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:
1. 2001 Annual Report (non financial part), MD&A and Financial Statements
2. Notice of Annual General Meeting of Shareholders and Information Circular
3. Proxy (Class A and B)
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.
[GRAPHIC OMITTED]
This is not just an annual report
this is how our fundamentals drive growth
> deliver quality to our clients
> challenge our members
> create value for our shareholders
Revenue
in millions of dollars
1997 231.9
1998 741.0
1999 1,409.5
2000 1,436.0
2001 1,581.3
Earnings Before Amortization of Goodwill (Cash EPS)
in dollars
1997 0.06
1998 0.18
1999 0.37
2000 0.27
2001 0.30
Contract Backlog
in millions of dollars
1997 1,300
1998 6,500
1999 7,500
2000 7,000
2001 9,300
Services
Management of IT and business functions (Outsourcing) 69%
Systems integration and Consulting 31%
Geographic Markets
Canada 77%
US 17%
International 6%
Target Markets
Financial services 38%
Telecommunications 33%
Manufacturing/retail/distribution 15%
Governments 12%
Utilities and energy 2%
Healthcare <1%
Our Mission
The mission of CGI is to assist private and public sector organizations with
professional services of outstanding quality, competence, performance and
objectivity, delivering the best solutions to fully satisfy client objectives in
information technology, telecommunications and management. In all we do, we
foster a culture of partnership, intrapreneurship and integrity, building a
world-class end-to-end information technology company.
Corporate Profile
Founded in 1976, CGI is the largest Canadian independent information technology
(IT) services firm and the fourth largest in North America, based on its
headcount of more than 13,000 professionals. CGI provides end-to-end IT services
and business solutions to some 3,000 clients in North America, Europe and Asia
Pacific from more than 60 offices in over 20 countries. The company's unique mix
of services is comprised of strategic IT and management consulting; systems
development and integration; and management of IT and business functions. CGI's
shares are traded on the NYSE (GIB) and the TSE (GIB.A) and are included in the
TSE 100 Composite Index as well as the S&P/TSE Canadian Information Technology
and Canadian MidCap Indices.
Our Services
CGI provides the consulting, implementation and operations services that
companies need to turn their corporate strategy into reality.
The CGI approach is centered around its clients. Its entrepreneurial heritage
enables it to bring client focus and flexibility. CGI specializes in a
personalized approach to solving its clients' IT challenges.
Consulting
CGI acts as a trusted advisor to its clients, providing a full range of IT and
management consulting services, including IT strategic planning, business
process engineering and systems architecture.
Systems integration
CGI provides implementation services covering the full scope of today's
enterprise IT environment, integrating different technologies, to create IT
systems that respond to clients' strategic needs. In addition to its expertise
at working with leading technologies and software applications, CGI provides
customized application development services leveraging its ISO and CMM certified
methodologies and the option of economies from offshore development.
Management of IT and business functions (Outsourcing)
Clients delegate entire or partial responsibility for IT or business functions
in order to achieve significant savings and access the best information
technology, while retaining control over strategic IT functions. These
contracts, typically for five to 10 years and renewable, provide revenue
visibility and support performance stability. They include such services as
systems development and maintenance, business solutions and technology
management services.
The Company defines its outsourcing business according to the four following
categories:
o Tier 1 - Facilities management services including data centers, call
centers, network and desktop services;
o Tier 2 - Functions associated with application maintenance and support,
including corrective, perfective, preventative and adaptive
maintenance;
o Tier 3 - Development and integration of new projects and applications to
support clients' strategic objectives, including the full range
of CGI consulting and implementation services;
o Tier 4 - Client business process management, where CGI assumes
responsibility for performance of both a business function and
the IT platform that supports it. CGI provides industry specific
services, such as insurance policy administration and wealth
management back office services, as well as services across
industry sectors such as human resources, payroll, finance and
administrative functions.
A high proportion of CGI's outsourcing business is in higher value-added Tier 2
and Tier 3 activities linking CGI closely to the business strategies of its
clients and fostering strong partnerships and continuous growth as its clients'
needs evolve.
Financial Services
This is not only a computer, it's instant access to your insurance coverage.
In the quest for a better insurance administration process, CGI joined forces
with Allianz, one of the world's leading financial services company. The two
companies worked closely for years to develop and deploy an integrated software
package that would help Allianz achieve greater efficiency and enhance customer
service.
Called Global Insurance Open Solutions or GIOS, the software facilitates the
administration of all forms of insurance, from investment to health. The scope
and scale of Allianz's operations were instrumental in the subsequent
development and roll out of GIOS. Its unique multi-language and multi-currency
capabilities were designed to meet Allianz's need for a single software solution
deployable on every continent. And CGI worked with Allianz to set up special
skilled resource centers around the world where Allianz IT staff learn to
configure GIOS to their various lines of business and become self-sufficient in
life cycle support.
GIOS works by making it possible to view the totality of each customer's
business across the various insurance types. Allianz can thus respond to a wide
range of customer needs on the first call. Not only does this increase customer
satisfaction, it also significantly reduces cost. Recently, CGI and Allianz used
GIOS to launch `VOI' (Virtual Online Insurer) which allows Allianz customers to
consult and modify their policies and claims via the Internet.
GIOS has the advantage of scalability and flexibility. It accommodates
user-developed applications while protecting Allianz's investment through its
capacity to grow and change as the company's needs evolve.
Telecommunications
This is not merely a phone, it's access to the world.
Companies rely increasingly on IT to solve business problems. And Bell Canada,
Canada's national leader for communications in the Internet world, depends on
CGI to deliver the end-to-end IT solutions that contribute to peak performance
and high-quality customer service.
As Bell's outsourcing partner, CGI serves the company's diverse IT needs, which
range from the development of new applications to day-to-day systems operations.
Bell's business is complex and meeting the business needs demands a diverse set
of highly specialized skills. CGI's focus on quality has ensured that IT
operations run efficiently and that the high level of service demanded by the
company is consistently delivered.
By working with CGI, Bell was able to double its telephone number capacity in
the Greater Toronto Area and develop an advanced high-security access
infrastructure for Bell's switching network.
To enhance customer service, Bell worked with CGI to design an integrated bill
that makes it easier for customers to keep track of their total communications
expenses. In addition, Bell also looked to CGI to develop e-business
applications that allow customers to shop for Bell products and services and
view their bill online.
With the intensification of competition, Bell requires an IT specialist that
offers high value, creates innovative solutions and helps accelerate time to
market. For Bell Canada Chief Information Officer Eugene Roman, "CGI is a key
partner in enabling Bell to meet our business and financial objectives."
Healthcare
This is not simply an empty waiting room, it's millions of successfully
processed claims.
As the health insurer of approximately two out of every three Tennesseans, Blue
Cross Blue Shield of Tennessee receives bills for healthcare services rendered
from a host of independent providers including hospitals, physicians and
pharmacies. In the health insurance business, overpaid and fraudulent claims can
represent a costly problem. But with the help of CGI, Blue Cross Blue Shield of
Tennessee has a system in place to verify claims for accuracy and completeness.
With the support of a staff of clinicians and nurses, CGI provides consulting
and application development services to Blue Cross Blue Shield of Tennessee's
provider audit department to assist in the detection of overpaid claims. CGI
case management software serves in auditing claims. It has the requisite ability
to handle hundreds of provider contracts, multiple lines of business and
multiple products, each with distinct rules for reimbursement.
By helping Blue Cross Blue Shield of Tennessee identify overpaid claims, CGI has
contributed to reducing medical expenses in the form of claims payment as well
as the administrative expenses associated with processing claims. This in turn
helps the insurer to hold down premiums for members.
"It is essential for us to have an efficient and effective system for verifying
the accuracy of the bills we receive. An indication of our satisfaction with CGI
is our recent decision to sign a five-year renewal of the licensing agreement,"
said Marilyn Korol, Manager, Facility Audit, Blue Cross and Blue Shield of
Tennessee.
Governments
This is not simply a television, it's delivering breaking news.
From the moment an election is called to the time the ballots are counted,
Elections Canada is responsible for ensuring the efficiency and integrity of the
electoral process. And in the year 2000, CGI won the bid to develop several
mission critical systems for Elections Canada to facilitate the coordination and
management of federal elections.
One of the most notable CGI contributions is the Event Result System (ERS). This
end-to-end IT system enables Elections Canada to receive and process election
results from all 301 electoral districts and transmit them to the media and the
public with speed and precision.
