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 February 2002.
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: First Quarterly Report.
This Form 6-K shall be deemed incorporated by reference in the Registrant's
Registration Statement on Form S-8, Reg. Nos. 333-13350, 333-6604 and 333-74932.
CGI Group Inc. Quarterly Report 1
For the three months ended December 31, 2001
About CGI
Founded in 1976, CGI is the fourth largest independent information technology
(IT) services firm in North America, based on its headcount of more than 13,000
professionals. CGI's annualized revenue run-rate totals CDN$2.1 billion (US$1.3
billion). CGI's order backlog currently totals CDN$9.2 billion (US$5.75
billion). CGI provides end-to-end IT services and business solutions to more
than 3,000 clients in countries such as the United States, Canada, the United
Kingdom and France from more than 60 offices. CGI's shares are included in the
TSE 100 Composite Index as well as the S&P/TSE Canadian Information Technology
and Canadian MidCap Indices.
Stock Exchanges
Toronto Stock Exchange: GIB.A
New York Stock Exchange: GIB
Shares outstanding (as at December 31, 2001)
338,624,036 Class A subordinate shares
40,799,774 Class B shares
First Quarter Fiscal 2002 Trading History
TSE NYSE
(CDN$) (US$)
High: $12.25 High: $7.61
Low: $8.90 Low: $5.53
Close: $12.25 Close: $7.55
Volume: 80,287,100 Volume: 5,792,900
Transfer Agent
Computershare Trust Company of Canada
1-800-564-6253
Investor Relations
Julie Creed
Vice-President, Investor Relations
Telephone: (312) 201-8094
Fax: (425) 920-2064
julie.creed@cgiusa.com
Ronald White
Director, Investor Relations
Telephone: (514) 841-3230
Fax: (514) 841-3299
ronald.white@cgi.ca
www.cgi.ca
CGI Reports Strong Growth in First Quarter of Fiscal 2002
CGI reported strong unaudited results for its first quarter ended December 31,
2001. All figures are in Canadian dollars unless otherwise indicated.
First Quarter Highlights
-- Revenue of $520.8 million represented 55.8% growth over the comparable
period one year ago and 11.0% quarterly sequential growth. Organic growth
was 23.1% year-over-year
-- Net earnings per share increased 33.3% to $0.08 from the comparable
earnings before amortization (cash net earnings) per share of $0.06 in last
year's first quarter. First quarter net earnings of $0.08 compared to
fourth quarter cash net earnings per share of $0.08 on a 7.5% increase in
weighted average shares outstanding
-- Operating cash flow was up 40.2% year-over-year to $43.3 million
-- Backlog of signed contracts stands at $9.2 billion or more than four times
current annualized revenue, compared with $7.0 billion at the same time
last year. Contracts in the backlog have a weighted average remaining
contract term of seven years
-- Current pipeline of bids for large outsourcing contracts being reviewed by
potential clients remains strong at $5 billion --Public offering closed in
December 2001 raised gross proceeds of $125.0 million to support future
growth
"We are pleased to have delivered strong first quarter financial results as well
as meaningful operating improvements in our cost structure," said Serge Godin,
chairman and CEO. "CGI effectively capitalized on growing trends that favor IT
and business process outsourcing and made significant progress in integrating
IMRglobal and recent large outsourcing contract wins."
The significant growth in first quarter revenue was due primarily to continuing
strong demand for outsourcing services across all geographic areas, but
especially in Canada. Revenue growth also reflects the contribution of
acquisitions completed in the past year.
Mr. Godin added, "Our first quarter results and current pipeline of outsourcing
contracts are good indicators that our business is on-track to achieve another
record year. The demand for IT and business process services continues to be
robust in Canada and in the US, where we are especially encouraged by the
results of the enhanced business development program we initiated in the Fall.
