-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dksd5jX03pRcwA9JMzHPoPSY6TczQaPTlasKEpCZg7lpwRgN08k1KfOiQ7Mb/A/y sqxq5kJ25WUWVklTt81aYw== /in/edgar/work/0001021408-00-003058/0001021408-00-003058.txt : 20001016 0001021408-00-003058.hdr.sgml : 20001016 ACCESSION NUMBER: 0001021408-00-003058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COGNOS INC CENTRAL INDEX KEY: 0000746782 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 980119485 STATE OF INCORPORATION: CA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-72402 FILM NUMBER: 739706 BUSINESS ADDRESS: STREET 1: 3755 RIVERSIDE DR STREET 2: PO BOX 9707 CITY: OTTAWA ONTARIO CAN K BUSINESS PHONE: 6137381440 MAIL ADDRESS: STREET 1: 3755 RIVERSIDE DR STREET 2: POST OFFICE BOX 9707 CITY: ONTARIO 10-Q 1 0001.txt FORM 10-Q - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________________________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended August 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From _________ To ________ Commission File Number 0-16006 COGNOS INCORPORATED (Exact Name Of Registrant As Specified In Its Charter) CANADA 98-0119485 (State Or Other Jurisdiction Of (IRS Employer Identification No.) Incorporation Or Organization) 3755 Riverside Drive, P.O. Box 9707, Station T, Ottawa, Ontario, Canada K1G 4K9 (Address Of Principal Executive Offices) (Zip Code) (613) 738-1440 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _____ ---- The number of shares outstanding of the registrant's only class of Common Stock as of September 30, 2000, was 88,070,202. - -------------------------------------------------------------------------------- COGNOS INCORPORATED INDEX
PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Statements of Income for the three and six months ended August 31, 2000 and August 31, 1999........................ 3 Consolidated Balance Sheets as of August 31, 2000 and February 29, 2000............................................ 4 Consolidated Statements of Cash Flows for the six months ended August 31, 2000 and August 31, 1999........................ 5 Condensed Notes to the Consolidated Financial Statements.......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 10 Item 3. Quantitative and Qualitative Disclosure about Market Risk......... 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings................................................. 21 Item 2. Changes in Securities............................................. 21 Item 4. Submission of Matters to a Vote of Security Holders............... 22 Item 6. Exhibits and Reports on Form 8-K.................................. 22 Signature .................................................................. 23
2 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Consolidated Financial Statements 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, - --------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------- Revenue Product license $ 61,485 $44,487 $118,218 $ 83,358 Product support 35,692 28,247 68,975 55,766 Services 21,036 15,394 39,718 30,649 - --------------------------------------------------------------------------------------------------------- Total revenue 118,213 88,128 226,911 169,773 - --------------------------------------------------------------------------------------------------------- Operating expenses Cost of product license 1,713 1,001 3,442 2,055 Cost of product support 4,071 3,336 8,345 6,431 Selling, general, and administrative 75,931 54,593 148,556 106,401 Research and development 16,507 12,845 32,361 25,042 - --------------------------------------------------------------------------------------------------------- Total operating expenses 98,222 71,775 192,704 139,929 - --------------------------------------------------------------------------------------------------------- Operating income 19,991 16,353 34,207 29,844 Interest expense (156) (201) (310) (333) Interest income 3,097 1,674 5,679 3,405 - --------------------------------------------------------------------------------------------------------- Income before taxes 22,932 17,826 39,576 32,916 Income tax provision 6,421 4,991 11,081 9,216 - --------------------------------------------------------------------------------------------------------- Net income $ 16,511 $12,835 $ 28,495 $ 23,700 ========================================================================================================= Net income per share Basic $0.19 $0.15 $0.33 $0.27 ========================================================================================================= Diluted $0.18 $0.15 $0.31 $0.27 ========================================================================================================= Weighted average number of shares (000s) Basic 87,706 85,970 87,349 86,320 ========================================================================================================= Diluted 92,345 86,808 91,935 87,320 =========================================================================================================
(See accompanying notes) 3 COGNOS INCORPORATED CONSOLIDATED BALANCE SHEETS (US$000s, U.S. GAAP)
August 31, February 29, 2000 2000 - -------------------------------------------------------------------------------------------- Assets (Unaudited) Current assets Cash and cash equivalents $175,536 $132,435 Short-term investments 47,716 64,284 Accounts receivable 107,032 107,823 Inventories 773 806 Prepaid expenses 10,211 7,840 - -------------------------------------------------------------------------------------------- 341,268 313,188 Fixed assets 61,819 44,835 Intangible assets 19,727 21,863 - -------------------------------------------------------------------------------------------- $422,814 $379,886 ============================================================================================ Liabilities Current liabilities Accounts payable $ 22,117 $ 22,908 Accrued charges 21,564 17,540 Salaries, commissions, and related items 21,789 24,024 Income taxes payable 6,189 3,548 Current portion of long-term debt 2,091 2,176 Deferred revenue 74,769 76,537 - -------------------------------------------------------------------------------------------- 148,519 146,733 Long-term liabilities 2,940 2,699 Deferred income taxes 14,941 15,150 - -------------------------------------------------------------------------------------------- 166,400 164,582 - -------------------------------------------------------------------------------------------- Stockholders' Equity Capital stock Common shares (August 31, 2000 - 87,923,232; February 29, 2000 - 86,657,578 ) 122,752 106,936 Retained earnings 141,121 114,601 Accumulated comprehensive items (7,459) (6,233) - -------------------------------------------------------------------------------------------- 256,414 215,304 - -------------------------------------------------------------------------------------------- $422,814 $379,886 ============================================================================================
(See accompanying notes) 4 COGNOS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (US$000s, U.S. GAAP) (Unaudited)
