SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2001.
CGI Group Inc.
(Translation of Registrant's Name Into English)
1130 Sherbrooke Street West
5th Floor
Montreal, Quebec
Canada H3A 2M8
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F Form 40-F |X|
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No |X|
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-___.
Enclosure: Fourth quarter report of fiscal 2001 - November 6, 2001
This Form 6-K shall be deemed incorporated by reference in the Registrant's
Registration Statement on Form S-8, Reg. No. 333-9106, 333-13350 and 333-66044.
FOR IMMEDIATE RELEASE
CGI reports continuing strong revenue and earnings growth
in fourth quarter of fiscal 2001
Montreal, November 6, 2001 - CGI Group Inc. (NYSE: GIB; TSE: GIB.A), a leading
provider of end-to-end information technology services and business solutions,
today reported unaudited results for the fourth quarter and audited results for
the year ended September 30, 2001. All figures are in Canadian dollars unless
otherwise indicated.
Fourth Quarter Highlights
o Revenue of $469.0 million represented 46.5% growth over the comparable
period one year ago and 16.1% quarterly sequential growth. Organic
growth was 13.8% year-over-year
o Cash net earnings per share (earnings before amortization of goodwill)
were $0.08, 166% higher than the $0.03 posted for the same period a
year ago
o Operating cash flow was up 43.5% to $75.6 million
o Announced several major or strategic outsourcing, systems integration
and consulting contracts, as well as contract renewals, totalling more
than $900 million for periods of up to 10 years
o Backlog of signed contracts increased to $9.3 billion, or 5.9 times
FY2001 annual revenue, from $8.5 billion as at June 30, 2001 and $7.0
billion at the same time last year. Contracts in the backlog have a
weighted average remaining contract term of 7.3 years
In millions of $ 3 months ended | 3 months ended
except per share |
amount 9/30/01 9/30/01 | 9/30/00 6/30/01
US$ CDN$ | CDN$ CDN$
-------------------------------------------------------|------------------------
|
Revenue $ 303.9 $ 469.0 | $ 320.1 $ 404.1
-------------------------------------------------------|------------------------
EBITDA $ 47.5 $ 72.6 | $ 24.8 $ 61.1
-------------------------------------------------------|------------------------
Cash net earnings $ 17.6 $ 27.3 | $ 7.1 $ 24.3
-------------------------------------------------------|------------------------
Per share $ 0.05 $ 0.08 | $ 0.03 $ 0.08
-------------------------------------------------------|------------------------
Order backlog $ 6,000 $ 9,300 | $ 7,000 $ 8,500
=======================================================|========================
Note: US dollar information in this chart is provided for comparison purposes
only and represents amounts accounted for according to Canadian GAAP. The
average exchange rate of 1.54 was used for the three-month period ended
September 30, 2001.
"This was a great quarter for CGI in many ways," said Serge Godin, chairman and
CEO. In addition to double-digit year over year and sequential revenue growth,
we achieved a number of other business and financial objectives. The growth we
realized in IT outsourcing, represented by some key contract and partnership
wins in the quarter, and a backlog of $9.3 billion, further increase our revenue
visibility. Moreover, our sales pipeline has never been stronger, filled with
numerous opportunities in Canada and, more importantly, in the US."
CGI Reports 4Q & FY01 Results
November 6, 2001
Page 2
Fourth Quarter Results
Revenue for the fourth quarter ended September 30, 2001 increased 47% to $469.0
million, from $320.1 million in the same quarter last year, and was up 16.1%
sequentially over third quarter revenue of $404.1 million. The significant
improvement in year-over-year revenue growth was due primarily to business
acquisitions as well as continuing strong demand for outsourcing services,
across all geographic areas, but especially in Canada.
Based on CGI's current revenue run-rate, revenue from long-term outsourcing
contracts represents 69% of the Company's total revenue, including 10% from
business process services outsourcing; while project oriented consulting and
systems integration work represents 31%. Geographically, contribution to revenue
from Canada was higher in the fourth quarter, representing 73% of revenue,
driven in part by several recent large outsourcing contract wins. Revenue from
the US represented 19%; and all other regions, 8%. CGI continued to solidify its
leading position as an IT services provider in the financial services sector,
which represented 41% of revenue in the fourth quarter, while telecom
represented 29%; manufacturing, retail and distribution, 17%; government, 10%;
utilities and services, 2%; and healthcare, 1%.