Where previously the media would have representatives stationed in every
district to report results, election results are now sent directly to a media
centre. This represents substantial time-savings for the electronic and print
media alike. Results are also sent to the Elections Canada Web site, where they
are accessible to the general public.
As a result of an election being called earlier than expected, the time frame
for delivery of ERS was unusually tight, and CGI worked against the calendar to
meet the October 2000 deadline. In addition to having the system in place on
time, CGI had staff on site on election day to handle any last minute glitches.
"Elections Canada is called upon to get accurate and timely information to
citizens and journalists at election time. CGI's expertise and support are
instrumental in our ability to fulfill this charge more effectively," said
Elections Canada Chief Electoral Officer J.P. Kingsley.
Manufacturing/Retail/Distribution
This is not merely a toaster, it's a product that has been coded and delivered.
Fingerhut Companies is one of North America's leading database marketers,
providing everything from electronics to cosmetics directly to the consumer
through catalogues, telemarketing and the Internet. Fingerhut's relationship
with CGI began several years ago when the former IMRglobal undertook a project
to make Fingerhut Y2K compliant. Now with the merger, Fingerhut benefits from a
greatly extended range of services, and the relationship has flourished.
As part of a current five-year contract, CGI is providing vital application
maintenance services for every domain of Fingerhut's operations, from
telemarketing and product distribution to order processing and customer service.
Employing a combination of onsite and offshore resources to support Fingerhut's
business systems, CGI has improved performance and delivered cost-effective
maintenance of legacy applications. For Fingerhut customers, the added
efficiency and performance translate into dependably smooth transactions. And
with CGI in the picture, Fingerhut people are freer to work on strategic
projects.
In this area too CGI is proving a valuable resource. This past summer, CGI
conducted an IT assessment that consisted of an eight-week study evaluating
infrastructure, operations and all costs associated with the IT function. This
study helped Fingerhut align its IT and business plans.
"We have been very satisfied with CGI's performance, as is evident by our
enduring relationship, and look forward to enjoying the benefits that result
from the company's expanded service offerings," said Fingerhut Chief Information
Officer Gary Bledsoe.
Financial Services
This is not only a bank, it's millions of seamless transactions per day.
The merger of the Toronto-Dominion Bank (TD) and Canada Trust was a significant
event in recent Canadian banking history. It propelled TD to the position of one
of Canada's largest mutual fund companies. And in the process, it offered an
opportunity for CGI to demonstrate its IT know-how.
Some of the key challenges in the wake of the merger were to integrate two
different systems of managing mutual funds, to develop new functionalities to
address gaps between the systems, and to ensure that the resulting integrated
system was capable of handling extremely high volumes of transactions. CGI and
TD worked together to achieve these aims.
On the basis of a comparative analysis conducted by CGI, TD was able to select
the best features of each system, while retaining its Shareholder Management
System (SMS), originally developed by CGI. CGI subsequently designed the
programs to receive, validate and upload Canada Trust data. It also designed a
stand-alone system which enabled TD to perform volume-handling testing.
With the help of CGI's expertise, TD is now able to provide consolidated and
streamlined mutual fund services to all its customers. And the success of the
project has strengthened the relationship between CGI and the TD Bank Financial
Group. "We are confident that CGI's reliable, flexible and cost-effective
solutions will support the growth of our business," said Gerry O'Mahoney, Senior
Vice-President, Security Services, TD Bank Financial Group.
These are not just goals, these are our commitments.
Dear Fellow Shareholders:
In 2001, CGI celebrated 25 years of delivering top quality information
technology (IT) services to its clients. Fiscal year 2001 was also a year of
many achievements which collectively enhanced the fundamentals of CGI that will
continue to drive our growth. CGI is now the fourth largest independent IT
services provider in North America and is better positioned than ever to
capitalize on the growing trend favoring IT and business process outsourcing.
With such enormous opportunity ahead of us, we are determined to be a world
leader in our domain.
Revenue in fiscal 2001 of $1.58 billion was up 10.1% over fiscal 2000. More
importantly, year-over-year revenue growth in our third and fourth quarters,
representing 22.2% and 46.5% respectively, demonstrates our return to strong
growth trends. While organic growth was negative for the year, we note that it
is clearly undergoing a favorable trend, increasing from 3.6% in the third
quarter to 13.8% in the last three months of the fiscal year. Operating margins
improved throughout the year to 15.5% in the fourth quarter, and cash earnings
per share for fiscal 2001 were $0.30, up 11.1% over fiscal 2000. In each of the
third and fourth quarters of fiscal 2001, CGI posted cash earnings per share of
$0.08, compared with $0.04 and $0.03 in the third and fourth quarters of fiscal
2000, respectively. We completed nine acquisitions, concluded one strategic
outsourcing alliance, made equity investments in four joint ventures, announced
contracts and renewals worth $4 billion, and welcomed 5,000 new members to CGI.
Our backlog today of $9.3 billion-business signed but not yet delivered-is
nearly six times our annual revenue, providing far-reaching visibility and a
solid base from which to grow.
Our revenue is diversified and reduces risk in uncertain economic conditions. On
a current revenue run-rate basis, revenue derived from the long-term outsourcing
of our clients' IT needs represents 69%, including a 10% contribution from our
business process services. Revenue from systems integration and consulting
projects, largely derived from our current, long-standing client relationships,
represents 31%. In fiscal 2001, 77% of our revenue was from Canada, 17% from the
US and 6% from outside North America. And our focused expertise in six vertical
or economic sectors has also provided growth and, at the same time, stability.
Revenue from clients in the financial services sector represented 38%;
telecommunications 33%; manufacturing/retail/distribution 15%; governments 12%;
utilities and energy 2%, and healthcare less than 1%.
Our mission remains the same. All of us at CGI are driven to provide
professional services of outstanding quality, competence, performance and
objectivity to fully satisfy our clients' objectives.
Market conditions, in good and bad times, fuel CGI growth
It is clear that organizations are increasingly aware of the benefits realized
through outsourcing their IT and business processing. We have seen demand grow,
even in current market conditions. In fact, we realized more than 15 years ago
that IT outsourcing was counter-cyclical. When business is prospering,
organizations invest more in their IT and we benefit as their long-term IT
partner. When economic conditions force a reduction in IT spending budgets, we
still see the number of inquiries related to IT and business process outsourcing
increase as organizations evaluate the potential to realize cost savings while
gaining access to state-of-the-art technology to further enhance their
competitiveness. This increased demand for IT and business process
outsourcing is strong throughout our network, from all of our targeted market
verticals, and especially in Canada and the US.
How is CGI better positioned to capitalize on these trends than it was a year
ago?
The success we achieved in fiscal 2001 better positions us to capitalize on the
growth opportunities in the IT and business process outsourcing markets,
especially in the US. For example:
> We can now offer our clients a remote delivery capability including cost
competitive offshore application development and maintenance services.
> As part of our contract win with Fireman's Fund Insurance Company, we
acquired a data center in Phoenix and can now support our clients' IT data
management needs from the US.
> In July, we regrouped our business process services into a separate
business unit to focus on leveraging a growing client demand for business
process outsourcing and give CGI added depth when bidding on large outsourcing
contracts.
By far the most significant step in our expansion strategy to date and driver of
future growth was the merger with IMRglobal, which closed at the end of July. In
addition to increasing our critical mass of highly skilled members in the US and
abroad, the merger increased our vertical market depth and breadth, and added to
our list of strong, long-term client relationships. IMRglobal's delivery model
complements ours and significantly enhances our ability to offer clients a
customized and cost competitive solution for the delivery of their IT services,
an important differentiator for CGI.
Looking ahead
Our growth initiatives for fiscal 2002 will capitalize on our core fundamentals
and leverage the excellent results we achieved in fiscal 2001. Although CGI is
arguably the premier IT services company in Canada, we have only just begun to
establish our position in the US, Europe and abroad. Recent contract wins
provide CGI stakeholders with substantial revenue visibility, but key to our
future growth will be driving accelerated organic growth and pursuing large
outsourcing contract wins. Especially in Canada, we believe that our systems
integration and consulting offering will continue to be vital to driving new
business as well as to benefit from projects awarded by long-term clients who
turn to CGI first as their partner for IT services. The other component of our
growth strategy is to identify acquisitions that further CGI's global
competitive position by increasing our geographic presence, or enhancing our
vertical service offerings.