Six months ended August 31, - -------------------------------------------------------------------------------------------------- 2000 1999 - -------------------------------------------------------------------------------------------------- Cash provided by (used in) operating activities Net income $ 28,495 $ 23,700 Non-cash items Depreciation and amortization 11,384 8,980 Deferred income taxes 18 1,640 Loss on disposal of fixed assets 213 56 - -------------------------------------------------------------------------------------------------- 40,110 34,376 Change in non-cash working capital Increase in accounts receivable (1,814) (1,244) Decrease (increase) in inventory 19 (124) Increase in prepaid expenses (2,595) (1,625) Decrease in accounts payable (166) (3,127) Increase (decrease) in accrued charges 4,333 (117) Decrease in salaries, commissions, and related items (1,644) (5,569) Increase (decrease) in income taxes payable 2,689 (3,941) Increase (decrease) in deferred revenue (63) 1,571 - -------------------------------------------------------------------------------------------------- 40,869 20,200 - -------------------------------------------------------------------------------------------------- Cash provided by (used in) investing activities Additions to fixed assets (26,594) (11,848) Maturity of short-term investments 91,820 116,024 Purchase of short-term investments (75,599) (75,965) Acquisition costs (854) (2,562) - -------------------------------------------------------------------------------------------------- (11,227) 25,649 - -------------------------------------------------------------------------------------------------- Cash provided by (used in) financing activities Issue of common shares (net) 15,882 2,301 Repurchase of shares (2,041) (18,488) Repayment of long-term debt 223 (464) Long-term payments 163 90 - -------------------------------------------------------------------------------------------------- 14,227 (16,561) - -------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (768) 687 - -------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 43,101 29,975 Cash and cash equivalents, beginning of period 132,435 93,617 - -------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period 175,536 123,592 Short-term investments, end of period 47,716 16,147 - -------------------------------------------------------------------------------------------------- Cash, cash equivalents, and short-term investments, end of period $223,252 $139,739 ==================================================================================================
(See accompanying notes) 5 COGNOS INCORPORATED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in United States dollars, unless otherwise stated) 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared by the Corporation in United States (U.S.) dollars and in accordance with generally accepted accounting principles (GAAP) in the U.S., applied on a consistent basis. These unaudited condensed notes to the consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Corporation's Annual Report for the fiscal year ended February 29, 2000. The preparation of these unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. In the opinion of Management, these unaudited consolidated financial statements reflect all adjustments (which include only normal, recurring adjustments) necessary to state fairly the results for the periods presented. Actual results could differ from these estimates and the operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. All information is presented in U.S. dollars, unless otherwise stated. 2. Revenue Recognition The Corporation recognizes revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, issued by the American Institute of Certified Public Accountants. Substantially all of the Corporation's product license revenue is earned from licenses of off-the-shelf software requiring no customization. Revenue from these licenses is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable. If a license includes the right to return the product for refund or credit, revenue is recognized net of an allowance for estimated returns provided all the requirements of SOP 97-2 have been met. Revenue from product support contracts is recognized ratably over the life of the contract. Incremental costs directly attributable to the acquisition of product support contracts are deferred and expensed in the period the related revenue is recognized. Revenue from education, consulting, and other services is recognized at the time such services are rendered. For contracts with multiple obligations (e.g. deliverable and undeliverable products, support obligations, education, consulting and other services), the Corporation allocates revenue to 6 COGNOS INCORPORATED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in United States dollars, unless otherwise stated) each element of the contract based on objective evidence, specific to the Corporation, of the fair value of the element. 3. Income Taxes The Corporation provides for income taxes in its quarterly unaudited financial statements based on the estimated effective tax rate for the full fiscal year. 4. Net Income per Share The reconciliation of the numerator and denominator for the calculation of basic and diluted net income per share is as follows: (000s, except per-share amounts)
Three months ended Six months ended August 31, August 31, ----------------------------- ------------------------------- 2000 1999 2000 1999 ------------- ------------ -------------- ------------- Basic Net Income per Share Net income $16,511 $12,835 $28,495 $23,700 ============= ============ ============== ============= Weighted average number of shares outstanding 87,706 85,970 87,349 86,320 ============= ============ ============== ============= Basic net income per share $ 0.19 $ 0.15 $ 0.33 $ 0.27 ============= ============ ============== ============= Diluted Net Income per Share Net income $16,511 $12,835 $28,495 $23,700 ============= ============ ============== ============= Weighted average number of shares outstanding 87,706 85,970 87,349 86,320 Dilutive effect of stock options 4,639 838 4,586 1,000 ------------- ------------ -------------- ------------- Adjusted weighted average number of shares outstanding 92,345 86,808 91,935 87,320 ============= ============ ============== ============= Diluted net income per share $ 0.18 $ 0.15 $ 0.31 $ 0.27 ============= ============ ============== =============
7 COGNOS INCORPORATED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in United States dollars, unless otherwise stated) 5. Comprehensive Income Comprehensive Income includes net income and "other comprehensive income." Other comprehensive income refers to changes in the balances of revenues, expenses, gains and losses that are recorded directly as a separate component of Stockholders' Equity and excluded from net income. For the quarter ended August 31, 2000, the Corporation had other comprehensive income of $578,000 compared to other comprehensive expense of $544,000 for the quarter ended August 31, 1999. These amounts relate to foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency. Total comprehensive income was $17,089,000 and $12,291,000 for the quarters ended August 31, 2000 and 1999, respectively. The Corporation had other comprehensive expense of $1,226,000 for the six months ended August 31, 2000 and other comprehensive income of $576,000 for the six months ended August 31, 1999. Total comprehensive income was $27,269,000 and $24,276,000 for the six months ended August 31, 2000 and 1999, respectively. 6. Segmented Information The Corporation has one reportable segment--computer software products. 7. Acquisition On June 1, 2000, the Corporation acquired Powerteam OY, the Corporation's distributor in Finland. The Corporation currently estimates that the shareholders of Powerteam OY will receive approximately $2.3 million in cash over two years and could also receive, in contingent consideration, an amount not to exceed $0.5 million over the next three years. The acquisition has been accounted for using the purchase method. The results of the acquired company are combined with those of the Corporation from the date of the acquisition. 