EBITDA for the fourth quarter increased 192.7% to $72.6 million, compared with
$24.8 million in the same quarter a year ago, and was up 18.8% sequentially,
from $61.1 million reported in the third quarter of fiscal 2001. The EBITDA
margin improved to 15.5% at the end of the fourth quarter, compared with 15.1%
at the end of the third quarter of fiscal 2001 and 12.0% at the end of fiscal
2000.
Cash net earnings in the quarter increased 284% to $27.3 million, compared with
$7.1 million in the same quarter a year ago, and were 12.2% higher sequentially
compared with $24.3 million reported in the third quarter of fiscal 2001. Cash
net earnings per share of $0.08 for the quarter were up 167% over $0.03 reported
for the fourth quarter of fiscal 2000. Cash net earnings per share on a diluted
basis were unchanged from the third quarter of fiscal 2001, after accounting for
a 18.5% increase in weighted shares outstanding in the fourth quarter.
Net earnings in the fourth quarter of fiscal 2001 were $19.8 million, up 719%
over the same period in the prior year, and up 14.3% sequentially over the $17.3
million reported in this year's third fiscal quarter. The net margin was 4.2%,
compared with 4.3% in the third quarter and 0.8% in the fourth quarter of fiscal
2000.
CGI maintains a strong balance sheet and cash position, which together with bank
lines are sufficient to support the Company's growth strategy and represent a
competitive strength when proposing on outsourcing contracts. At September 30,
2001, the total credit facility available amounted to approximately $225
million. As of September 30, 2001, CGI had cash and cash equivalents of $46.0
million, compared with $49.3 million as of September 30, 2000.
Operating cash flow in the fourth quarter amounted to $75.6 million, compared
with $20.6 million in the fourth quarter a year ago and $52.7 million in the
third quarter of fiscal 2001. The improvement in operating cash flow reflects
mostly the improvement in net earnings and future income taxes.
The integration of IMRglobal is proceeding as expected. CGI's increased
presence, especially in the US, has strengthened its capability to propose on
large outsourcing contracts and gain market share. The recently integrated
marketing and business development teams have
CGI Reports 4Q & FY01 Results
November 6, 2001
Page 3
ramped up sales development efforts, capitalizing on long-standing client
relationships and the expanded service and delivery capabilities.
Fiscal Year 2001 Audited Results
Revenue for the year ended September 30, 2001 was $1.58 billion, up 10.1% from
revenue of $1.43 billion for the 2000 fiscal year. Revenue growth accelerated
during the year, driven primarily by business acquisitions, as well as several
large outsourcing contract wins.
Cash net earnings per share were $0.30, up 11.1% over fiscal year 2000 results
of $0.27.
At September 30, 2001 CGI employed approximately 13,000 people in more than 20
countries around the world. Through ten acquisitions, investments in four joint
venture companies and several large new outsourcing contracts, CGI successfully
integrated more than 5,000 members in fiscal year 2001.
Regarding CGI's annual results Mr. Godin commented, "We are pleased with the
increasing momentum of our business during fiscal year 2001. Over the last year,
CGI has closed over $4 billion in new contract wins and renewals. Year-over-year
revenue growth in our third and fourth quarters of 22.2% and 46.5% respectively
signals our return to strong growth trends. Organic growth, year-over-year, of
3.6% in the third quarter and 13.8% in the fourth quarter also demonstrates our
emphasis on internal growth initiatives."
Backlog and Pipeline
The current backlog of signed contracts not yet delivered is $9.3 billion, or
5.9 times FY2001 annual revenue, with a weighted average time remaining of 7.3
years. CGI conservatively estimates its pipeline of proposals for large
outsourcing contracts being reviewed by potential clients to be at $5 billion,
up from $4 billion as stated during all of fiscal 2001. A large portion of this
increase is driven by increased activity in Canada and in the US. Importantly,
none of the deals in the sales pipeline have been cancelled in the last six
months, despite more challenging economic conditions.
Initiatives and Outlook
Mr. Godin added: "Our growth initiatives for FY2002 will capitalize on our core
fundamentals and the excellent results we achieved in FY2001. Our pipeline of
outsourcing contracts is more robust than ever, as organizations focus on ways
to reduce their IT costs while maintaining their competitive position. Key to
our growth will be an enhanced business development program to drive accelerated
organic growth and a continued focus on identifying acquisitions that bring
value to CGI."