In six months, since closing our merger with IMRglobal, CGI has tripled its
backlog of signed long-term contracts in the US and the revenue mix has shifted
from 26% outsourcing to 60% outsourcing today. Although we are experiencing soft
demand for systems integration and consulting services from clients in the US,
we saw continued strong demand from clients in Canada. With a complete offering
of IT and business process services, the flexibility to deliver our services
through our own on-shore, near shore and off-shore facilities, and proceeds from
our recent offering, we are excited about the opportunities for increasing
organic growth. As part of our growth strategy, we will continue to focus on
identifying acquisition targets in the US and Europe that will bring value to
CGI."
Management's Discussion and Analysis of Financial Position and Results of
Operations
First quarter ended December 31, 2001
The following discussion and analysis should be read in conjunction with
financial statements for the first quarter of fiscal 2002 and 2001; with the
Management's Discussion and Analysis of Financial Position and Results of
Operations ("MD&A") in the fiscal 2001 annual report, including the section on
risks and uncertainties; and with the notes to the financial statements for the
first quarter of fiscal 2002 and in the fiscal 2001 annual report. All dollar
amounts are in Canadian dollars unless otherwise indicated.
Significant Developments
On October 1, 2001, Fireman's Fund Insurance Company ("Fireman's Fund"), a
subsidiary of Allianz AG of Munich, and CGI finalized a 10-year, information
technology outsourcing contract valued at US$380.0 million. As part of the
agreement, CGI will provide Fireman's Fund with IT support services to some 80
locations across the United States. Also, CGI has taken over the client's
Phoenix-based, 40,000 square foot, state-of-the-art data center.
On October 17, 2001, British Telecommunications PLC ("BT") and CGI announced the
signing of a partnership agreement whereby BT has selected CGI to be its
development partner as it offers "single-window" e-government service delivery
solutions to local authorities in Scotland, England and Wales.
On December 12, Arbella Insurance Group ("Arbella") and CGI announced the
signing of a five-year contract valued at US$20.0 million, whereby CGI will
supply full document management services to the New England P&C insurance
carrier. CGI will serve Arbella from its US state-of-the-art document management
operation in Andover, Massachusetts. This facility produces over eight million
documents per month for CGI's clients and their customers. Monthly, CGI will
print for Arbella some 2 to 2.5 million images in addition to mailing
approximately 400,000 to 500,000 policies and billing-related forms. CGI will
implement a host of various software and hardware products to manage, simplify
and streamline Arbella's print and distribution workflow.
On December 20, CGI successfully closed its public offering of Class A
subordinate shares in Canada announced on December 3, 2001. CGI sold 11,110,000
Class A subordinate shares of the Company at a price of $11.25 per share, for
gross proceeds of $125.0 million, to a syndicate of investment dealers. The net
proceeds of the offering will be used to repay indebtedness and the balance will
be added to CGI's general funds and be used to finance its development
activities, including the funding of large outsourcing contracts and
acquisitions, and for other general corporate purposes.
Revenue
Revenue in the first quarter of fiscal 2002 increased 55.8% to $520.8 million,
from $334.2 million in the quarter ended December 31, 2000. The year-over-year
increase reflects growth in outsourcing contract revenues in Canada and in the
US. Acquisitions made in fiscal 2001 contributed to 32.7% of the increase in
revenue. Organic growth was 23.1% year-over-year. On a sequential basis, revenue
increased by 11.0% from the fourth quarter of fiscal 2001, reflecting an
increase in outsourcing contract revenues.
In the first quarter, revenue from long-term outsourcing contracts represented
72% of total revenues, including almost 14% from business process services,
while revenue from systems integration and consulting projects represented 28%.
Geographically, contribution to revenue from clients in Canada was 71%, while
clients in the US represented 22%; and all other regions, 7%. This mix is
similar to the fourth quarter of fiscal 2001. Client revenue from the financial
services sector represented 40%, while telecom represented 26%; manufacturing,
retail and distribution, 17%; government, 14%; energy and services, 2%; and
healthcare 1%.