8. Two-for-one Stock Split On April 6, 2000 the Board of Directors of the Corporation authorized a two- for-one stock split, effected in the form of a stock dividend, payable on or about April 27, 2000, to shareholders of record at the close of business on April 20, 2000. All share and per-share amounts have been adjusted for the split. 8 COGNOS INCORPORATED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts in United States dollars, unless otherwise stated) 9. Subsequent Event On September 21, 2000, the Corporation acquired NoticeCast Software Ltd., based in Twickenham, United Kingdom. NoticeCast's Enterprise Event Management Software monitors business processes and delivers timely business intelligence notifications to business users across the enterprise via e- mail on their personal computer, hand-held or wireless device. The Corporation currently estimates that the shareholders of NoticeCast Software Ltd. will receive approximately $9 million in cash on closing and 148,468 shares of the Corporation's common stock valued at approximately $6 million over two years. The shares are being held in escrow by the Corporation and will be released on the second anniversary of the closing of the transaction. Upon closing, this acquisition is expected to result in a charge against after-tax income of approximately $3 million, or $0.03 per share, as a write-off of in-process research and development under U.S. Generally Accepted Accounting Principles. The acquisition will be accounted for using the purchase method. The results of the acquired company will be combined with those of the Corporation from the date of the acquisition. 10. Accounting Pronouncements In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes standards for derivative instruments and hedging activities. It requires that all derivatives be recognized as either assets or liabilities on the Balance Sheet and be measured at fair value. This Statement is effective for fiscal years beginning after June 15, 2000, which is the fiscal year beginning March 1, 2001 for the Corporation. Prior periods should not be restated. The Corporation has not yet quantified the impact, if any, of this pronouncement on its consolidated financial statements. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, which was amended in March 2000 by SAB 101A, and in June 2000 by SAB 101B. The SAB summarizes certain of the SEC staff views in applying generally accepted accounting principles to revenue recognition in financial statements. This SAB is effective beginning the Corporation's fourth fiscal quarter of fiscal 2001. The Corporation does not expect the adoption of this SAB to have a material impact on its results of operations or financial position. 9 Item 2. COGNOS INCORPORATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in United States dollars, unless otherwise indicated, and in accordance with U.S. GAAP) The following information should be read in conjunction with the unaudited Consolidated Financial Statements and Notes included in Item 1 of this Quarterly Report and can also be read in conjunction with the audited Consolidated Financial Statements and Notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Corporation's Annual Report for the fiscal year ended February 29, 2000 (fiscal 2000). RESULTS OF OPERATIONS - --------------------- Revenue for the quarter ended August 31, 2000 was $118.2 million, a 34% increase from revenue of $88.1 million for the same quarter last year. Pretax income for the quarter ended August 31, 2000 was $22.9 million compared to pretax income of $17.8 million in the same quarter last year. Net income for the current quarter was $16.5 million compared to net income of $12.8 million for the same quarter last year. Diluted net income per share was $0.18 for the current quarter, compared to $0.15 for the same quarter last year. Basic net income per share was $0.19 and $0.15 for quarters ending August 31, 2000 and August 31, 1999, respectively. Revenue for the six months ended August 31, 2000 was $226.9 million, a 34% increase from revenue of $169.8 million for the same period last year. Pretax income for the six months ended August 31, 2000 was $39.6 million compared to pretax income of $32.9 million in the same period last year. Net income for the current six months was $28.5 million compared to net income of $23.7 million for the same period last year. Diluted net income per share was $0.31 for the current six months, compared to $0.27 for the same period last year. Basic net income per share was $0.33 and $0.27 for the six month periods ending August 31, 2000 and August 31, 1999, respectively. Total operating expenses for the quarter ended August 31, 2000 were $98.2 million, a 37% increase from operating expenses of $71.8 million for the same quarter last year. Operating margins for the quarter ended August 31, 2000 were 17%, compared to 19% for the same quarter last year. Total operating expenses for the six months ended August 31, 2000 were $192.7 million, a 38% increase from operating expenses of $139.9 million for the same period last year. Operating margins for the six months ended August 31, 2000 were 15%, compared to 18% for the same period last year. 10 The following table sets out, for the periods indicated, the percentage that each income and expense item bears to revenue, and the percentage change of each item as compared to the indicated prior period.
Percentage of Revenue Percentage Change ------------------------------------------ ------------------------- Three months ended Six months ended Three Six August 31, August 31, months months ------------------ ---------------- ended August 31, 2000 1999 2000 1999 1999 to 2000 ------ ------ ------ ------- ------------------------- Revenue..................... 100.0% 100.0% 100.0% 100.0% 34.1% 33.7% ----- ----- ----- ----- Operating expenses Cost of product license..... 1.5 1.1 1.5 1.2 71.1 67.5 Cost of product support..... 3.4 3.8 3.7 3.8 22.0 29.8 Selling, general, and administrative............. 64.2 61.9 65.4 62.7 39.1 39.6 Research and development.... 14.0 14.6 14.3 14.7 28.5 29.2 ----- ----- ----- ----- Total operating expenses.... 83.1 81.4 84.9 82.4 36.9 37.7 ----- ----- ----- ----- Operating income............ 16.9 18.6 15.1 17.6 22.3 14.6 Interest expense............ (0.1) (0.2) (0.1) (0.2) (22.4) (6.9) Interest income............. 2.6 1.8 2.5 2.0 85.0 66.8 ----- ----- ----- ----- Income before taxes......... 19.4 20.2 17.5 19.4 28.6 20.2 Income tax provision........ 5.4 5.6 4.9 5.4 28.7 20.2 ----- ---- ----- ----- Net income.................. 14.0% 14.6% 12.6% 14.0% 28.6% 20.2% ===== ==== ===== =====