Based on the information known today about current market conditions and demand,
the company provides the following guidance for its fiscal year ending September
30, 2002:
o Base revenue for the year is expected to be between $2.1 billion and
$2.2 billion, representing between 33% and 39% growth over fiscal 2001
results. These numbers do not include any contribution from potential
large acquisitions or large outsourcing contract wins valued at more
than $50 million per year.
o Cash net earnings per share, which going forward will be referred to
as net earnings, should be in the range of $0.37 and $0.40,
representing between 23% and 33% growth year-over-year.
CGI Reports 4Q & FY01 Results
November 6, 2001
Page 4
In the first quarter ended December 31, 2001, revenue is expected to total
between $505 and $520 million, representing between 51% and 56% year over year
growth. Cash earnings per share are expected to be between $0.07 and $0.08 on a
diluted basis.
Quarterly Conference Call
A conference call for the investment community will be held today, November 6,
2001 at 11:00 am (Eastern Daylight Time). Participants may access the call by
dialing 800-550-7368. A live audio webcast of the conference call, with
accompanying slides, will be available at CGI's website, www.cgi.ca. For those
unable to participate, a replay will be available until November 22 by dialing
(800) 558-5253, access number 19779536.
Forward-Looking Statements
All statements in this press release and MD&A that do not directly and
exclusively relate to historical facts constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements represent CGI Group Inc.'s intentions, plans, expectations, and
beliefs, and are subject to risks, uncertainties, and other factors, of which
many are beyond the control of the Company. These factors could cause actual
results to differ materially from such forward-looking statements.
These factors include and are not restricted to the timing and size of
contracts, acquisitions and other corporate developments; the ability to attract
and retain qualified employees; market competition in the rapidly-evolving
information technology industry; general economic and business conditions,
foreign exchange and other risks identified in the Management's Discussion and
Analysis (MD&A) in CGI Group Inc.'s Annual Report or Form 40F filed with the
SEC, the Company's Annual Information Form filed with the Canadian securities
commissions, on the Registration Statement on Form F-4 filed with the SEC in
connection with the acquisition of IMRglobal and with the Forms 10-K and 10-Q of
IMRglobal filed with the SEC for the periods ended December 31, 2000 and March
31, 2001 respectively. All of the risk factors included in these filed documents
are included here by reference. CGI disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Financial Statements Follow
For more information:
CGI Investor Relations Ronald White - Canada
Director, investor relations
Julie Creed - USA (514) 841-3230
Vice-president, investor relations
(312) 201-1911
CGI Media Relations
Eileen Murphy
Director, media relations
(514) 841-3430
Consolidated financial statements of
CGI Group Inc.
For the twelve months ended September 30, 2001
CGI Group Inc.
Consolidated statements of earnings
(in thousands of Canadian dollars, except per share amounts) (unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
September 30, September 30,
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Revenue 469,018 320,101 1,581,315 1,436,008
-----------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Costs of services, selling and administrative expenses 392,684 293,030 1,339,110 1,254,351
Research 3,704 2,250 12,585 9,960
-----------------------------------------------------------------------------------------------------------------------------------
396,388 295,280 1,351,695 1,264,311
-----------------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 72,630 24,821 229,620 171,697
-----------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization of fixed assets 9,523 5,698 32,536 26,387
Amortization of contract costs 12,637 5,393 33,460 21,991
-----------------------------------------------------------------------------------------------------------------------------------
22,160 11,091 65,996 48,378
-----------------------------------------------------------------------------------------------------------------------------------
Earnings before the following items 50,470 13,730 163,624 123,319
-----------------------------------------------------------------------------------------------------------------------------------
Interest
Long-term debt (1,258) (946) (4,206) (3,624)
Other (233) 52 (335) (130)
Income 800 810 2,999 3,898
-----------------------------------------------------------------------------------------------------------------------------------
(691) (84) (1,542) 144
-----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, entity subject to significant
influence and amortization of goodwill 49,779 13,646 162,082 123,463
Income taxes 22,507 6,553 72,165 49,985
-----------------------------------------------------------------------------------------------------------------------------------
Earnings before entity subject to significant influence
and amortization of goodwill 27,272 7,093 89,917 73,478
Entity subject to significant influence - - 7 64
-----------------------------------------------------------------------------------------------------------------------------------
Earnings before amortization of goodwill 27,272 7,093 89,924 73,542
Amortization of goodwill, net of income taxes 7,451 4,674 27,135 17,876
-----------------------------------------------------------------------------------------------------------------------------------
Net earnings 19,821 2,419 62,789 55,666
===================================================================================================================================
Weighted average number of outstanding Class A
subordinate shares and Class B shares 343,593,521 272,041,480 299,500,350 270,442,354
===================================================================================================================================
Basic and diluted earnings before amortization of goodwill
per share (Note 1) 0.08 0.03 0.30 0.27
===================================================================================================================================
Basic earnings per share (Note 1) 0.06 0.01 0.21 0.21
===================================================================================================================================
Diluted earnings per share (Note 1) 0.06 0.01 0.21 0.20
===================================================================================================================================
2
CGI Group Inc.