To support these growth objectives, we are investing in several initiatives at
CGI to further strengthen our fundamentals. First, in conjunction with an
improved business development program, we are devoting more effort to increasing
CGI's brand awareness among potential clients, the media and investors,
especially outside Canada.
Second, we are making one of our largest investments to date in our human,
intellectual capital with the recent establishment of the CGI Leadership
Institute. As Paule Dore explains in the following pages, this learning
institution will allow us to ensure that the CGI approach to business is well
known and integrated by all managers across our network.
Additionally, we will continue to deploy our quality framework, which enables
CGI to deliver consistently high quality services everywhere in the world.
Similarly, we are committed to improving shareholder value with continued
financial discipline that provides the infrastructure for evaluating
acquisitions and structuring large, long-term outsourcing contracts. Our balance
sheet remains one of the strongest in our industry, with
virtually no debt, making us an attractive IT and business process outsourcing
partner and giving us the flexibility to make these new investments in
technology and people that will further our long-term success.
We have been blessed by the accelerating trend leading companies to seek a
single, dependable partner for their information technology service needs. As we
head into our next 25 years, we will continue to pursue our dream of becoming a
world leader in our domain. Our core fundamentals provide the platform for this
goal. We will continue to recruit, motivate and retain the very best people to
fulfill the growing demand for IT services under the highest quality standards
and in doing so, create meaningful shareholder value.
In addition to applauding our members, we would like to thank our shareholders,
clients, partners and members of the Board for their continued support.
(signed)
Serge Godin
Chairman and Chief Executive Officer
These are not just words, these are our fundamentals.
Quality Drives Our Ability to Manage Growth and Create Value
If last year is any indication of things to come, CGI will be growing at
breathtaking pace in fiscal 2002. Then again, since inception more than 25 years
ago we have been growing rapidly, both organically and through acquisitions.
This past year, we completed nine acquisitions, concluded one strategic alliance
and took an interest in four joint venture companies. Taking into consideration
the numerous outsourcing contracts signed during fiscal 2001, in addition to
acquisitions and investments, this represents the integration of 5,000 new
employees, or members as we refer to them.
In view of such rapid growth, one of our main challenges obviously rests in
maintaining, enriching and further extending our deeply rooted corporate
culture. This culture is characterized by a total dedication to client needs,
constant focus on delivering high quality services, as well as an
entrepreneurial spirit that applies to all our work. These values truly
represent who we are, and they are the foundation on which the Company was built
over the past 25 years.
Our values also represent a proven set of guiding principles. These have been
put to the test, and time and again we have witnessed how they make good
business sense. Quality, for instance, stands first and foremost among our
values. Seven years ago, CGI became the first North American IT services firm to
receive the internationally recognized ISO 9001 quality certification for the
way in which we manage projects. Very early on, our quality processes allowed us
to improve how we deliver services to our clients. Today, the vast majority of
our projects are delivered on time, on budget, and to the satisfaction of our
clients. And we have seen a direct correlation between this disciplined approach
and the steady improvement of our profit margins.
In the coming year we will be implementing an enhanced version of the quality
system that is the cornerstone of our ISO 9001 certified quality approach. This
new system, known as the Client Partnership Management Framework (CPMF), was the
result of an extensive review. We have now extended the reach of our quality
framework, and further improved its potential to make a strategic contribution
to our clients' business.
Since a growing proportion of our revenue stream is related to long-term
outsourcing contracts, we felt it was time to extend our quality approach beyond
service delivery and to focus more on building relationships and providing our
clients with greater value from a strategic and tactical standpoint. Our quality
processes are now more representative of the way in which we help our clients
enhance their competitive position through the use of information technology.
At CGI, integrations of new members are a widely decentralized process. Indeed,
consistent with our business approach, local business units are responsible and
accountable for identifying acquisition targets and integrating people and
operations following the transaction. Throughout the process, of course,
business units benefit from the Company's best practices and support from
corporate functions. Integrations are handled according to the same exacting
standards as clients' IT projects. They are managed according to a strict
calendar and come with well-defined deliverables. One designated manager has
overall responsibility for the project and member communication ranks high among
priorities.
Our ISO 9001 certified processes play an important role and facilitate the
integration of new members. For example, each of our business units is
individually responsible for maintaining its
own ISO 9001 certification. Therefore, securing this certification quickly
becomes a matter of pride, and people strive to implement CGI's management
frameworks and processes. In fact, shortly after an acquisition, one of our new
members' most common question usually is: "When will we be implementing the
Company's quality processes and seeking ISO 9001 certification?"
Ensuring that we deliver quality services is directly linked to the depth and
management capability of our leaders. It is with this in mind that on June 15,
2001, to coincide with the Company's 25th anniversary, some 250 of our
executives and senior managers were personally involved in the launch of the CGI
Leadership Institute.
As CGI is becoming a truly global organization, with a presence on four
continents and the ability to meet ever more complex client needs, there was a
growing requirement to deepen our leadership capability while preparing our
people for tomorrow's challenges. This is why we have created our own Leadership
Institute.
This learning organization will play a key role in the sharing and dissemination
of our values, our best practices and our vision with our ever growing network
of members. It will also play a vital role in the integration of new members,
since its e-learning features will allow us to quickly disseminate information
across our network. In our integration efforts with new members, time is of the
essence and the Institute will be a powerful tool at our disposal.
CGI's core values focusing on quality, service to others and personal
fulfillment meet a universal need for personal growth and accomplishment. Our
members from around the world relate to these values and share in realizing
them. Our role as leaders is simply to act as a conduit for the energies of the
people who share our Company's dream, whether members, clients or shareholders.
We believe that with the new tools at its disposal, including our quality
approach and CPMF, as well as with the CGI Leadership Institute, CGI will, more
than ever and for years to come, continue in its role as a force of attraction
for members, clients and shareholders.
(signed)
Paule Dore
Executive Vice-President and Chief Corporate Officer
Board of Directors
Serge Godin 3
Chairman and Chief Executive Officer, CGI
Yvan Allaire 1
Emeritus Professor of Strategy, UQAM
Chairman, Governance Value Added Inc.
William D. Anderson
President, BCE Ventures Inc.
Claude Boivin 1
Director of Companies
Jean Brassard
Vice-Chairman, CGI and Director of Companies
Claude Chamberland 2
Director of Companies
Paule Dore
Executive Vice-President and Chief Corporate Officer, and Secretary, CGI
Andre Imbeau 1
Executive Vice-President and Chief Financial Officer, and Treasurer, CGI
David L. Johnston 2
President and Vice-Chancellor, University of Waterloo
Eileen A. Mercier 1
President, Finvoy Management Inc.
Jean C. Monty 2
Chairman and Chief Executive Officer, BCE Inc.
C. Wesley M. Scott
Director of Companies
Charles Sirois
Chairman and Chief Executive Officer, Telesystem Ltd.