Revenue The Corporation's total revenue was $118.2 million for the quarter ended August 31, 2000, an increase of $30.1 million or 34%, compared to the quarter ended August 31, 1999. The Corporation's total revenue was $226.9 million for the six months ended August 31, 2000, an increase of $57.1 million or 34%, compared to the six months ended August 31, 1999. The Corporation operates internationally, with a substantial portion of its business conducted in foreign currencies. Accordingly, the Corporation's results are affected by year-over-year exchange rate fluctuations of the United States dollar relative to various European currencies, to the Canadian dollar, and to a lesser extent, other foreign currencies. Foreign exchange rate fluctuations reduced the overall revenue increase by five and four percentage points for the quarter and the six months ended August 31, 2000, respectively. The Corporation's growth in total revenue was derived primarily from the increased revenue attributable to the licensing, supporting and servicing of the Corporation's business intelligence products, PowerPlay(R), Impromptu(R), Cognos Query, Cognos Visualizer, DecisionStream(TM), Scenario(TM), Cognos Suite, 4Thought(TM), Cognos Finance, Cognos NovaView(TM), Cognos e-Applications and Cognos Accelerator(TM) for SAP. Total revenue (license, support, and services revenue) derived from these products was $106.8 million in the quarter ended August 31, 2000, an increase of $32.9 million or 44%, and was $202.0 million for the six months ended August 31, 2000 an increase of $62.7 million or 45% when compared to the corresponding periods in the 11 prior fiscal year. Total revenue from these business intelligence products was 90% and 84% of total revenue for the quarters ended August 31, 2000 and August 31, 1999, respectively, whereas these percentages on a year-to-date basis were 89% and 82%, respectively. The Corporation believes that its business intelligence products address the current market need for distributing corporate information to the end user's desktop in an extended enterprise environment of corporate intranets, extranets, and client/server networks. In earlier years the Corporation addressed this opportunity with the release of Web-based products: PowerPlay Web, Impromptu Web Reports and Cognos Query. While the Corporation believes that there is a market opportunity for Web-based decision support solutions, there can be no assurance of the rate or extent of growth of this market, or that the Corporation will be successful in continuing to develop products that will effectively address this market. Total revenue (license, support, and services revenue) from the Corporation's application development tools, PowerHouse and Axiant, was $11.4 million for the quarter ended August 31, 2000, a decrease of $2.8 million or 19% from the corresponding period in the prior fiscal year, and was $24.9 million for the six months ended August 31, 2000, a decrease of $5.5 million or 18% when compared to the corresponding six month period in fiscal 2000. The Corporation believes that, in the long-term, revenues from these products will continue to decline. The growth in total revenue from the three revenue categories in the quarter ended August 31, 2000 from August 31, 1999 was as follows: a 38% increase in product license revenue, a 26% increase in product support revenue, and an 37% increase in services revenue. The growth for the same categories for the six months was as follows: 42%, 24% and 30%, respectively. Product License Revenue - ----------------------- Product license revenue was $61.5 million in the quarter ended August 31, 2000, an increase of $17.0 million or 38%, and was $118.2 million for the six months ended August 31, 2000, an increase of $34.9 million or 42% compared to the corresponding periods in the prior fiscal year. The increase in product license revenue for both periods was predominantly due to the performance of the Corporation's business intelligence products. Product license revenue accounted for 52% of total revenue in the quarter ended August 31, 2000, compared to 50% for the corresponding quarter in the prior fiscal year, and accounted for 52% of total revenue for the six months ended August 31, 2000, compared to 49% for the corresponding period in the prior fiscal year. Product license revenue from the business intelligence products was $58.8 million for the quarter ended August 31, 2000, an increase of $18.2 million or 45%, and was $111.1 million for the six months ended August 31, 2000, an increase of $37.0 million or 50% compared to the corresponding periods in the prior fiscal year. Product license revenue from these business intelligence products accounted for 96% and 91% of total product license revenue for the quarters ended August 31, 2000 and 1999, respectively. On a year-to-date basis, the Corporation derived 94% of product license revenue from these products, compared to 89% in the corresponding period last year. Product license revenue from the application development tools was $2.7 million for the quarter ended August 31, 2000, a decrease of $1.2 million or 32%, and was $7.1 million for the six months ended August 31, 2000, a decrease of $2.2 million or 23% compared to the 12 corresponding periods in the prior fiscal year. Over several of the past fiscal years, the Corporation has been experiencing a decline in product license revenue in this market which is consistent, in the Corporation's view, with the market trend away from proprietary systems and host-based computing toward industry-standard systems, corporate intranets, extranets, client/server technology and packaged applications products. The Corporation expects that, in the long term, the trend of decreasing product license revenue from these products will continue. There can be no assurance that increases in total product license revenue will continue to occur, or occur to the same extent to which they have historically occurred. Product Support Revenue - ----------------------- Product support revenue was $35.7 million in the quarter ended August 31, 2000, an increase of $7.4 million or 26%, and was $69.0 million for the six months ended August 31, 2000, an increase of $13.2 million or 24% compared to the corresponding periods in the prior fiscal year. The increase in the dollar amounts was the result of the expansion of the Corporation's customer base, as well as the renewal of support contracts. The product support revenue associated with the expansion of the Corporation's customer base has exceeded the rate of non-renewals of support contracts. Product support revenue accounted for 30% and 32% of the Corporation's total revenue for each of the quarters ended August 31, 2000, and 1999, respectively and accounted for 30% of total revenue for the six months ended August 31, 2000 and 33% for the corresponding period in the prior fiscal year. Total product support revenue from the business intelligence products comprised 77% and 65% of the total product support revenue for the quarters ended August 31, 2000, and August 31, 1999, respectively and comprised 75% and 64% of the total product support revenue for the six months ended August 31, 2000 and August 31, 1999, respectively. Total support revenue from the business intelligence products increased by 48% in the quarter ended August 31, 2000, and total support revenue from the application development tools decreased by 15%, compared to the corresponding quarter in the prior fiscal year. For the six months ended August 31, 2000, total support revenue from the business intelligence products increased by 46%, whereas total support revenue from the application development tools decreased by 16%, compared to the corresponding period in the prior fiscal year. There can be no assurance that increases in total product support revenue will continue to occur, or occur to the same extent to which they have historically occurred. Services Revenue - ---------------- Services revenue (training, consulting, and other revenue) was $21.0 million in the quarter ended August 31, 2000, an increase of $5.6 million or 37%, and was $39.7 million, an increase of $9.1 million or 30% for the six months ended August 31, 2000 compared to the corresponding periods in the prior fiscal year. Services revenue accounted for 18% of the Corporation's total revenue for both the quarter and six months ended August 31, 