Consolidated statements of retained earnings
(in thousands of Canadian dollars) (unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
September 30, September 30,
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Retained earnings, beginning of period, as previously
reported 226,124 180,737 183,156 139,080
Adjustment for change in accounting policy - - - (11,590)
-----------------------------------------------------------------------------------------------------------------------------------
Retained earnings, beginning of period, as restated 226,124 180,737 183,156 127,490
Net earnings 19,821 2,419 62,789 55,666
-----------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period 245,945 183,156 245,945 183,156
===================================================================================================================================
3
CGI Group Inc.
Consolidated balance sheets
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------------------------------------------------------------
As at September 30, As at September 30,
2001 2000
----------------------------------------------------------------------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 46,008 49,341
Accounts receivable 320,667 218,938
Income taxes 979 2,733
Work in progress 84,838 56,799
Prepaid expenses and other current assets 48,931 19,442
Future income taxes 17,998 7,052
-----------------------------------------------------------------------------------------------------------------------------------
519,421 354,305
Investment in an entity subject to significant influence - 1,261
Fixed assets 123,391 58,900
Contract costs and other long-term assets 272,403 93,716
Future income taxes 32,785 24,470
Goodwill 1,114,793 395,903
-----------------------------------------------------------------------------------------------------------------------------------
2,062,793 928,555
===================================================================================================================================
Liabilities
Current liabilities
Accounts payable and accrued liabilities 315,902 142,754
Deferred revenue 85,163 33,194
Future income taxes 21,013 7,963
Current portion of long-term debt 7,528 5,770
-----------------------------------------------------------------------------------------------------------------------------------
429,606 189,681
Future income taxes 43,705 23,929
Long-term debt 32,752 37,644
Deferred credits 74,813 -
-----------------------------------------------------------------------------------------------------------------------------------
580,876 251,254
-----------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Capital stock (Note 2) 1,213,542 491,807
Contributed surplus 211 211
Warrants (Note 2) 19,655 -
Retained earnings 245,945 183,156
Foreign currency translation adjustment 2,564 2,127
-----------------------------------------------------------------------------------------------------------------------------------
1,481,917 677,301
-----------------------------------------------------------------------------------------------------------------------------------
2,062,793 928,555
===================================================================================================================================
4
CGI Group Inc.
Consolidated statements of cash flows
(in thousands of Canadian dollars) (unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
September 30, September 30,
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Operating activities
Net earnings 19,821 2,419 62,789 55,666
Adjustments for:
Depreciation and amortization of fixed assets 9,523 5,698 32,536 26,387
Loss on disposal of fixed assets - 509 - 1,454
Amortization of contract costs and other long-term
assets 12,637 5,393 33,460 21,991
Amortization of goodwill 7,807 4,993 28,586 19,153
Future income taxes 26,166 1,516 32,589 2,214
Foreign exchange loss (gain) (396) 86 4,213 (497)
Entity subject to significant influence - - (7) (64)
-----------------------------------------------------------------------------------------------------------------------------------
75,558 20,614 194,166 126,304
-----------------------------------------------------------------------------------------------------------------------------------
Changes in non-cash operating working capital items:
Accounts receivable (29,176) 5,620 (33,786) 17,206
Work in progress (11,314) 23,565 (12,277) 31,725
Prepaid expenses and other current assets 11,447 6,684 (556) (5,486)
Accounts payable and accrued liabilities (17,558) (15,546) 2,073 (92,027)
Income taxes 2,511 (6,975) (559) (13,647)
Deferred revenue (15,834) 3,075 24,941 3,475
-----------------------------------------------------------------------------------------------------------------------------------
(59,924) 16,423 (20,164) (58,754)
-----------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 15,634 37,037 174,002 67,550
-----------------------------------------------------------------------------------------------------------------------------------
Financing activities
Net variation of credit facility (30,000) - (5,000) (16,200)
Reduction of other long-term debts (51,093) (1,147) (65,027) (5,907)
Issuance of shares 53,716 434 54,206 10,931
-----------------------------------------------------------------------------------------------------------------------------------
Cash used for financing activities (27,377) (713) (15,821) (11,176)
-----------------------------------------------------------------------------------------------------------------------------------
Investing activities
Business acquisitions (net of cash) (Note 3) 22,399 (15,503) (86,393) (18,395)
Investment in an entity subject to significant
influence - - - (514)
Purchase of fixed assets (2,966) (5,650) (23,993) (18,090)
Proceeds from sale of fixed assets 1,270 11 1,270 845
Contract costs and other long-term assets (12,375) 516 (48,635) (14,177)
-----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) investing activities 8,328 (20,626) (157,751) (50,331)
-----------------------------------------------------------------------------------------------------------------------------------
Foreign exchange (loss) gain on cash held in foreign
currencies (3,891) 352 (3,763) 1,069
-----------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (7,306) 16,050 (3,333) 7,112
Cash and cash equivalents at beginning of period 53,314 33,291 49,341 42,229
-----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents to end of period 46,008 49,341 46,008 49,341
===================================================================================================================================
Interest paid 552 894 4,592 3,754
Income taxes paid and received 10,100 13,629 41,615 67,154
===================================================================================================================================
5
CGI Group Inc.