1 Member of the Audit Committee
2 Member of the Human Resources and Corporate Governance Committee
3 Ex-officio member of the Human Resources and Corporate Governance Committee
Executive Management
Serge Godin
Chairman and Chief Executive Officer
Francois Chasse
Executive Vice-President, Mergers and Acquisitions
Paule Dore
Executive Vice-President and Chief Corporate Officer
Andre Imbeau
Executive Vice-President and Chief Financial Officer
Andre Nadeau
Executive Vice-President and Chief Strategy Officer
Luc Pinard
President, European Operations
Michael Roach
President, Canada and Europe
Daniel Rocheleau
Executive Vice-President and Chief Business Engineering Officer
Satish Sanan
President, United States and Asia Pacific
Joseph I. Saliba
President, Business Process Services
Management Team
Corporate Services
Serge Godin
Chairman and Chief Executive Officer
Francois Chasse
Executive Vice-President, Mergers and Acquisitions
Paule Dore
Executive Vice-President and Chief Corporate Officer
Andre Imbeau
Executive Vice-President and Chief Financial Officer
Andre Nadeau
Executive Vice-President and Chief Strategy Officer
Daniel Rocheleau
Executive Vice-President and Chief Business Engineering Officer
Operations
Canada and Europe
Michael Roach
President
Luc Pinard
President, European Operations
Hicham Adra
Senior Vice-President, Ottawa
Paul Biron
Senior Vice-President and General Manager, Services to BCE
Al MacDonald
Senior Vice-President, Atlantic Canada
Pierre Turcotte
Senior Vice-President, Greater Montreal Area
Jacques Giguere
Senior Vice-President, Integrated Technology Management, Quebec
Gilles Godbout
Senior Vice-President, Credit Union Solutions and Services
Terry Johnson
Senior Vice-President, Western Canada
Claude Marcoux
Senior Vice-President, Quebec City
Ross Marsden
Senior Vice-President and General Manager, Greater Toronto Area
United States and Asia Pacific
Satish Sanan
President
George Arsenault
Senior Vice-President, Central US and Healthcare/Government Sector Leader
Santosh Bhargava
Senior Vice-President, India
Terry Broom
Senior Vice-President, Eastern US and Financial Services Sector Leader
Joe Calavassy
Vice-President, Australia
Prakash Challa
Senior Vice-President, Application Development and Maintenance Services
Jay Clark
Senior Vice-President, Western US and Manufacturing/Retail/Distribution,
Telecom and Utilities & Energy Sector Leader
Ken Dickinson
Senior Vice-President, Business Engineering
Bob Evans
Senior Vice-President, Solutions Management
Eric Lecoquierre
Vice-President, Japan
Business Process Services
Joseph I. Saliba
President
Al Bonfiglio
Vice-President, Document Management
Daniel Crepeau
Senior Vice-President, Canadian Operations
Karen Furtado
Vice-President, Insurance Business Process Services
Patti Rajski
Vice-President, Solutions Marketing
CGI Offices
North America
Canada
Burnaby, BC
Calgary, AB
Edmonton, AB
Fredericton, NB
Halifax, NS
Jonquiere, QC
Montreal, QC
Ottawa, ON
Quebec City, QC Regina, SK
Saint John, NB
Toronto, ON
Vancouver, BC
Winnipeg, MB
US
Albany, NY
Andover, MA
Atlanta, GA
Canton, MA
Chicago, IL
Cincinnati, OH
Clearwater, FL
Cleveland, OH
Dallas, TX
Detroit, MI
Harrisburg, PA
Houston, TX
Howell, NJ
Kansas City, KS
Minneapolis, MN
Nashville, TN
New Iberia, LA
New York, NY
Phoenix, AR
Pittsburg, PA
Rancho Cordova, CA
San Jose, CA
St. Louis, MO
Latin America
Uruguay
Montevideo
Europe
England
Basingstoke
Bristol
Stevenage/London
France
Paris
Portugal
Lisbon
Asia Pacific
Australia
Sydney
India
Bangalore
Mumbai
Japan
Tokyo
For a list of CGI offices worldwide, please visit our Website at: www.cgi.ca
Main Addresses
Global Headquarters
1130 Sherbrooke Street West
5th Floor
Montreal, Quebec H3A 2M8
CANADA
Tel.: (514) 841-3200
Fax: (514) 841-3299
Canadian Operations
4 King Street West
Suite 1900
Toronto, Ontario M5H 1B6
CANADA
Tel.: (416) 862-0430
Fax: (416) 862-2321
US Operations
100 South Missouri Avenue
Clearwater, FL 33756
USA
Tel: (727) 467-8000
Fax: (727) 467-8001
European Operations
1800 McGill College Avenue
16th Floor
Montreal, Quebec H3A 3J6
CANADA
Tel.: (514) 878-8585
Fax: (514) 281-1709
Broadlands House
Primett Road
Stevenage, Herts SG1 3EE
ENGLAND
Tel.: 44 (0) 143 831 7966
Fax: 44 (0) 143 831 4368
Business Process Services
600 Federal Street
Andover, MA 01810
USA
Tel.: (978) 946-3000
Fax: (978) 682-5500
Shareholder Information
Listing
The Toronto Stock Exchange:
April 1992: GIB.A
New York Stock Exchange:
October 1998: GIB
Number of shares outstanding as at October 31, 2001:
327,130,450 Class A subordinate shares
40,799,774 Class B shares
High/low of share price from October 1, 2000 to October 31, 2001:
TSE: 12.20/5.01
NYSE (US$): 8.00/3.22
Auditors
Samson Belair/Deloitte & Touche
Transfer Agent
Computershare
Investor Relations
For further information about the Company, additional copies of this report or
other financial information, contact:
Investor Relations CGI Group Inc.
1130 Sherbrooke Street West
5th Floor
Montreal, Quebec H3A 2M8
CANADA
Tel.: (514) 841-3200
You may also contact us by sending an e-mail to ir@cgi.ca or by visiting the
Investor Relations section on the Company's Web site at www.cgi.ca.
Annual General Meeting of Shareholders
Monday, January 21, 2002, at 11:00 a.m.
The Hilton Montreal Bonaventure
1 Place Bonaventure
Montreal, Quebec
CGI presents a live Webcast of its Annual Meeting of Shareholders via Internet
at www.cgi.ca. Complete instructions on viewing the Webcast will be available on
CGI's Web site. Voting is restricted to shareholders present at the Annual
Meeting or represented by proxy.
This annual report is also on the Internet at the following address: www.cgi.ca.
[GRAPHIC OMITTED]
CGI Group Inc.
2001 Annual Report
Management's Discussion and Analysis
of Financial Position and Results of Operations
Management's Discussion and Analysis of Financial Position and Results of
Operations
The following discussion and analysis should be read in conjunction with the
Company's fiscal 2001, 2000 and 1999 Consolidated Financial Statements and the
notes thereto. All dollar amounts are in Canadian dollars unless otherwise
indicated.
Corporate Overview
Headquartered in Montreal, CGI was organized along geographic lines with three
strategic business units: Canada, US and International. Effective October 1,
2001, CGI reorganized its business units according to the following breakdown:
Canada and Europe, US and Asia Pacific, and Business Process Services (see the
section entitled "Organizational Change" on page 5). CGI provides end-to-end
information technology (IT) services in six economic sectors: financial
services, telecommunications, manufacturing/retail/distribution, governments,
utilities and energy, as well as healthcare. Some 69% of the Company's business
is in the management of business and IT functions (outsourcing), and 31% in
consulting and systems integration.
CGI has more than 13,000 employees (members) and provides end-to-end IT services
and business solutions to some 3,000 clients in North America, Europe and Asia
Pacific from more than 60 offices in over 20 countries. The Company provides IT
facilities management to its clients using a network of state-of-the-art data
centers in Montreal, Toronto and Regina, as well as in Phoenix (US) and
Basingstoke (UK). CGI also has applications maintenance and development centers
in Mumbai and Bangalore (India).
Business Acquisitions
In fiscal 2001, CGI completed the acquisition of eight niche companies, one
large acquisition and one strategic outsourcing alliance that was accounted for
as a business acquisition, as well as four joint venture investments.
On October 4, 2000, CGI completed the acquisition of Detroit-based C.U.
Processing Inc. ("CUP"), a provider of information management systems primarily
to US credit unions. At the time of the acquisition, CUP had a staff of
approximately 160 and for its latest fiscal year, it recorded revenue of more
than $35.0 million. CUP was acquired for a cash consideration of $38.5 million
and goodwill of $41.6 million was recorded as part of the transaction.
Effective November 27, 2000, CGI completed a 49.0% equity investment in AGTI
Consulting Services Inc. ("AGTI"), a Montreal-based IT consulting firm with more
than 225 senior consultants and generating annual revenue of approximately $27
million. This transaction was paid for through the issuance of $24.9 million in
cash. Goodwill resulting from the transaction amounted to $14.6 million.
On December 12, 2000, CGI completed the acquisition of Toronto-based RSI
Realtime Consulting Inc. ("RSI"), an SAP implementation specialist. At the time
of the acquisition, the consulting and software development firm employed a
staff of 45 and had annual
2
revenue of $6.0 million. CGI completed this acquisition for a consideration of
$2.6 million in cash and shares. Goodwill resulting from the transaction
amounted to $3.1 million.
On January 4, 2001, CGI closed the acquisition of Groupe-conseil CDL Inc.
("CDL"), a Montreal-based IT consulting firm specializing in the implementation
of J.D. Edwards enterprise resource planning solutions. At the time of the
acquisition, CDL had 45 employees and annual revenue of $6.4 million. CGI
acquired CDL for a consideration of $4.9 million in cash and shares. As part of
the transaction, CGI recorded goodwill of $4.0 million.
On January 9, 2001, CGI acquired all of the outstanding shares of Star Data
Systems Inc. ("Star Data"), a Canadian-based provider of financial services with
annual revenue, at the time of closing, of nearly $80 million. Star Data
employed over 400 professionals and operated two primary business
lines-information systems and wealth management solutions-and its clients
included major Canadian financial institutions. The transaction was completed on
the basis of 0.737 Class A subordinate share of CGI for each Star Data common
share. As a result of the transaction, CGI issued 13.5 million Class A
subordinate shares and recorded goodwill amounting to $73.1 million.