2000, compared to 17% and 18% for the quarter and six months ended, respectively, in the prior fiscal year. The increase in the dollar amounts was primarily attributable to an increase in consulting revenue, and, to a lesser extent, 13 education revenue associated with the Corporation's business intelligence products, consistent with the trend in product license revenue for these products. In the quarter ended August 31, 2000, services revenue associated with the business intelligence products contributed $20.6 million, an increase of $5.7 million or 38%, and contributed $39.0 million, an increase of $9.3 million or 31% for the six months ended August 31, 2000 compared to the corresponding periods in the prior fiscal year. This increase was offset by a decline of $0.1 million or 15% and $0.2 million or 21%, respectively, in total services revenue associated with the Corporation's application development tools for the same periods. Services revenue associated with the business intelligence products contributed 98% of the total services revenue for both the quarter and six months ended August 31, 2000 compared to 97% for both the corresponding periods in the prior fiscal year. There can be no assurance that increases in total services revenue will continue to occur, or occur to the same extent to which they have historically occurred. Cost of Product License The cost of product license consists primarily of royalties for technology licensed from third parties, as well as the costs of materials and distribution related to licensed software. The cost of product license revenue was $1.7 million, an increase of $0.7 million or 71% in the quarter ended August 31, 2000, compared to the corresponding period in the prior fiscal year and was $3.4 million, for the six months ended August 31, 2000, a 67% increase from the corresponding period in the prior fiscal year. These costs represented 3% of product license revenue for the three and six months ended August 31, 2000, as compared to 2% for the three and six months ended August 31, 1999. The increases in both the quarter and the six months ended August 31, 2000 were the result of an increase in royalty expense. Cost of Product Support The cost of product support includes the costs associated with resolving customer inquiries and other telesupport activities, royalties in respect of technological support received from third parties, and the cost of materials delivered in connection with enhancement releases. The cost of product support revenue was $4.1 million, an increase of $0.7 million or 22% in the quarter ended August 31, 2000, and was $8.3 million, an increase of $1.9 million or 30% for the six months ended August 31, 2000, compared to the corresponding periods in the prior fiscal year. The increase in the dollar amounts for both periods was primarily due to increases in telesupport costs, and to a lesser extent, release costs. The cost of product support represented 11% and 12% of total product support revenue for the three and six months ended August 31, 2000, respectively, compared to 12% for both the corresponding periods in the prior fiscal year. 14 Selling, General, and Administrative Selling, general, and administrative (SG&A) expenses were $75.9 million, an increase of $21.3 million or 39% in the quarter ended August 31, 2000, and were $148.6 million, an increase of $42.2 million or 40% for the six months ended August 31, 2000, compared to the corresponding periods in the prior fiscal year. These costs increased as a percentage of revenue, representing 64% and 65% for the three and six months ended August 31, 2000, respectively compared to 62% and 63% for the corresponding periods in the prior fiscal year. The increase in these expenses was predominantly because of increased staffing and related compensation expenses. The increase in the average number of employees within SG&A was 31% for both the three and six months ended August 31, 2000, when compared to the corresponding periods in the prior fiscal year. The Corporation has stepped up its investments in its products, distribution and service strength to focus its actions on opportunities for revenue growth. Research and Development Gross research and development (R&D) costs were $16.6 million, an increase of $3.7 million or 28% in the quarter ended August 31, 2000, and were $32.7 million, an increase of $7.3 million or 29% for the six months ended August 31, 2000, compared to the corresponding periods in the prior fiscal year. The increase was predominantly the result of increases associated with higher staffing levels and related compensation expenses, as well as increases in services purchased externally. The increase in the average number of employees within R&D was 13% and 15% for the three and six months ended August 31, 2000, respectively, when compared to the corresponding periods in the prior fiscal year. During the six months ended August 31, 2000 the Corporation continued to invest in R&D activities for its business intelligence solutions, including further development of e-Application packages and continued investment in the existing Cognos enterprise business intelligence platform. During the quarter ended August 31, 2000 the Corporation released DecisionStream 6.5, the data mart creation component of the BI platform which unites data from disparate sources and consolidates it into data marts. In addition to the e-Application packages currently available for Sales Analysis, Inventory Analysis and Financial Analysis the Corporation announced the e-Commerce Analysis application for the IBM WebSphere Commerce Suite during the quarter ended August 31, 2000. During the quarter ended August 31, 2000, the Corporation also announced version 5.0 of Cognos Finance, a solution that delivers integrated budgeting, forecasting, consolidation and financial reporting and analysis in one comprehensive system, and version 1.5 of Cognos Visualizer which has significant enhancements for scorecarding and key performance indicator applications displaying these metrics in a single presentation and supports Web deployment in a UNIX based environment. As indicated in the preceding discussion on Revenue, the Corporation believes that its business intelligence products address the current market need for distributing corporate information to the end user's desktop in an extended enterprise environment of corporate intranets, extranets and client/server networks. Net R&D expenses were $16.5 million, an increase of $3.7 million or 29% in the quarter ended August 31, 2000, and were $32.4 million, an increase of $7.4 million or 29% for the six months 15 ended August 31, 2000, compared to the corresponding periods in the prior fiscal year. The increase was the result of the increased gross R&D expenses as outlined above. Software development costs are expensed as incurred unless they meet generally accepted accounting criteria for deferral and amortization. Software development costs incurred prior to the establishment of technological feasibility do not meet these criteria, and are expensed as incurred. Capitalized costs are amortized over a period not exceeding 36 months. No costs were deferred in either quarter. Costs were not deferred in the period because either no projects met the criteria for deferral or the period between (i) achieving technological feasibility and (ii) the general availability of the product was short, and the associated costs were immaterial. The following table sets out the components of the Corporation's research and development, as well as the percentages of revenue, for the periods indicated.