Notes to the consolidated financial statements
(tabular amounts only are in thousands of Canadian dollars)(unaudited)
Note 1 - Summary of significant accounting policies
These interim financial statements should be read in conjunction with the
consolidated financial statements of the Company and notes thereto for the year
ended September 30, 2000.
On October 1, 2000, the Company adopted the new recommendations of the Canadian
Institute of Chartered Accountants ("CICA") Handbook section 3500 - Earnings per
share. Under the revised section 3500, the treasury stock method is used instead
of the current imputed earnings approach for determining the dilutive effect of
options and warrants issued. In addition, the section requires that a
reconciliation of the numerator and denominator be disclosed.
The CICA recently issued Handbook Sections 1581, Business Combinations, and
3062, Goodwill and Other Intangible Assets. Effective July 1, 2001, the
Standards require that all business combinations be accounted for using the
purchase method. Additionally, effective January 1, 2002, goodwill and
intangible assets with an indefinite life will no longer be amortized to
earnings and will be assessed for impairment on an annual basis in accordance
with the new standards, including a transitional impairment test whereby any
resulting impairment will be charged to opening retained earnings. Since early
adoption of Sections 1581 and 3062 is permitted for companies with a fiscal year
beginning after March 15, 2000, the Company will adopt these sections effective
October 1, 2001. In fiscal 2002, the effect of the non-amortization of currently
amortized goodwill will result in an increase in the consolidated net earnings
of approximately $28,800,000. The Company is currently evaluating the impact of
the adoption of the new standards, including the transitional impairment test,
and therefore has not yet assessed their effect on the Company's future
consolidated net earnings and financial position.
----------------------------------------------------------------------------------------------------------------------------
Three months ended September 30,
----------------------------------------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------
Net earnings Number of shares Per share Net earnings Number of share Per share
(numerator) (denominator) amount (numerator) (denominator) amount
----------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Net earnings available to common shareholders 19,821 343,593,521 0.06 2,419 272,041,480 0.01
----------------------------------------------------------------------------------------------------------------------------
Dilutive options 2,202,589 1,252,106
Dilutive warrants 981,267 -
----------------------------------------------------------------------------------------------------------------------------
Net earnings available to common shareholders
and assumed conversions 19,821 346,777,377 0.06 2,419 273,293,586 0.01
============================================================================================================================
----------------------------------------------------------------------------------------------------------------------------
Twelve months ended September 30,
----------------------------------------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------
Net earnings Number of shares Per share Net earnings Number of share Per share
(numerator) (denominator) amount (numerator) (denominator) amount
----------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Net earnings available to common shareholders 62,789 299,500,350 0.21 55,666 270,442,354 0.21
----------------------------------------------------------------------------------------------------------------------------
Dilutive options 1,287,291 2,317,858
Dilutive warrants 319,545 -
----------------------------------------------------------------------------------------------------------------------------
Net earnings available to common shareholders
and assumed conversions 62,789 301,107,186 0.21 55,666 272,760,212 0.20
============================================================================================================================
Note 2 - Capital Stock and Warrants
Capital Stock
Class A subordinate shares carrying one vote per share, participating equally
with Class B shares with respect to the payment of dividends and convertible
into Class B shares under certain conditions in the event of certain takeover
bids on Class B shares.