Operating Expenses
The costs of services, selling and administrative expenses were $439.5 million,
or 51.7% higher than the prior year. Total operating expenses were 85.2% of
revenue, an improvement from 87.5% in the first quarter of fiscal 2001 and only
a slight increase from an expense ratio of 84.5% in the fourth quarter of fiscal
2001.
The year-over-year reduction in the expense ratio was achieved through synergies
resulting from the integration of business acquisitions and large outsourcing
contracts. The sequential expense ratio increase resulted mainly from CGI's
decision to increase the provision for a few doubtful accounts, following the
quarterly review of all client accounts.
Depreciation and Amortization
Depreciation and amortization of fixed assets increased to $11.1 million, from
$6.8 million in the previous year.
The year-over-year increase reflected the fact that additional business and
assets were acquired in the course of acquisitions and through the signing of
large outsourcing contracts.
Amortization of contract costs increased year-over-year to $13.2 million, from
$5.5 million in fiscal 2001, mainly as a result of the capitalization of
contract costs following the signing of large outsourcing contracts.
Sequentially, the increase in depreciation and amortization of fixed assets and
in the expense related to amortization of contract costs reflected the
acquisition of assets in the course of business, and the contract costs
resulting from a large outsourcing contract signed during the quarter.
Income Taxes
The effective income tax rate was 41.3% in the first quarter of fiscal 2002
compared with 44.8% for the first quarter of fiscal 2001 and 45.2% for the
fourth quarter of fiscal 2001. The decrease in the effective income tax rate is
a result of the combined effect of two developments. Firstly, a reduction in the
tax loss incurred by foreign subsidiaries (namely in the US and Europe) in the
first quarter of 2002 over the same period in 2001, for which a valuation
allowance had been provided against the future tax benefit. Secondly, the
general Canadian statutory tax rate reduction in fiscal 2002 compared with
fiscal 2001.
Amortization of Goodwill, Net of Income Taxes
Based on standards issued by the Canadian Institute of Chartered Accountants
("CICA") in Handbook Section 1581, Business Combinations, and 3062, Goodwill and
Other Intangible Assets, all business combinations are accounted for using the
purchase method effective July 1, 2001. 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.
The Company adopted these sections effective October 1, 2001. The Company is
currently evaluating the impact of the adoption of the new standards, including
the transitional impairment test for goodwill, and therefore has not yet
assessed their effect on the Company's future consolidated net earnings and
financial position.
Management's Discussion and Analysis of Financial Position and Results of
Operations
First quarter ended December 31, 2001
Net Earnings
Effective October 1, 2001, CGI stopped recording the amortization of goodwill
based on new accounting recommendations described above. As such, earnings
before amortization of goodwill (cash net earnings) and net earnings are
equivalent. For purposes of clarity and ease of comparison, in fiscal 2002 CGI
will compare earnings before amortization of goodwill results with cash net
earnings figures provided in earlier periods. In the first quarter, earnings
before amortization of goodwill increased 89.7% to $30.6 million, compared with
$16.1 million in the same quarter a year ago, and were 12.2% higher
sequentially, compared with $27.3 million reported in the fourth quarter of
fiscal 2001. Earnings per share before amortization of goodwill of $0.08 for the
quarter were up 33.3% over $0.06 reported for the first quarter of fiscal 2001,
and unchanged from $0.08 reported in the fourth quarter, after accounting for a
34.0% year-over-year and 7.5% sequential increase in weighted average shares
outstanding. The net margin was 5.9%, compared with 4.2% in the fourth quarter
and 3.1% in the first quarter of fiscal 2001.
Liquidity and Financial Resources
CGI maintains a strong balance sheet and cash position, which together with bank
lines are sufficient to support the Company's growth strategy. On December 20,
2001 CGI closed its public offering in Canada by selling 11,110,000 Class A
subordinate shares of the Company at a price of $11.25 per share, for gross
proceeds of $125.0 million. At December 31, 2001, the total credit facility
available amounted to $202.7 million. As of December 31, 2001, CGI had cash and
cash equivalents of $155.8 million, compared with $51.5 million as of December
31, 2000.