Three months ended Six months ended August 31, August 31, ------------------- ------------------- 2000 1999 2000 1999 ------- ------- ------- ------- (US$000s) Gross research and development costs........ $16,647 $12,978 $32,653 $25,309 Government allowance........................ (140) (133) (292) (267) Amortization of capitalized R&D............. - - - - ------- ------- ------- ------- Research and development expenses........... $16,507 $12,845 $32,361 $25,042 ======= ======= ======= ======= Percentage of total revenue Gross research and development............. 14% 15% 14% 15% Research and development................... 14% 15% 14% 15%
Interest Income and Expense Net interest income was $2.9 million in the quarter ended August 31, 2000, an increase of $1.5 million or 100% for the quarter, and was $5.4 million, an increase of $2.3 million or 75% for the six months ended August 31, 2000, compared to the corresponding periods in the prior fiscal year. The average portfolio balances were higher in both current fiscal periods and effective interest rates were higher as compared to the corresponding periods in the prior fiscal year. Income Tax Provision The Corporation's tax rate is affected by the relative profitability of its operations in various geographic regions. In the three and six months ended August 31, 2000, the Corporation recorded an income tax provision of $6.4 million and $11.1 million respectively, which represents an effective income tax rate of 28%. This effective rate is consistent with the effective rate used in the three and six months ended August 31, 1999. 16 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- As of August 31, 2000 the Corporation had $223.3 million in cash, cash equivalents, and short-term investments, a increase of $26.5 million from February 29, 2000. In addition, the Corporation has an unsecured credit facility that includes an operating line and foreign exchange conversion facilities. The operating line permits the Corporation to borrow funds or issue letters of credit or guarantee up to Cdn$15.0 (US$10.2) million, subject to certain covenants. As of August 31, 2000, there were no direct borrowings under this operating line. As discussed further below, the Corporation has foreign exchange conversion facilities that allow it to hold foreign exchange contracts of approximately Cdn$130.0 (US$88.3) million outstanding at any one time. As of August 31, 2000, the Corporation had a total of $5.0 million of long-term indebtedness (including the current portion of long-term debt), consisting of a mortgage and other long-term liabilities. As of August 31, 2000, working capital was $192.7 million, an increase of $26.3 million from February 29, 2000, primarily because of increases in cash and prepaid expenses, and decreases in salaries, commissions and related items, and deferred product support revenue, which were partially offset by an decreases in short-term investments and increases in accrued charges and income taxes payable. The change in working capital for the six months ended August 31, 2000 included the use, by the Corporation, of $2.0 million in cash for the repurchase of 50,000 of its common shares of stock during the period. Cash provided by operating activities (after changes in non-cash working capital items) for the six months ended August 31, 2000 was $40.9 million, a $20.7 million increase when compared to the corresponding period in the prior fiscal year. This increase as compared to the prior period was primarily due to the increase in net income, and an decrease in the level of non-cash working capital requirements during the current six month period. Cash used in investing activities was $11.2 million for the six months ended August 31, 2000 compared to $25.6 million provided by investing activities for the corresponding period in the prior fiscal year. During the current six month period, the Corporation received $16.2 million related to the activity in short- term investments (net of maturities) compared to $40.1 million in the corresponding period in the prior fiscal year. There were acquisition costs totaling $0.9 million in the six months ended August 31, 2000 relating to the Corporation's purchase of its distributor in Finland. In the corresponding period in the prior fiscal year, the Corporation spent $2.6 million related to the purchase of the Corporation's distributor in Switzerland and the purchase of the entire outstanding minority interest in the Corporation's subsidiary in Singapore. During fiscal 2000 the Corporation began the construction of a second building on the site of its corporate headquarters in Ottawa. This expansion will accommodate the continued growth of the Corporation and will allow for the consolidation of a number of corporate operations in the Ottawa area. The Corporation has invested approximately $14.9 million in the current year and prior fiscal year and it is anticipated that costs will total $21 million when the construction of this new facility is substantially complete in fiscal 2001. The Corporation issued 1,315,000 common shares, valued at $13.9 million, during the six months ended August 31, 2000 compared to the issuance of 324,000 shares valued at $2.2 million for the same period in the prior fiscal year. The issuance of shares in both periods was pursuant to the Corporation's stock purchase plan and the exercise of stock options by employees, officers, and directors. The Corporation's financing activities for both six month 17 periods also included the repurchase of its own common shares in the open market. During the six months ended August 31, 2000, the Corporation repurchased 50,000 of its own shares at a cost of $2.0 million compared to 1,686,000 shares repurchased at a cost of $18.5 million in the corresponding period in the prior fiscal year. The share repurchases made in the current six month period were part of an open market share repurchase program. The program adopted in October 1999 expired on October 8, 2000. This program enables the Corporation to purchase up to 4,200,000 (not more than 5% of those issued and outstanding) common shares between October 9, 1999 and October 8, 2000. This program does not commit the Corporation to make any share repurchases. Any purchases made, will be made on The Nasdaq Stock Market at prevailing open market prices and paid out of general corporate funds. All repurchased shares will be cancelled. Under this program the Corporation repurchased 50,000 of its shares for $2.0 million in the six months ended August 31, 2000. During the term of the program the Corporation repurchased a total of 150,000 of its shares for $3.4 million; all repurchased shares were cancelled. In October 2000, the Corporation adopted a new program that will enable it to purchase up to 4,403,510 common shares (not more than 5% of those issued and outstanding) between October 9, 2000 and October 8, 2001. Purchases will be made on the Nasdaq Stock Market at prevailing open market prices and paid out of general corporate funds. This program does not commit the Corporation to make any share repurchases. All repurchased shares will be cancelled. The Corporation's policy with respect to foreign currency exposure is to manage its financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. To achieve this objective, the Corporation enters into foreign exchange forward contracts to hedge portions of the net investment in its various subsidiaries. The Corporation enters into these foreign exchange forward contracts with major Canadian chartered banks, and therefore does not anticipate non-performance by these counterparties. The amount of the exposure on account of any non-performance is restricted to the unrealized gains in such contracts. As of August 31, 2000, the Corporation had foreign exchange forward contracts, with maturity dates ranging from September 28, 2000 to December 21, 2000, to exchange various foreign currencies in the amount of $11.1 million. The Corporation anticipates that over the next twelve months its operations will be financed by current cash balances and funds from operations. If the Corporation were to require funds in excess of its current cash position to finance its longer-term operations, the Corporation would expect to obtain such funds from, one or a combination of, the expansion of its existing credit facilities, or from public or private sales of equity or debt securities. EUROPEAN ECONOMIC AND MONETARY UNION - ------------------------------------ The euro currency was introduced on January 1, 1999, and the transition to this new currency has associated with it many potential implications for businesses operating in Europe including, but not limited to, products, information technology, pricing, currency exchange rate risk and derivatives exposure, continuity of material contracts, and potential tax consequences. The new euro currency is to be introduced in stages over the course of a 3 1/2 year transition period. The Corporation believes the transition to the euro will have limited longer-term implications on the Corporation's business. The Corporation has taken steps in the transition to 18 the euro in the area of its internal processes and systems through identifying, modifying, and testing these processes and systems to handle transactions involving the euro in accordance with the regulations. The Corporation's financial application systems represent the most significant internal systems that are affected by the transition to the euro. The Corporation upgraded these systems to a version that enables it, together with certain process changes and modifications provided by the application vendor to its supported customers, to handle the initial requirements for transactions involving the euro. The Corporation continues to identify and, where necessary, modify its systems and processes in order to handle the various stages of the euro implementation. The Corporation is continuing to monitor its pricing in Europe, giving consideration to the transition to the euro. The Corporation believes that the costs relating to the conversion of its internal systems and processes incurred to date, along with any future costs relating to such conversions, will not have a material adverse effect on its business, results of operations, or financial condition. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS - ---------------------------------------------- This Form 10-Q contains forward-looking statements relating to: our expectations concerning future revenues and earnings, including future rates of growth, from the licensing of our business intelligence and application development products and related product support and services; the sufficiency of capital to meet our working capital and capital expenditure requirements; future prospects of our current and future products and our ability to compete in an intensely competitive marketplace. Forward-looking statements are subject to risks and uncertainties that may cause future results to differ materially from those expected. There can be no guarantee that future results will turn out as expected. Factors that may cause such differences include, but are not limited to: our ability to continue to grow at historical growth rates or to anticipate a decline in revenue from any of our products; fluctuations in quarterly and annual operating results based on historical patterns, which may cause our stock price to fluctuate or decline; the rapid technological change and new product introductions and enhancements that characterize the software markets we target; our reliance on partners and other distribution channels to market and distribute our products and any failure of these parties to do so; unauthorized use of our intellectual property; the loss of rights to use software licensed to us by third parties; the actions of our competitors in an intensely competitive marketplace; risks inherent in international operations; our ability to identify, hire, train, motivate and retain highly qualified management and other key personnel; our ability to identify, pursue and complete acquisitions which could divert management attention and financial resources and not produce desired business results; our ability to address issues relating to the transition to the euro; and volatility and fluctuation of our stock price. As a result of these, and other factors, we may experience material fluctuations in future operating results on a quarterly and annual basis, which could materially and adversely affect our business, financial condition, operating results and stock price. We typically realize a larger percentage of our annual revenue and earnings in the fourth quarter of each fiscal year, and lower revenue and earnings in the first quarter of the next fiscal year. A detailed discussion of each of these risk factors is contained under the heading "Certain Factors That May Affect Future Results" in our most recent Annual Report on Form 10-K filed with the United States Securities and Exchange Commission. 19 Item 3. Quantitative and Qualitative Disclosure about Market Risk --------------------------------------------------------- Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. Interest Rate Risk Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. The investment of cash is regulated by our investment policy of which the primary objective is security of principal. Among other selection criteria, the investment policy states that the term to maturity of investments cannot exceed one year in length. We do not use derivative financial instruments in our investment portfolio. Interest income on our cash, cash equivalents, and short-term investments is subject to interest rate fluctuations, but we believe that the impact of these fluctuations does not have a material effect on our financial position due to the short-term nature of these financial instruments. The amount of our long- term debt is immaterial. Our interest income and interest expense are most sensitive to the general level of interest rates in Canada and the United States. Sensitivity analysis is used to measure our interest rate risk. For the quarter and six months ended August 31, 2000, a 100 basis-point adverse change in interest rates would not have had a material effect on our consolidated financial position, earnings, or cash flows. Foreign Currency Risk We operate internationally; accordingly, a substantial portion of our financial instruments are held in currencies other than the United States dollar. Our policy with respect to foreign currency exposure is to manage financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. To achieve this objective, we enter into foreign exchange forward contracts to hedge portions of the net investment in various subsidiaries. The forward contracts are typically between the United States dollar and the British pound, the German mark, and the Australian dollar. Sensitivity analysis is used to measure our foreign currency exchange rate risk. As of August 31, 2000, a 10% adverse change in foreign exchange rates versus the U.S. dollar would not have had a material effect on our reported cash, cash equivalents, and short-term investments. 20 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings ----------------- On May 5, 2000 an action was filed in the United States District Court for the Northern District of California against the Corporation and its subsidiary, Cognos Corporation (collectively "Cognos") by Business Objects S.A. ("Complainant"), for alleged patent infringement. The complaint alleges that the Corporation's Impromptu product infringes the Complainant's United States Patent No. 5,555,403 entitled "Relational Database Access System using Semantically Dynamic Objects". The complaint seeks relief in the form of an injunction against the Corporation and unspecified damages. The Corporation believes the complaint is without merit and intends to vigorously contest it. As this action is at a very preliminary stage, the Corporation cannot estimate the financial impact, if any, at this time. In addition, the Corporation and its subsidiaries may, from time to time be involved in other legal proceedings, claims, and litigation that arise in the ordinary course of business which the Corporation believes would not reasonably be expected to have a material adverse effect on the financial condition of the Corporation. Item 2. Changes in Securities --------------------- c) On September 21, 2000, the Corporation acquired NoticeCast Software Ltd., based in Twickenham, United Kingdom. NoticeCast's Enterprise Event Management Software monitors business processes and delivers timely business intelligence notifications to business users across the enterprise via e-mail on their personal computer, hand-held or wireless device. The Corporation currently estimates that the shareholders of NoticeCast Software Ltd. will receive approximately $9 million in cash on closing and 148,468 shares of the Corporation's common stock valued at approximately $6 million over two years. The shares are being held in escrow by the Corporation and will be released on the second anniversary of the closing of the transaction. The shares were issued in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933. Upon closing, this acquisition is expected to result in a charge against after-tax income of approximately $3 million, or $ 0.03 per share, as a write-off of in-process research and development under U.S. Generally Accepted Accounting Principles. The acquisition will be accounted for using the purchase method. The results of the acquired company will be combined with those of the Corporation from the date of the acquisition. 21 Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Corporation held its Annual Meeting of Shareholders on June 21, 2000. (b) At the meeting, it was resolved that those persons nominated as indicated below be elected as directors of the Corporation and that Ernst & Young LLP be reappointed as the Corporation's Auditors for the fiscal year ended February 28, 2001. The voting results of the meeting are presented in the following table: Voting Results Annual Meeting of Shareholders June 21, 2000