On January 12, 2001, CGI increased its equity ownership in Quebec-based IT
consulting firm Conseillers en informatique d'affaires from 35.0% to 49.0%. In
the course of this transaction, CGI issued 153,895 Class A subordinate shares
and recorded goodwill totalling $2.8 million.
On February 1, 2001, CGI entered into a partnership with Loto-Quebec, which
involved the creation of Nter Technologies, Limited Partnership ("Nter"). Nter
offers products and services to the worldwide gaming industry, including the
development and sale of IT solutions, consulting and management services. CGI
acquired a 49.9% interest in Nter. At the time of the announcement, the two
partners estimated that the venture would generate revenues of approximately
$100 million over five years. CGI acquired its ownership position for a cash
consideration of $5.0 million. As part of this transaction, CGI accounted for
goodwill totalling $2.5 million.
On May 1, 2001, CGI signed a strategic, 10-year alliance worth an estimated
value of $1.2 billion with leading Canadian financial services group
Confederation des caisses populaires et d'economie Desjardins du Quebec. In the
context of this agreement, CGI acquired the related assets, certain intellectual
property rights and assumed liabilities of Confederation des caisses populaires
et d'economie Desjardins du Quebec, used in data and micro-computing of
Mouvement des caisses Desjardins ("Desjardins") operations. CGI also took over
450 Desjardins employees and two Montreal data centers and will manage
Desjardins' data processing operations. CGI also agreed to join with Desjardins
to market the client's banking solutions to financial institutions.
On May 31, 2001, CGI acquired California-based CyberBranch Corporation, an
Internet and intranet provider of leading edge technology to credit unions
across North America. The acquisition was paid for with a cash consideration of
$1.5 million, plus future royalties. Goodwill from this transaction totalled
$2.1 million.
3
On July 1, 2001, CGI completed the acquisition of Larochelle Gratton, a
Quebec-based IT consulting firm, for a consideration of $4.7 million in cash and
516,352 Class A subordinate shares of CGI. At the time of the acquisition,
Larochelle Gratton had annual revenue of $18.0 million and employed a staff of
200 employees. CGI recorded goodwill of $7.8 million as part of this
transaction.
On July 27, 2001, CGI completed its merger with IMRglobal Corp. ("IMRglobal"),
following the approval of the merger agreement by a majority of IMRglobal
shareholders. As part of this transaction, CGI acquired all outstanding shares
of common stock of IMRglobal, on the basis of 1.5974 Class A subordinate share
of CGI for each share of IMRglobal common stock. As a result of the merger, CGI
issued 70.8 million Class A subordinate shares and 8.4 million options to
acquire Class A subordinate shares, for a total value of $552.8 million.
Non-cash working capital items acquired included costs totalling $68.0 million
of acquisition and integration liabilities incurred for professional fees and
costs to exit and consolidate certain IMRglobal activities. CGI, as part of the
preliminary price allocation, recorded goodwill of $578.5 million on this
transaction which, under the new accounting standards effective July 1, 2001, is
not amortized.
On August 7, 2001, CGI acquired Portugal-based LoyalTech, a consulting and
systems integration firm specializing in customer relationship management
solutions and e-business strategies, for a total consideration of $4.2 million.
At the time of the acquisition, LoyalTech's sales run-rate totalled over $4
million. Goodwill resulting from this transaction totalled $4.2 million.
On August 27, 2001, CGI signed a joint venture agreement with the former
management team of Toronto-based strategy and research firm Digital 4Sight,
which involved the creation of a new management strategy and research firm to
accelerate Digital 4Sight's expansion. CGI paid a consideration of $200,000 for
its 51.0% interest, and recorded goodwill totalling that same amount.
On September 10, 2001, CGI acquired EPC Services Conseils Inc. ("EPC"), a
Quebec-based IT consulting firm, for a consideration of $155,000.
Large Contracts
On January 4, 2001, CGI signed an outsourcing contract worth more than $119
million with UK-based financial services company Sun Life Financial ("Sun
Life"). Under the terms of the contract, extending over a seven-year period, CGI
has taken over Sun Life's Basingstoke, UK, data center and will run and support
the client's IT infrastructure and desktops.
On January 22, 2001, CGI announced the 10-year extension and broadening of an IT
outsourcing agreement with Interac Association, for an undisclosed amount.
On February 7, 2001, CGI signed a major multi-million pounds sterling contract
with insurance industry leader Allianz, for the implementation of GIOS, CGI's
insurance solution, in more than 20 countries around the world.
4
On April 5, 2001, CGI and UCAR International Inc. ("UCAR") signed a 10-year
outsourcing contract valued at approximately US$75 million. Under the agreement,
CGI will manage UCAR's data center services, networks, desktops,
telecommunications and legacy systems by leveraging its cost efficient
near-shore delivery model.
On June 14, 2001, CGI began operating the IT systems of Laurentian Bank of
Canada ("Laurentian Bank"), as part of a $300.0 million, 10-year outsourcing
contract with this client. The agreement covers areas such as project
development, applications maintenance and evolution, operations support and
automated banking machine support. The contract with Laurentian Bank was signed
on June 4, 2001.
On October 1, 2001, CGI signed a US$380.0 million, strategic 10-year alliance
with California-based Fireman's Fund Insurance Company ("Fireman"). As part of
the agreement, CGI took over the client's Phoenix-based, state-of-the art data
center and will provide Fireman with IT support services to some 80 locations
across the US.
Organizational Change
On July 27, 2001, CGI announced the launch of a new business unit, responsible
for providing business process services to CGI's worldwide client base. On the
same date, CGI also announced organizational adjustments to better reflect the
nature of the Company's operations. Based on these changes, the Company's
operations are managed by three senior executives, namely Michael Roach,
President, Canada and Europe, Satish Sanan, President, US and Asia Pacific, and
Joseph Saliba, President, Business Process Services. All CGI global and
corporate functions remain the same. This change in operations management will
be reflected in the Company's accounting effective October 1, 2001.
Each unit is evaluated primarily on its revenue, operating earnings and net
contribution (the latter being defined as earnings before interest, income
taxes, entity subject to significant influence and amortization of goodwill) by
its respective President, who reports directly to the Chief Executive Officer.
Growth Strategy of the Company
The Company's growth strategy is comprised of four pillars, namely organic
growth, large outsourcing contracts, acquisition of niche companies and large
business acquisitions.
During the year, CGI signed several outsourcing contracts, with an aggregate
value of $2.1 billion (excluding backlog from acquired companies), plus a
US$380.0 million contract signed with Fireman effective October 1, 2001. Some of
these negotiations had been ongoing since the latter part of fiscal 2000, but
their signing had been delayed by the turn of the millennium.
Throughout fiscal 2001, the Company continued to acquire niche players in the IT
services sector, which allowed it to enrich its vertical industry offering or
complete its geographic coverage. The acquisition of these companies and the
joint ventures
5
represented the addition of approximately $160 million and $35 million in annual
revenue, respectively (based on annualized revenue as at acquisition date).
In addition to the acquisition of these niche companies, CGI also pursued its
large acquisition strategy. On July 27, 2001, CGI closed its merger agreement
with IMRglobal, which provided it with significantly greater critical mass in
the US and other international markets. For the six-month period ended June 30,
2001, representing its last two quarters as a publicly traded company, IMRglobal
achieved revenue totalling approximately US$235 million on an annualized basis.
CGI continues to seek large business acquisitions and continues to focus on
growing its presence in the US market. One main component of this growth is the
Company's highly cost effective IT services delivery model, which allowed it to
sign several IT outsourcing contracts during the year. CGI's flexible model
allows it to serve its US clients using a combination of local (US), near-shore
(Canadian) and offshore (Indian) operations. CGI is in a position to leverage
its newly acquired Phoenix-based US data center, its network of Canadian
infrastructure facilities, as well as its Bangalore and Mumbai applications
development centers.