Operating cash flow (operating cash flow represents cash provided by operating
activities before changes in non-cash operating working capital items) in the
first quarter amounted to $43.3 million, compared with $30.9 million in the
first quarter a year ago and $75.6 million in the fourth quarter of fiscal 2001.
The year-over-year improvement in operating cash flow largely reflects the
improvement in net earnings along with an increase in the depreciation of fixed
assets and the amortization of contract costs related to the acquisitions and
large outsourcing contracts closed in the year. The sequential decrease in
operating cash flow mainly reflects the utilization in CGI's fourth quarter of
future income tax benefits related to the acquisitions and large outsourcing
contracts closed during the year.
As at December 31, 2001, CGI's long-term debt totalled $54.7 million, compared
with $32.7 million at September 30, 2001. The change reflected CGI's issuance of
a US$20 million debt in order to address foreign currency risk exposure, offset
partially by a debt repayment.
Accounting Changes
The CICA recently issued Handbook Section 3870, Stock-based Compensation and
Other Stock-based Payments. This section establishes standards for the
recognition, measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services and applies to
transactions, including non-reciprocal transactions, in which an enterprise
grants shares of common stock, stock options, or other equity instruments, or
incurs liabilities based on the price of common stock or other equity
instruments. This section sets out a fair value based method of accounting and
is required for certain stock-based transactions, effective January 1, 2002 and
applied to awards granted on or after that date. The Company's management is
currently evaluating the impact of the adoption of the new recommendations and
therefore has not yet assessed the effect on its financial statements.
Forward-Looking Statements
All statements in this 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 MD&A in CGI Group Inc.'s
Annual Report or Form 40-F filed with the Securities and Exchange Commission
("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.
Consolidated Financial Statements of CGI Group Inc.
For the three months ended December 31, 2001
Consolidated Statements of Earnings
(in thousands of Canadian dollars, except per share amounts) (unaudited)
Three months ended December 31
------------------------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------------------------
$ $
Revenue 520,783 334,179
------------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Costs of services, selling and administrative expenses 439,535 289,821
Research 4,305 2,490
------------------------------------------------------------------------------------------------------------------------------------
443,840 292,311
------------------------------------------------------------------------------------------------------------------------------------
Operating earnings before: 76,943 41,868
------------------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization of fixed assets 11,144 6,837
Amortization of contract costs and other long-term assets 13,240 5,467
------------------------------------------------------------------------------------------------------------------------------------
24,384 12,304
------------------------------------------------------------------------------------------------------------------------------------
Earnings before the following items 52,559 29,564
------------------------------------------------------------------------------------------------------------------------------------
Interest
Long-term debt (826) (862)
Other 50 (38)
Income 362 545
------------------------------------------------------------------------------------------------------------------------------------
(414) (355)
------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, entity subject to significant influence and
amortization of goodwill 52,145 29,209
Income taxes 21,533 13,074
------------------------------------------------------------------------------------------------------------------------------------
Earnings before entity subject to significant influence and amortization of
goodwill 30,612 16,135
Entity subject to significant influence - 7
------------------------------------------------------------------------------------------------------------------------------------
Earnings before amortization of goodwill 30,612 16,142
Amortization of goodwill, net of income taxes - 5,720
------------------------------------------------------------------------------------------------------------------------------------
Net earnings 30,612 10,422
------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of outstanding Class A subordinate shares and Class B shares 369,406,415 275,663,540
------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share before amortization of goodwill (Note 2) 0.08 0.06
------------------------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per share (Note 2) 0.08 0.04
------------------------------------------------------------------------------------------------------------------------------------
Consolidated Statements of Retained Earnings
(in thousands of Canadian dollars) (unaudited)
Three months ended December 31
------------------------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------------------------
$ $
Retained earnings, beginning of period 245,945 183,156
Share issue costs (Note 2) (3,800) -
Net earnings 30,612 10,422
------------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period 272,757 193,578
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Consolidated Financial Statements of CGI Group Inc.
