 Total $5,757 $4,558 $10,835 $8,640
COGNOS INCORPORATED Reconciliation of US GAAP to Non-GAAP Diluted
Earnings per Share for Business Outlook (Unaudited) Three Months
Twelve Months ending ending November 30, February 28, 2006 2007
Projected US GAAP Diluted Earnings per Share $0.10 - $0.14
$1.08-$1.15 Plus: Amortization of acquisition-related intangible
assets 0.02 0.08 Stock-based compensation expense 0.06 0.25
Restructuring Charge 0.31 0.31 Less: Income tax effect of non-GAAP
adjustments (0.09) (0.14) Projected non-GAAP Diluted Earnings per
Share $0.40 - $0.44 $1.58 - $1.65 Media Contact: Sean Reid Cognos,
613-738-1440 Investor Relations: John Lawlor 613-738-3503
DATASOURCE: Cognos CONTACT: Media Contact: Sean Reid, 613-738-1440,
, or Investor Relations: John Lawlor, +1-613-738-3503, , both of
Cognos Web site: http://www.cognos.com/
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