Performance Overview
Fiscal 2001 marked the twenty-fifth consecutive year of growth for CGI, as
revenue totalled $1.58 billion, up from $1.44 billion in fiscal 2000 and $1.41
billion in fiscal 1999. Operating earnings before depreciation and amortization
of fixed assets and amortization of contract costs and other long-term assets
totalled $229.6 million, compared with $171.7 million in fiscal 2000 and $214.3
million in 1999. Earnings before amortization of goodwill were $89.9 million
($0.30 per share basic and diluted), compared with $73.5 million ($0.27 per
share basic and diluted) in fiscal 2000 and $99.9 million ($0.37 per share basic
and diluted) in fiscal 1999. The year-over-year improvement in earnings before
amortization of goodwill was 22.3%. Net earnings amounted to $62.8 million
($0.21 per share basic and diluted), compared with $55.7 million ($0.21 per
share basic and $0.20 per share diluted) in fiscal 2000 and $83.8 million ($0.31
per share basic and diluted) in fiscal 1999. The net margin was 4.0%, compared
with 3.9% one year ago and 5.9% in 1999.
In the fourth quarter, revenue was $469.0 million, compared with $320.1 million
in the fourth quarter a year ago. Operating earnings before depreciation and
amortization of fixed assets and amortization of contract costs and other
long-term assets totalled $72.6 million, compared with $24.8 million in the
fourth quarter of fiscal 2000. Earnings before amortization of goodwill were
$27.2 million ($0.08 per share basic and diluted), compared with $7.1 million
($0.03 per share basic and diluted) in fiscal 2000. Net earnings were $19.8
million ($0.06 per share basic and diluted), compared with $2.4 million ($0.01
per share basic and diluted) in the same quarter of fiscal 2000. The
year-over-year improvement in earnings before amortization of goodwill was
283.1% while the improvement over the same period for net earnings was 725.0%.
The balance sheet remained strong at September 30, 2001, with $46.0 million in
cash and cash equivalents, $1.48 billion in shareholders' equity and $40.3
million in long-term debt, related to bankers' acceptances and capital leases.
6
Seasonality
CGI's quarterly results reflect some seasonality, which in many years has been
offset to some extent by the Company's growing outsourcing revenue, which is
earned consistently on a monthly basis throughout the year. Seasonality in the
fourth quarter of fiscal 2001 has increased marginally following the July 2001
acquisition of IMRglobal, whose business is mainly comprised of consulting and
systems integration services.
Comparison of Operating Results for the Years Ended September 30, 2001, 2000 and
1999 Revenue
Revenue increased by 10.1% in fiscal 2001 to $1,581.3 million, following a
marginal increase to $1,436.0 million in fiscal 2000, and a 90.2% increase to
$1,409.5 million in fiscal 1999. In fiscal 2001, revenue growth was driven by
business acquisitions.
Throughout the year, revenue growth from the US and international markets
remained challenged. Completion in fiscal 2000 of a large international systems
integration contract in Brazil also hindered internal growth.
These factors were more than compensated by CGI's dynamic two-fold acquisition
strategy, aimed at acquiring niche IT companies as well as large players. In
fiscal 2001, CGI acquired nine IT companies and took an equity position in four
such entities, which together made a revenue contribution of $216.5 million in
the year. CGI also acquired one large US-based company (IMRglobal), which added
another $48.7 million to revenue in the two last months of fiscal 2001.
Throughout the year, CGI signed several large IT outsourcing contracts, which
contributed significantly to its revenue growth. CGI benefited from a five-month
contribution from its contract with Desjardins, three and a half month
contribution from its agreement with Laurentian Bank, in addition to contracts
with Allianz (effective February 7, 2001) and Sun Life (effective January 4,
2001), among others.
In fiscal 2000, the Company benefited from a 12-month contribution of its
contract with Bell Mobility, as well as from its DRT Systems International and
DRT Systems International L.P. (jointly, "DRT") acquisition, effective July 1,
1999. These revenue gains were partially offset by Bell Canada's reduction in IT
budgets, compounded by an industry-wide slowdown in IT spending related to the
Year 2000 phenomenon. The 90.2% increase in revenue in fiscal 1999 reflected the
$4.5 billion, 10-year IT outsourcing contract with Bell Canada (through CGI's
acquisition of Bell Sygma Telecom Solutions) and the acquisition of Bell Sygma
International for the full year. The 1999 revenue increase also reflected the
acquisition of Technologie Desjardins Laurentienne effective January 1, 1999.
In fiscal 2001, the revenue mix by geographic region was: Canada 77%, compared
with 73% in fiscal 2000 and 81% in fiscal 1999; US 17%, compared with 15% in
2000 and 10% in 1999; and International 6%, compared with 12% in 2000 and 9% in
1999.
7
In fiscal 2001, the mix by type of service was 69% management of IT and business
functions-or outsourcing, and 31% from consulting and systems integration. In
fiscal 2000, the mix was 62% outsourcing and 38% systems integration and
consulting. In fiscal 1999, these two sectors represented 72% and 28%,
respectively.
Operating expenses
Costs of services, selling and administrative expenses amounted to $1,339.1
million in fiscal 2001 or 84.7% of revenue, compared with $1,254.4 million or
87.3% the previous year and $1,185.6 million or 84.1% of revenue in fiscal 1999.
This reduction in the operating expense to revenue ratio in fiscal 2001 was
achieved by lower overhead costs in the US and international units resulting
from the improvements in the utilization of CGI's IT members, synergies from the
integration of the business acquisitions and outsourcing contracts, the revenue
contribution of IMRglobal and other acquired companies and, finally, the
Company's participation in the Quebec government's refundable tax credits on
salaries program which the Company benefits from as a result of its future
relocation to E-Commerce Place.
Research expenses amounted to $12.6 million in fiscal 2001, up from $10.0
million in the previous fiscal year and $9.6 million in fiscal 1999. During
2001, CGI continued to invest in the $50.0 million Strategic Investment Program
announced in fiscal 2000. The purpose of the program is to support client
oriented initiatives, development of CGI's proprietary solutions and
implementation of new technologies. CGI's efforts are aimed at assisting its
clients in meeting their growing and diversified needs. In fiscal 2000, research
expenses were related to the Web-enabling of CGI's capabilities and intellectual
property. In 1999, research spending revolved around the development of
solutions for the property and casualty insurance markets in Canada and the US.
Earnings before depreciation and amortization of fixed assets and amortization
of contract costs and other long-term assets
Earnings before depreciation and amortization of fixed assets and amortization
of contract costs and other long-term assets totalled $229.6 million, compared
with $171.7 million in fiscal 2000 and $214.3 million in fiscal 1999. In fiscal
2001, CGI reported depreciation and amortization of fixed assets totalling $32.5
million, compared with $26.4 million in fiscal 2000 and $27.4 million in fiscal
1999. In fiscal 2001, amortization of fixed assets increased as a result of the
acquisition of fixed assets related to the Desjardins contract, as well as other
asset purchases acquired through the nine companies acquired, and the four joint
ventures in which CGI acquired interests. In fiscal 2000, amortization of fixed
assets was slightly lower than in fiscal 1999, due to the fact that some assets
were fully amortized and given that only two companies were acquired. In fiscal
1999, amortization of fixed assets reflected the purchase of new assets
resulting from business acquisitions.
Amortization of contract costs and other long-term assets totalled $33.5 million
in fiscal 2001, up from $22.0 million in the previous year and $20.9 million in
fiscal 1999. Amortization of contract costs and other long-term assets increased
as a result of costs incurred for the delivery of large outsourcing contracts
with Desjardins, Laurentian Bank, UCAR and Sun Life, among others. In fiscal
2000, the increase in amortization of
8
contract costs and other long-term assets reflected the addition of licensing
fees and other expenses incurred in the course of IT management contracts.
Interest
Interest on long-term debt increased to $4.2 million from $3.6 million in the
previous year and $1.4 million in 1999. In fiscal 2001, interest expense was
related mainly to a loan contracted in the course of a large outsourcing
contract and an acquisition. In fiscal 2000, such expense stemmed from a full
year of outstanding long-term debt relating to the acquisition of DRT. Fiscal
1999 interest expense was primarily related to the financing of the DRT
acquisition over a period of three months.
Interest income amounted to $3.0 million, compared with $3.9 million in fiscal
2000 and $5.3 million in 1999. Interest income was related to investment of
excess cash balances in short-term fixed income instruments.
Income taxes
The effective income tax rate before goodwill amortization was 44.5% in fiscal
2001, compared with 40.5% in 2000 and 41.2% in 1999. In fiscal 2001, the Company
recorded additional valuation allowances relating to the tax benefit on losses
incurred in the US and certain international operations.