For the three months ended December 31, 2001
Consolidated Balance Sheets
(in thousands of Canadian dollars) (unaudited)
As at December 31, 2001 As at September 30, 2001
------------------------------------------------------------------------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 155,830 46,008
Accounts receivable 313,388 320,667
Income taxes 7,020 979
Work in progress 83,708 84,838
Prepaid expenses and other current assets 66,389 48,931
Future income taxes 15,297 17,998
------------------------------------------------------------------------------------------------------------------------------------
641,632 519,421
Fixed assets 132,563 123,391
Contract costs and other long-term assets 322,947 272,403
Future income taxes 35,954 32,785
Goodwill 1,142,066 1,114,793
------------------------------------------------------------------------------------------------------------------------------------
2,275,162 2,062,793
------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 312,673 315,902
Deferred revenue 87,896 85,163
Future income taxes 21,489 21,013
Current portion of long-term debt 5,857 7,528
------------------------------------------------------------------------------------------------------------------------------------
427,915 429,606
Future income taxes 45,512 43,705
Long-term debt 54,740 32,752
Deferred credits 84,955 74,813
------------------------------------------------------------------------------------------------------------------------------------
613,122 580,876
------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Capital stock (Note 2) 1,341,135 1,213,542
Contributed surplus 211 211
Warrants (Note 2) 19,655 19,655
Retained earnings 272,757 245,945
Foreign currency translation adjustment 28,282 2,564
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1,662,040 1,481,917
------------------------------------------------------------------------------------------------------------------------------------
2,275,162 2,062,793
------------------------------------------------------------------------------------------------------------------------------------
Consolidated Financial Statements of CGI Group Inc.
For the three months ended December 31, 2001
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)
Three months ended December 31
------------------------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------------------------
$ $
Operating activities
Net earnings 30,612 10,422
Adjustments for:
Depreciation and amortization of fixed assets 11,144 6,837
Amortization of contract costs and other long-term assets 13,240 5,467
Amortization of goodwill - 6,086
Deferred credits (13,679) -
Future income taxes 1,815 942
Foreign exchange loss 187 1,129
Entity subject to significant influence - (7)
------------------------------------------------------------------------------------------------------------------------------------
43,319 30,876
------------------------------------------------------------------------------------------------------------------------------------
Changes in non-cash operating working capital items:
Accounts receivable 7,284 9,356
Work in progress 1,118 16,751
Prepaid expenses and other current assets (17,441) (3,380)
Accounts payable and accrued liabilities (3,308) (3,941)
Income taxes (6,052) (11,306)
Deferred revenue 2,634 2,017
------------------------------------------------------------------------------------------------------------------------------------
(15,765) 9,497
------------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 27,554 40,373
------------------------------------------------------------------------------------------------------------------------------------
Financing activities
Net variation of credit facility 21,363 20,000
Decrease of other long-term debts (1,046) (1,173)
Issuance of shares 127,593 174
Share issue costs (5,500) -
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Cash provided by financing activities 142,410 19,001
------------------------------------------------------------------------------------------------------------------------------------
Investing activities
Business acquisitions (net of cash) - (54,471)
Purchase of fixed assets (20,287) (2,987)
Contract costs and other long-term assets (39,806) (134)
------------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (60,093) (57,592)
------------------------------------------------------------------------------------------------------------------------------------
Foreign exchange (loss) gain on cash held in foreign currencies (49) 330
------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 109,822 2,112
Cash and cash equivalents at beginning of period 46,008 49,341
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period 155,830 51,453
------------------------------------------------------------------------------------------------------------------------------------
Interest paid 450 900
Income taxes paid and received 6,504 18,596
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Notes to the Consolidated Financial Statements
(tabular amounts only are in thousands of Canadian dollars, except share data)
(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, 2001.