Class B shares, carrying ten votes per share, participating equally with Class A
subordinate shares with respect to the payment of dividends and convertible at
any time at the option of the holder into Class A subordinate shares.
Options
Under a stock option plan for certain employees and directors of the Company and
its subsidiaries, the Board of Directors may grant, at its discretion, options
to purchase company stock to certain employees and directors of the Company and
of its subsidiaries. The exercise price is established by the Board of Directors
but may not be lower than the average closing price for Class A subordinate
shares over the five business days preceeding the date of grant. Each option
must be exercised within a ten-year period, except in the event of retirement,
termination of employment or death.
6
CGI Group Inc.
Notes to the consolidated financial statements
(tabular amounts only are in thousands of Canadian dollars)(unaudited)
Note 2 - Capital Stock and Warrants (cont'd)
Warrants
In connection with the signing of strategic outsourcing contract and of a
business acquisition, the Company granted warrants entitling the holders to
subscribe to up to 5,118,210 Class A subordinate shares. The exercise prices
were determined using the average closing price for Class A subordinate shares
at a date and for a number of days around the respective transaction dates. The
warrants vest upon signature of the contracts or date of business acquisition
and have an exercise period of five years. As at September 30, 2001, there were
5,118,210 warrants issued and outstanding, 4,000,000 of which are exercisable at
a price of $6.55 per share and expire April 30, 2006 and remaining 1,118,210 are
exercisable at a price of $8.88 per share expiring June 13, 2006. These warrants
have a total fair value of $19,655,000. The fair values of the warrants were
estimated at their respective grant dates using the Black-Scholes option pricing
model with the following assumptions : risk-free interest rate of 4.9%, dividend
yield of 0.0%, expected volatility of 57.7% and expected life of 5 years.
The following table presents information concerning capital stock issued and
paid and all stock options and warrants as at September 30, 2001 :
Number of shares issued and paid Number
--------------------------------------------------------------------------------
Class A subordinate shares 327,032,717
Class B shares 40,799,774
--------------------------------------------------------------------------------
Total capital stock 367,832,491
Number of stock options (convertible into Class A subordinate shares) 25,285,303
Number of warrants (convertible into Class A subordinate shares) 5,118,210
--------------------------------------------------------------------------------
Number of shares reflecting the potential exercise of stock options
and warrants 398,236,004
================================================================================
As at September 30, 2001 and 2000, (after giving retroactive effect of the
subdivision of the Company's shares that occured on August 12, 1997, December
15, 1997, May 21, 1998 and January 7, 2000), the Class A subordinate shares and
the Class B shares changed as follows :
September 30, 2001 September 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
Class A subordinate shares Class B shares Class A subordinate shares Class B shares
------------------------------------------------------------------------------------------------------------------------------------
Number Amount Number Amount Number Amount Number Amount
------------------------------------------------------------------------------------------------------------------------------------
$ $ $ $
Balance, beginning of period 240,755,667 490,645 34,846,526 1,162 233,887,974 423,616 34,773,652 148
Issued for cash 287,914 4,003 - -
Issued as consideration for
business acquisitions 85,835,178 651,010 5,953,248 53,043 5,626,369 57,112 - -
Fair value of options issued
as consideration for
business acquisitions - 16,519 - - - - - -
Options exercised 441,872 1,163 - - 953,410 5,914 72,874 1,014
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of period 327,032,717 1,159,337 40,799,774 54,205 240,755,667 490,645 34,846,526 1,162
====================================================================================================================================
The following table presents information concerning all stock options granted to
certain employees and directors by the Company as at September 30, 2001 and
2000:
September 30, September 30,
2001 2000
---------------------------------------------------------------------------------------
Number of options
Outstanding, beginning of period 6,413,181 4,996,414
Granted 11,705,381 2,565,594
Granted as consideration for business acquisitions 8,424,502 -
Exercised (441,872) (1,026,284)
Forfeited and expired (815,889) (122,543)
---------------------------------------------------------------------------------------
Outstanding, end of year 25,285,303 6,413,181
---------------------------------------------------------------------------------------
7
CGI Group Inc.