Earnings before amortization of goodwill
Earnings before amortization of goodwill totalled $89.9 million ($0.30 per share
basic and diluted) in fiscal 2001, compared with $73.5 million ($0.27 per share
basic and diluted) in 2000 and $99.9 million ($0.37 per share basic and diluted)
in 1999. CGI's increase in earnings before amortization of goodwill was driven
by the Company's higher revenue stream resulting from new large IT outsourcing
contracts and business acquisitions. However, earnings were negatively impacted
by the Company's higher tax expense.
Amortization of goodwill
Amortization of goodwill, net of income taxes, increased to $27.1 million, from
$17.9 million in fiscal 2000 and $16.1 million in 1999. The increase was mainly
due to amortization of the goodwill from the companies acquired in fiscal 2001,
and the goodwill resulting from the acquisition of APG Solutions & Technologies
Inc. ("APG"), over a full 12-month period, compared with one month in fiscal
2000. Effective July 1, 2001, CGI has been applying Canadian Institute of
Chartered Accountants ("CICA") Handbook Sections 1581, Business Combinations,
and 3062, Goodwill and Other Intangible Assets. Please refer to Note 2 to the
Consolidated Financial Statements. Accordingly, CGI has not amortized goodwill
related to the business acquisitions of IMRglobal, LoyalTech, Larochelle
Gratton, EPC and Digital4Sight. Effective October 1, 2001, CGI will no longer
record amortization of goodwill.
Net earnings
Net earnings increased 12.8% to $62.8 million ($0.21 per share basic and
diluted), from $55.7 million ($0.21 per share basic and $0.20 per share diluted)
in fiscal 2000 and $83.8 million ($0.31 per share basic and diluted) in fiscal
1999. The net margin was 4.0%, compared with 3.9% in fiscal 2000 and 5.9% in
fiscal 1999.
9
The weighted average number of shares outstanding increased by 10.7% to
299,500,350, compared with a 0.9% increase to 270,442,354 in fiscal 2000 and
14.2% increase to 267,969,082 in fiscal 1999, adjusted for two-for-one share
splits in January 2000. In fiscal 2001, the increase in the weighted number of
shares outstanding resulted from the issue of 70,753,841 shares for the
acquisition of IMRglobal on July 27, 2001, the issue of 5,953,248 shares on
August 14, 2001 for the exercise of preemptive rights of Serge Godin and Andre
Imbeau in the course of the IMRglobal transaction, and the issue of 15,081,337
shares in consideration for the business acquisitions outlined in Note 9 to the
Consolidated Financial Statements.
On October 1, 2000, the Company adopted the new recommendations of the CICA
Handbook Section 3500, Earnings per share. Under the revised Section 3500, the
treasury stock method is used instead of the 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 (see Notes 2 and 7 to the Consolidated Financial Statements).
In accordance with US generally accepted accounting principles ("GAAP"), net
earnings were $46.2 million ($0.15 per share basic and diluted) in fiscal 2001,
$53.9 million ($0.20 per share basic and diluted) in fiscal 2000 and $86.1
million ($0.32 per share basic and diluted) in fiscal 1999. Differences between
Canadian GAAP and US GAAP arise mainly from the difference in the accounting
treatment of warrants issued, as well as the method used for integration costs
recognition.
Liquidity and financial resources
CGI concluded fiscal 2001 with a strong balance sheet and cash position which,
together with its available credit facility, is sufficient to support the
Company's organic growth strategy. If these resources need to be augmented due
to the financing requirements related to new large outsourcing contracts or
large acquisitions, significant additional cash requirements would likely be
financed by the issuance of debt and/or equity securities. In fiscal 2001, the
Company renewed the $250.0 million revolving credit facility arranged in 1999
with four Canadian chartered banks. The credit facility is available for
business acquisitions, for general working capital purposes and can be locked
into a three-year term at the Company's initiative. At the close of fiscal 2001,
the total credit facilities available amounted to $225.2 million.
Operating cash flow before changes in non-cash operating working capital items
was $194.2 million ($0.65 per share basic) in fiscal 2001, compared with $126.3
million in fiscal 2000 ($0.47 per share basic) and $162.0 million ($0.60 per
share basic) in fiscal 1999. When adjusted for changes in non-cash operating
working capital items, the operating cash flow was $174.0 million, compared with
$67.6 million in fiscal 2000 and $76.5 million in 1999. The change in the
operating cash flow reflected the $7.1 million increase (12.8%) in net earnings,
as well as higher depreciation and amortization expenses and future income
taxes.
10
Changes in non-cash operating working capital items, which excludes business
acquisitions described in Note 9 to the Consolidated Financial Statements,
reflected an increase in accounts receivable and work in progress, which
resulted from the increased business volumes, business acquisitions and major
outsourcing contracts signed during the year. Accounts payable and accrued
liabilities increased in the normal course of business. Deferred revenue
increased due to the billing in advance on new outsourcing contracts as well as
a general increase related to other outsourcing contracts. In fiscal 2000, the
change in non-cash working capital items reflected mainly a decrease in accounts
payable and accrued liabilities related to the decrease in the operating
expenses on a quarter-over-quarter basis.
Net cash used for financing activities amounted to $15.8 million, from $11.2
million in fiscal 2000 while $41.5 million was provided by financing activities
in fiscal 1999. The $65.0 million of debt repayment during fiscal 2001 was
related to the reimbursement of outstanding long-term debt of acquired companies
(mostly Star Data and IMRglobal). Also, during fiscal 2001 the Company repaid,
on its credit facility, an amount of $5.0 million over and above the sums drawn
during the year.
In fiscal 2001, the issuance of shares provided $54.2 million to the cash
balance, compared with $10.9 million in the previous year. This resulted
primarily from the exercise of preemptive rights by two majority shareholders of
the Company pursuant to the IMRglobal merger, as well as from the exercise of
options.
Net cash used for investing activities totalled $157.8 million, up from $50.3
million in fiscal 2000. Business acquisitions increased to $86.4 million, up
from $18.4 million in fiscal 2000, reflecting the Company's 10 business
acquisitions and four joint venture investments completed in fiscal 2001,
compared with two business acquisitions in fiscal 2000 (for a complete
description of business acquisitions, please refer to the section entitled
"Business Acquisitions" on page 2). The purchase of fixed assets totalled $24.0
million, compared with $18.1 million in fiscal 2000. The increase reflected
improvements that were carried out on Star Data's infrastructure and other
assets which were also acquired in the normal course of business.
Contract costs and other long-term assets include costs incurred as part of
outsourcing contracts signed during the year, including those with Desjardins,
Laurentian Bank, Sun Life and UCAR.
The net decrease in cash position amounted to $3.3 million, compared with a net
increase of $7.1 million in fiscal 2000, and a net decrease of $79.2 million in
fiscal 1999.
Accounting changes
Effective July 1, 2001, CGI has been applying CICA Handbook Sections 1581,
Business Combinations, and 3062, Goodwill and Other Intangible Assets. The
standards require that all business combinations be accounted for using the
purchase method. Additionally, effective January 1, 2002, goodwill and other
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. Please refer to Note 2 to the Consolidated Financial
Statements.
11
Balance Sheet-Fiscal Year-Ends 2001 and 2000
Assets totalled $2,062.8 million at the end of fiscal 2001, compared with $928.6
million at September 30, 2000, representing an increase of 122.2%. All asset
items increased over the previous fiscal year, the major item being goodwill,
which increased by $718.9 million (181.6%) to $1,114.8 million, from $395.9
million in fiscal 2000 due to goodwill resulting from the 10 business
acquisitions and four joint venture investments completed during the year. This
$718.9 million increase also includes $578.5 million of goodwill from the
acquisition of IMRglobal.
Fiscal 2001 accounts receivable include the Quebec government's E-Commerce Place
tax credits on salaries which the Company has been accounting for since the
third quarter of fiscal 2000. Such credits were excluded from the calculation of
the Company's collection period for accounts receivable and work in progress
(days-sales outstanding or DSOs), which amounted to 72 days, compared with 75
days in fiscal 2000. Excluding the impact on DSOs of the IMRglobal acquisition,
DSOs for CGI would have totalled 65 days as at September 30, 2001. This
difference is due to the fact that IMRglobal's revenue stream was accounted for
over a period of only two months. In fiscal 2000, the DSOs reflected the closing
of the APG shortly before the end of the fiscal year.
Fixed assets increased to $123.4 million, up from $58.9 million in fiscal 2000.