- ----------------------------------------------------------------------------------------------------------------------- BROKER - ----------------------------------------------------------------------------------------------------------------------- FOR WITHHELD NON VOTE TOTAL - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Election of Directors - ----------------------------------------------------------------------------------------------------------------------- John E. Caldwell 60,728,015 21,903 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Douglas C. Cameron 60,724,831 25,087 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Pierre Y. Ducros 60,723,831 26,087 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Douglas J. Erwin 60,722,025 27,893 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Robert W. Korthals 60,722,185 27,733 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Candy M. Obourn 60,725,515 24,403 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- James M. Tory 60,726,231 23,687 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- Renato Zambonini 60,730,799 19,119 - 60,749,918 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Reappointment of Auditors 60,735,749 11,474 60,747,223 - -----------------------------------------------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 27 - Financial Data Schedule 99 - Selected Consolidated Financial Statements in U.S. Dollars and in accordance with Canadian Generally Accepted Accounting Principles (b) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended August 31, 2000. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COGNOS INCORPORATED (Registrant) October 12, 2000 /s/ Donnie M. Moore - ------------------------------ ------------------------------------- Date Donnie M. Moore Senior Vice President, Finance and Administration (Principal Financial Officer and Chief Accounting Officer) 23 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - ----------- ----------- ---- 27 Financial Data Schedule 99 Selected Consolidated Financial Statements in U.S. Dollars and in accordance with Canadian Generally Accepted Accounting Principles 25-27
EX-27 2 0002.txt EXHIBIT 27
5 1,000 3-MOS FEB-28-2001 JUN-01-2000 AUG-31-2000 175,536 47,716 111,993 (4,961) 773 341,268 127,189 (65,370) 422,814 148,519 0 0 0 122,752 133,662 422,814 118,213 118,213 5,784 5,784 92,438 0 (2,941) 22,932 6,421 16,511 0 0 0 16,511 0.19 0.18
EX-99 3 0003.txt EXHIBIT 99 Exhibit 99 CDN GAAP COGNOS INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (US$000s except share amounts, CDN GAAP) (Unaudited)
Three months ended Six months ended August 31, August 31, - ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------- Revenue Product license $ 61,485 $44,487 $118,218 $ 83,358 Product support 35,692 28,247 68,975 55,766 Services 21,036 15,394 39,718 30,649 - ----------------------------------------------------------------------------------------------------------------------------- Total revenue 118,213 88,128 226,911 169,773 - ----------------------------------------------------------------------------------------------------------------------------- Operating expenses Cost of product license 1,713 1,001 3,442 2,055 Cost of product support 4,071 3,336 8,345 6,431 Selling, general, and administrative 77,601 56,263 151,896 109,741 Research and development 16,507 12,845 32,361 25,042 Investment tax credits (1,297) (1,163) (2,635) (2,330) - ----------------------------------------------------------------------------------------------------------------------------- Total operating expenses 98,595 72,282 193,409 140,939 - ----------------------------------------------------------------------------------------------------------------------------- Operating income 19,618 15,846 33,502 28,834 Interest expense (156) (201) (310) (333) Interest income 3,097 1,674 5,679 3,405 - ----------------------------------------------------------------------------------------------------------------------------- Income before taxes 22,559 17,319 38,871 31,906 Income tax provision 7,116 5,551 12,513 10,342 - ----------------------------------------------------------------------------------------------------------------------------- Net income $ 15,443 $11,768 $ 26,358 $ 21,564 ============================================================================================================================= Net income per share Basic $ 0.18 $ 0.14 $ 0.30 $ 0.25 ============================================================================================================================= Fully diluted $ 0.17 $ 0.14 $ 0.30 $ 0.25 ============================================================================================================================= Weighted average number of shares (000s) Basic 87,706 85,970 87,349 86,320 ============================================================================================================================= Fully diluted 93,235 91,888 90,960 90,922 =============================================================================================================================
1 Exhibit 99 CDN GAAP COGNOS INCORPORATED CONSOLIDATED BALANCE SHEETS (US$000s, CDN GAAP)
August 31, February 29, 2000 2000 - ------------------------------------------------------------------------------------------------------------- Assets (Unaudited) Current assets Cash and cash equivalents $175,536 $132,435 Short-term investments 47,716 64,284 Accounts receivable 107,032 107,823 Inventories 773 806 Prepaid expenses 10,211 7,840 - ------------------------------------------------------------------------------------------------------------- 341,268 313,188 Fixed assets 61,819 44,835 Intangible assets 34,683 40,158 - ------------------------------------------------------------------------------------------------------------- $437,770 $398,181 ============================================================================================================= Liabilities Current liabilities Accounts payable $ 22,117 $ 22,908 Accrued charges 21,564 17,540 Salaries, commissions, and related items 21,789 24,024 Income taxes payable 6,189 3,548 Current portion of long-term debt 2,091 2,176 Deferred revenue 74,769 76,537 - ------------------------------------------------------------------------------------------------------------- 148,519 146,733 Long-term liabilities 2,940 2,699 Deferred income taxes 20,319 21,730 - ------------------------------------------------------------------------------------------------------------- 171,778 171,162 - ------------------------------------------------------------------------------------------------------------- Stockholders' Equity Capital stock Common shares (August 31, 2000 - 87,923,232; February 29, 2000 - 86,657,578) 122,752 106,936 Retained earnings 150,699 126,316 Accumulated comprehensive items (7,459) (6,233) - ------------------------------------------------------------------------------------------------------------- 265,992 227,019 - ------------------------------------------------------------------------------------------------------------- $437,770 $398,181 =============================================================================================================
2 Exhibit 99 CDN GAAP COGNOS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (US$000s, CDN GAAP) (Unaudited)
Six months ended August 31, - --------------------------------------------------------------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------------------------------------------------------------- Cash provided by (used in) operating activities Net income $ 26,358 $ 21,564 Non-cash items Depreciation and amortization 14,725 12,322 Deferred income taxes (1,186) 435 Loss on disposal of fixed assets 213 55 - --------------------------------------------------------------------------------------------------------------------- 40,110 34,376 Change in non-cash working capital Increase in accounts receivable (1,814) (1,244) Decrease (increase) in inventory 19 (124) Increase in prepaid expenses (2,595) (1,625) Decrease in accounts payable (166) (3,127) Increase (decrease) in accrued charges 4,333 (117) Decrease in salaries, commissions, and related items (1,644) (5,569) Increase (decrease) in income taxes payable 2,689 (3,941) Increase (decrease) in deferred revenue (63) 1,571 - --------------------------------------------------------------------------------------------------------------------- 40,869 20,200 - --------------------------------------------------------------------------------------------------------------------- Cash provided by (used in) investing activities Additions to fixed assets (26,594) (11,848) Maturity of short-term investments 91,820 116,024 Purchase of short-term investments (75,599) (75,965) Acquisition costs (854) (2,562) - --------------------------------------------------------------------------------------------------------------------- (11,227) 25,649 - --------------------------------------------------------------------------------------------------------------------- Cash provided by (used in) financing activities Issue of common shares (net) 15,882 2,301 Repurchase of shares (2,041) (18,488) Repayment of long-term debt 223 (464) Long-term payments 163 90 - --------------------------------------------------------------------------------------------------------------------- 14,227 (16,561) - --------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (768) 687 - --------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 43,101 29,975 Cash and cash equivalents, beginning of period 132,435 93,617 Cash and cash equivalents, end of period 175,536 123,592 Short-term investments, end of period 47,716 16,147 - --------------------------------------------------------------------------------------------------------------------- Cash, cash equivalents, and short-term investments, end of period $223,252 $139,739 =====================================================================================================================
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