Notes to the consolidated financial statements
(tabular amounts only are in thousands of Canadian dollars)(unaudited)
Note 3 - Business acquisitions
During the twelve months ended September 30, 2001, the Company acquired all the
outstanding shares of C.U. Processing Inc. ("CUP") and RSI Realtime Inc. on
October 4, 2000, and on December 12, 2000, respectively, and acquired 49.0% of
all the outstanding shares of AGTI Consulting Services Inc. ("AGTI") on November
27, 2000. On January 4, 2001, the Company acquired all the outstanding shares of
Groupe-conseil CDL Inc. and, on January 9, 2001, acquired all of the outstanding
Star Data Systems Inc. ("Star Data") common shares on the basis of 0.737 Class A
subordinate shares of the Company for each Star Data common share. On January
12, 2001, the Company increased its interest in Conseillers en informatique
d'affaires ("CIA") from 35.0% to 49.0% and began using the proportionate
consolidation method to account for this investment; prior to January 12, 2001,
the Company used the equity method to account for this investment. A contingent
payment of $1,640,000 for AGTI was made in the three months ended March 31, 2001
based on the accomplishment of specified financial goals as at December 31,
2000. The contingent payment resulted in a corresponding increase of the
purchase price and the resulting goodwill.
On May 1, 2001, the Company signed a strategic alliance for the management of
data and micro-computing of Mouvement Desjardins operations. In the context of
this agreement, the Company acquired the related assets, certain intellectual
property rights and assumed liabilities of La Confederation des Caisses
Populaires et d'Economie Desjardins du Quebec ("Desjardins") used in data and
micro-computing of Mouvement Desjardins operations. In addition, approximately
450 Desjardins employees were transferred to the Company. On May 31, 2001, the
Company acquired CyberBranch, a subsidiary of Stanford Federal Credit Union of
Palo Alto, California, and, on June 12, 2001, made its initial contribution of
$5,000,000 in NTER Technologies, Limited Partnership ("NTER"), a partnership
created on February, 1, 2001. The Company accounts for its 49.9% interest in
NTER using the proportionate consolidation method.
On July 1, 2001, the Company acquired all of the outstanding shares of
Larochelle Gratton. On July 27, 2001, the Company acquired all of the
outstanding shares of common stock of IMRglobal Corp. ("IMR"), on the basis of
1.5974 Class A subordinate share of the Company for each share of IMR common
stock. In addition, outstanding IMR stock options as of that date became 8.4
million options to acquire Class A subordinate shares of the Company. Total
consideration included $68,000,000 for integration costs and professionnal fees.
The IMR purchase price allocation shown below is preliminary and is based on the
Company estimates pending the completion of valuation studies with the use of
external advisors. The final allocation is expected to be completed within
twelve months from the acquisition date and may result in the purchase price
being allocated to other identifiable intangible assets besides goodwill which
will be amortized over their respective estimated useful lives. On August 7,
2001, the Company acquired all of the outstanding shares of Loyaltech and, on
August 27, 2001, the Company signed a joint venture agreement with former
Digital 4Sight management. The Company accounts for its 49.0% interest in
Digital 4Sight using the proportionate consolidation method. On September 10,
2001, the Company acquired all the outstanding shares of EPC.
For business combinations that occurred after June 30, 2001, the Company did not
amortize the resulting goodwill as it is provided in the transition
recommendations in CICA sections 1581, Business Combinations, and 3062, Goodwill
and Other Intangible Assets.
These acquisitions were accounted for using the purchase method, as follows:
IMR Star Data Desjardins AGTI CUP Other Total
-----------------------------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $ $
Non-cash working capital items (62,558) (18,391) 21,381 2,216 (12,061) (471) (69,884)
Fixed assets 42,095 21,211 3,612 448 3,296 2,135 72,797
Contract costs and other long-term assets 22,346 9,203 111,986 - 447 11 143,993
Future income taxes 7,537 15,716 (6,685) 10 4,228 1,139 21,945
Goodwill 578,525 73,060 9,549 14,602 41,601 27,588 744,925
Long-term debt (53,988) (10,799) - - (812) (1,759) (67,358)
Deffered credits (7,609) - (67,627) - - - (75,236)
-----------------------------------------------------------------------------------------------------------------------------------
526,348 90,000 72,216 17,276 36,699 28,643 771,182
Cash position at acquisition 26,485 12,820 - 7,639 1,837 4,062 52,843
-----------------------------------------------------------------------------------------------------------------------------------
552,833 102,820 72,216 24,915 38,536 32,705 824,025
===================================================================================================================================
Consideration
Cash - - 57,945 24,915 38,536 19,561 140,957
Issuance of 85,835,178 Class A subordinate
shares 536,314 102,820 - - - 11,876 651,010
Issuance of 8,424,502 options to acquire
Class A subordinate 16,519 - - - - - 16,519
4,000,000 warrants at fair value - - 14,271 - - - 14,271
Equity value of CIA investment at
acquisition date - - - - - 1,268 1,268
-----------------------------------------------------------------------------------------------------------------------------------
552,833 102,820 72,216 24,915 38,536 32,705 824,025
===================================================================================================================================
8
CGI Group Inc.