On October 1, 2001, the Company adopted the new recommendations of the Canadian
Institute of Chartered Accountants ("CICA") Handbook Sections 1581, Business
Combinations, and 3062, Goodwill and Other Intangible Assets. Under the revised
Section 1581, all business combinations are accounted for using the purchase
method. Additionally, under the revised Section 3062, 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. In fiscal 2002, the
effect of the non-amortization of 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 transitional impairment test, and therefore has not
yet assessed its effect on the Company's future consolidated net earnings and
financial position.
On October 1, 2001, the Company reclassified its UK subsidiary company from
integrated foreign operations to self-sustained foreign operations as a result
of changes in the economic facts and circumstances. Consequently, this
subsidiary was accounted for using the current-rate method, which change was
applied prospectively.
The CICA recently issued Handbook Section 3870, Stock-based Compensation and
Other Stock-based Payments. This section establishes standards for the
recognition, measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services and applies to
transaction, including non-reciprocal transactions, in which an enterprise
grants shares of common stock, stock options, or other equity instruments, or
incurs liabilities based on the price of common stock or other equity
instruments. This section sets out a fair value based method of accounting and
is required for certain stock-based transactions, effective January 1, 2002 and
applied to awards granted on or after that date. The Company's management is
currently evaluating the impact of the adoption of the new recommendations, and
therefore has not yet assessed the effect on its financial statements.
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 10 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 10-year period, except in the event of
retirement, termination of employment or death.
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. The fair
values of the warrants were estimated at their respective grant dates at
$19,655,000 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 five years.
In addition to the warrants to purchase up to 5,118,210 Class A shares referred
to above and issued in connection with the signing of a strategic outsourcing
contract and of a business acquisition the "Initial Warrants", CGI issued to the
Majority Shareholders and BCE warrants (the "Pre-emptive Rights Warrants") to
subscribe in the aggregate up to 3,865,014 Class A shares and 697,044 Class B
shares pursuant to the exercise of their pre-emptive rights contained in the
articles of incorporation of CGI, with substantially similar terms and
conditions as those of the Initial Warrants. The Pre-emptive Rights Warrants may
be exercised by BCE and the Majority Shareholders only to the extent that the
holders of the Initial Warrants exercise such Initial Warrants.
Furthermore, subject to regulatory approval, the Company has undertaken in
favour of a holder of Initial Warrants to purchase up to 4,000,000 Class A
shares to issue promptly after April 30, 2006 (the "Expiration Date") replacing
warrants (the "Extended Warrants") to purchase Class A shares equal to the
number of Class A shares not purchased by such holder under terms of the Initial
Warrants on the Expiration Date. The Extended Warrants will have substantially
similar terms and conditions as those of the Initial Warrants, except for the
exercise price which will be based upon the closing price of the Class A shares
on the TSE on the date preceding the issuance of the Extended Warrants.
Notes to the Consolidated Financial Statements
(tabular amounts only are in thousands of Canadian dollars, except share data)
(unaudited)
Note 2 - Capital stock and warrants (cont'd)
The following table presents information concerning capital stock issued and
paid and all stock options and warrants as at December 31, 2001:
Number of shares issued and paid Number
------------------------------------------------------------------------------------------------------------------------------------
Class A subordinate shares 338,624,036
Class B shares 40,799,774
------------------------------------------------------------------------------------------------------------------------------------
Total capital stock 379,423,810
Number of stock options (Class A subordinate shares) 23,675,032
Number of warrants (Class A subordinate shares) 9,680,268
------------------------------------------------------------------------------------------------------------------------------------
Number of shares reflecting the potential exercise of stock options and warrants 412,779,110
------------------------------------------------------------------------------------------------------------------------------------
As at December 31, 2001 and September 30, 2001, (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:
December 31, 2001 September 30, 2001
------------------------------------------------------------------------------------------------------------------------------------
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 327,032,717 1,159,337 40,799,774 54,205 240,755,667 490,645 34,846,526 1,162
Issued for cash(1) 11,110,000 124,988 - - - - 5,953,248 53,043
Issued as consideration for
business acquisitions - - - - 85,835,178 651,010 - -
Fair value of options issued as
consideration for business
acquisitions - - - - - 16,519 - -
Options exercised 481,319 2,605 - - 441,872 1,163 - -
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Balance, end of period 338,624,036 1,286,930 40,799,774 54,205 327,032,717 1,159,337 40,799,774 54,205
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(1) On December 20, 2001, the Company issued 11,110,000 Class A subordinate shares to the public for cash
proceeds of $124,987,500 before share issue costs of $3,800,000 (net of income taxes of $1,700,000).