Notes to the consolidated financial statements
(tabular amounts only are in thousands of Canadian dollars)(unaudited)
Note 4 - Segmented information
The Company provides information technology services. The following presents
information on the Company's operations based on its organizational structure.
----------------------------------------------------------------------------------------------------------------------------
As at and for the three months Canada US International Corporate Intersegment Total
ended September 30, 2001 expenses and elimination
programs
----------------------------------------------------------------------------------------------------------------------------
$ $ $ $ $ $
Revenue 367,582 80,454 32,429 - (11,447) 469,018
Operating expenses 288,409 78,713 32,549 8,164 (11,447) 396,388
----------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 79,173 1,741 (120) (8,164) - 72,630
Depreciation and amortization 19,275 1,604 951 330 - 22,160
----------------------------------------------------------------------------------------------------------------------------
Earnings before interest, income taxes
and amortization of goodwill 59,898 137 (1,071) (8,494) - 50,470
============================================================================================================================
Total assets 971,154 806,173 240,710 44,756 = 2,062,793
============================================================================================================================
As at and for the three months
ended September 30, 2000
----------------------------------------------------------------------------------------------------------------------------
Revenue 269,172 52,538 21,099 - (22,708) 320,101
Operating expenses 224,425 55,349 24,701 13,513 (22,708) 295,280
----------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 44,747 (2,811) (3,602) (13,513) - 24,821
Depreciation and amortization 9,446 720 612 313 - 11,091
----------------------------------------------------------------------------------------------------------------------------
Earnings before interest, income taxes
and amortization of goodwill 35,301 (3,531) (4,214) (13,826) - 13,730
============================================================================================================================
Total assets 597,729 207,469 95,095 28,262 = 928,555
============================================================================================================================
As at and for the twelve months
ended September 30, 2001
----------------------------------------------------------------------------------------------------------------------------
Revenue 1,300,258 232,655 86,850 - (38,448) 1,581,315
Operating expenses 1,031,041 235,587 89,110 34,405 (38,448) 1,351,695
----------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 269,217 (2,932) (2,260) (34,405) - 229,620
Depreciation and amortization 58,585 4,072 2,133 1,206 - 65,996
----------------------------------------------------------------------------------------------------------------------------
Earnings before interest, income taxes
and amortization of goodwill 210,632 (7,004) (4,393) (35,611) - 163,624
============================================================================================================================
Total assets 971,154 806,173 240,710 44,756 = 2,062,793
============================================================================================================================
As at and for the twelve months
ended September 30, 2000
----------------------------------------------------------------------------------------------------------------------------
Revenue 1,127,715 215,442 179,531 - (86,680) 1,436,008
Operating expenses 943,612 207,104 165,543 34,732 (86,680) 1,264,311
----------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 184,103 8,338 13,988 (34,732) - 171,697
Depreciation and amortization 41,023 4,009 2,046 1,300 - 48,378
----------------------------------------------------------------------------------------------------------------------------
Earnings before interest, income taxes
and amortization of goodwill 143,080 4,329 11,942 (36,032) - 123,319
============================================================================================================================
Total assets 597,729 207,469 95,095 28,262 = 928,555
============================================================================================================================
9
CGI Group Inc.
Notes to the consolidated financial statements
(tabular amounts only are in thousands of Canadian dollars)(unaudited)
Note 5 - Subsequent event
On October 1, 2001, the Company signed a strategic outsourcing alliance
providing IT support services for Fireman's Fund Insurance Company ("Fireman")
operations. In the context of this agreement, the Company acquired the related
assets and assumed liabilities of Fireman used in their IT operations for a
total consideration of $38.1 million. This transaction was accounted for using
the purchase method.
Note 6 - Comparative figures
Certain comparative figures have been reclassified in order to conform to the
presentation adopted in 2001.
10
SIGNATURES
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.
CGI GROUP INC.
(Registrant)
Date: November 6, 2001 By /s/ Paule Dore
Name: Paule Dore
Title: Executive Vice President
and Chief Corporate Officer
and Secretary