The following table presents information concerning all stock options granted to
certain employees and directors by the Company as at December 31, 2001 and
September 30, 2001.
December 31, 2001 September 30, 2001
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Number of options
Outstanding, beginning of period 24,223,852 6,413,181
Granted 407,446 10,643,930
Granted as consideration for business acquisitions - 8,424,502
Exercised (481,319) (441,872)
Forfeited and expired (474,947) (815,889)
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Outstanding, end of period 23,675,032 24,223,852
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Notes to the Consolidated Financial Statements
(tabular amounts only are in thousands of Canadian dollars, except share data)
(unaudited)
Note 2 - Capital stock and warrants (cont'd)
Earnings per share
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended December 31, 2001 and December 31, 2000.
Three months ended December 31
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2001 2000
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Net earnings Number of shares Per share Net earnings Number of shares Per share
(numerator) (denominator) amount (numerator) (denominator) amount
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$ $ $ $
Net earnings available to common shareholders 30,612 369,406,415 0.08 10,422 275,663,540 0.04
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Dilutive options 4,246,841 919,344
Dilutive warrants 3,291,477 -
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Net earnings available to common shareholders
and assumed conversions 30,612 376,944,733 0.08 10,422 276,582,884 0.04
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Note 3 - Segmented information
The Company provides information technology services. Effective October 1, 2001,
the Company changed it's organizational structure. The Company has three
strategic business units ("SBU"), organized according to the following
breakdown: Canada and Europe, US and Asia Pacific, and Business Process Services
("BPS"). The Company evaluates each SBU's performance under this structure and
reports segmented information on that basis.
The following presents information on the Company's operations based on its new
organizational structure.
Corporate
Canada and US and expenses and Intersegment
As at and for the three months ended December 31, 2001 Europe Asia Pacific BPS programs elimination Total
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$ $ $ $ $ $
Revenue 430,698 94,496 20,104 - (24,515) 520,783
Operating expenses 355,366 89,593 14,751 8,645 (24,515) 443,840
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Operating earnings before: 75,332 4,903 5,353 (8,645) - 76,943
Depreciation and amortization 19,132 4,159 770 323 - 24,384
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Earnings before interest, income taxes and
amortization of goodwill 56,200 744 4,583 (8,968) - 52,559
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Total assets 1,193,032 809,821 72,985 199,324 - 2,275,162
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As at and for the three months ended December 31, 2000
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Revenue 294,027 37,977 18,160 - (15,985) 334,179
Operating expenses 246,147 40,475 14,527 7,147 (15,985) 292,311
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Operating earnings before: 47,880 (2,498) 3,633 (7,147) - 41,868
Depreciation and amortization 10,682 588 759 275 - 12,304
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Earnings before interest, income taxes, entity subject to
significant influence and amortization of goodwill 37,198 (3,086) 2,874 (7,422) - 29,564
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Total assets 709,832 99,510 84,435 63,635 - 957,412
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Note 4 - Comparative figures
Certain comparative figures have been reclassified in order to conform to the
presentation adopted in 2002.
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: February 28, 2002 By /s/ Paule Dore
Name: Paule Dore
Title: Executive Vice President
and Chief Corporate Officer
and Secretary