The increase was primarily a result of assets acquired through business
acquisitions and large outsourcing contracts. Four buildings, located in
Clearwater (two), Mumbai and New Delhi and worth $23.4 million were acquired
through the merger agreement with IMRglobal.
Contract costs and other long-term assets are related to large outsourcing
contracts and include certain integration costs as well as incentives and
warrants granted to clients to encourage the use of IT services from CGI. These
contracts include conditions for early termination such that any unamortized
amount would be refundable to CGI upon termination.
Accounts payable and accrued liabilities totalled $315.9 million, up 121.3% from
the amount of $142.8 million recorded in fiscal 2000, primarly due to 10
business acquisitions and four joint venture investments. The transaction with
IMRglobal also resulted in an addition of $53.1 million in accounts payable, as
at September 30, 2001.
Deferred revenue totalled $85.2 million, up from $33.2 million in fiscal 2000.
The current liability is comprised mostly of billing revenue, related to certain
outsourcing contracts, which has been paid prior to the delivery of services.
This increase is consistent with the greater number and larger value of
outsourcing contracts signed during fiscal 2001.
CGI's long-term debt decreased by 7.1% to $40.3 million as at September 30,
2001, compared with $43.4 million one year prior. This is the result of a net
repayment of $5.0 million on its credit facility line, partially offset by
additional capital leases.
12
Deferred credits are primarily comprised of unused portion of discounts granted
under the terms of the contracts entered into with Desjardins and Laurentian
Bank.
Risks and Uncertainties
While management is optimistic about the Company's long-term prospects, the
following risks and uncertainties should be considered in evaluating CGI's
potential.
The competition for contracts-CGI has a highly disciplined approach to
management of all aspects of its business, with an increasing proportion of its
operations codified under ISO 9001 certified processes and in corporate manuals.
These processes were developed to help CGI ensure that its employees deliver
services consistently according to the Company's high standards and they are
based on strong values underlying its client-focused culture. These processes
contribute to CGI's high contract win rate and renewal rate. Additionally, the
Company has developed a deep strategic understanding of the six economic sectors
it targets, and this helps enhance its competitive position. CGI's critical mass
and end-to-end IT services have qualified it to make proposals on large IT
services contracts across North America and in Europe.
The long sales cycle for major outsourcing contracts-The average sales cycle for
large outsourcing contracts typically ranges from six to 18 months. In the
second half of fiscal 2001, however, CGI witnessed a shortening of the sales
cycle and, in some cases, signing of outsourcing contracts only a few months
after issuance of requests for proposals.
Foreign currency risk-The increased international business volume could expose
CGI to greater foreign currency exchange risks, which could adversely impact its
operating results. CGI has in place a hedging strategy to protect it, to the
extent possible, against foreign currency exposure.
Business mix variations-Following the merger with IMRglobal, the greater
proportion of consulting and systems integration services in CGI's business mix,
versus outsourcing, may result in greater quarterly revenue variations. However,
CGI's efforts are aimed at developing IMRglobal's capability to deliver an
end-to-end IT outsourcing offering. As a result of this transition, CGI expects
to increase the proportion of its outsourcing business, thus ensuring greater
revenue visibility and predictability.
The availability and cost of qualified IT professionals-The high growth of the
IT industry results in strong demand for qualified individuals. Over the years,
CGI has been able to successfully staff for its needs thanks to its solid
culture, strong values and emphasis on career development, as well as
performance-driven remuneration. In addition, CGI has implemented a
comprehensive program aimed at attracting and retaining qualified and dedicated
professionals and today, CGI is a preferred employer in the IT services
industry. CGI also secures access to additional qualified professionals through
outsourcing contracts and business acquisitions.
The ability to successfully integrate business acquisitions and the operations
of IT outsourcing clients-The integration of acquired operations has become a
core competency for CGI, which has acquired a significant number of companies
over the past 15 years. The Company's disciplined approach to management,
largely based on its ISO
13
9001 certified management frameworks, has been an important factor in the
successful integration of human resources of acquired companies and the IT
operations of outsourcing clients. As at the end of fiscal 2001, the vast
majority of CGI's operations had received ISO 9001 certification.
The ability to continue developing and expanding service offerings to address
emerging business demand and technology trends-CGI remains at the forefront of
developments in the IT services industry, thus ensuring that it can meet the
evolving needs of its clients.
The Company achieves the aforementioned through: its specialization in six
targeted economic sectors, its non-exclusive commercial alliances with hardware
and software vendors and strategic alliances with major partners, its
development of proprietary IT solutions to meet the needs of clients, regular
training and sharing of professional expertise across its network of offices,
and business acquisitions that provide specific knowledge or added geographic
coverage.
Material developments regarding major commercial clients resulting from such
causes as changes in financial condition, mergers or business acquisitions-With
the exception of BCE Inc., its subsidiaries and affiliates, no one company or
group of related companies represents more than 10% of CGI's total revenue.
Potential liability if contracts are not successfully carried out-CGI has a
strong record of successfully meeting or exceeding client needs. The Company
takes a professional approach to business, and its contracts are written to
clearly identify the scope of its responsibilities and to minimize risks.
Outlook
CGI expects to post solid growth in fiscal 2002. The Company's strategy will
continue to be based on its four pillars of growth, namely organic, growth
through large outsourcing contracts, and growth through the acquisition of niche
players and large companies.
CGI will continue to leverage its unique and highly flexible outsourcing
delivery model in order to secure a growing number of large outsourcing
contracts in the US market. As CGI successfuly completes the integration of
IMRglobal, it expects to gradually migrate IMRglobal's business model away from
consulting and systems integration, to focus more on providing end-to-end IT
outsourcing services.
There is growing demand for IT services outsourcing in CGI's markets in general,
and particularly in North America. In a slowing economic environment, more and
more companies recognize the value of outsourcing their IT services in order to
reduce their cost base while using IT to further enhance their competitive
position.
Also, CGI's solid balance sheet with a strong liquidity position enables it to
capitalize on acquisition opportunities and is an important strength when
bidding on large contracts. CGI maintains a conservative approach to financial
management.
Forward-looking statements
All statements contained in the Annual Report of CGI Group Inc., or in any
document filed by the Company with the U.S. Securities and Exchange Commission
("SEC"), or in
14
any other written or oral communication by or on behalf of the Company, 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 the intentions, plans,
expectations and beliefs of CGI Group Inc. and no assurance can be given that
the results described in such statements will be achieved.
The Annual Report may contain forward-looking statements that involve a number
of risks and uncertainties including statements regarding the outlook for the
Company's business and results of operations. There are a number of factors that
could cause such actual results to differ materially from those indicated. Such
factors include, without limitation, the various factors set forth in the
Management's Discussion and Analysis of Financial Position and Results of
Operations of this report under "Risks and Uncertainties", or Form 40F filed
with the SEC, which important factors 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.
15
Consolidated Financial Statements of
CGI GROUP INC.
September 30, 2001, 2000 and 1999
CGI GROUP INC.
Table of contents
--------------------------------------------------------------------------------
Auditors' Report...............................................................1
Consolidated Statements of Earnings............................................2
Consolidated Statements of Retained Earnings...................................3
Consolidated Balance Sheets....................................................4
Consolidated Statements of Cash Flows..........................................5
Notes to the Consolidated Financial Statements..............................6-35
Samson Belair/Deloitte & Touche, S.E.N.C.
Assurance and Advisory Services
1 Place Ville-Marie
Suite 3000
Montreal QC H3B 4T9
Canada
Tel.: (514) 393-7115
Fax: (514) 390-4113
www.deloitte.ca
Auditors' Report
To the Shareholders of
CGI Group Inc.
We have audited the consolidated balance sheets of CGI Group Inc. as at
September 30, 2001 and 2000 and the consolidated statements of earnings,
retained earnings and cash flows for each of the years in the three-year period
ended September 30, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
2001 and 2000 and the results of its operations and its cash flows for each of
the years in the three-year period ended September 30, 2001 in accordance with
Canadian generally accepted accounting principles.
"Signed"
Samson Belair Deloitte & Touche
Chartered Accountants
Montreal, Quebec
November 5, 2001
CGI GROUP INC.
Consolidated Statements of Earnings
years ended September 30
(in thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------------------------------------------------
2001 2000 1999
-------------------------------------------------------------------------------------------------------------------
$ $ $
Revenue 1,581,315 1,436,008 1,409,458
-------------------------------------------------------------------------------------------------------------------
Operating expenses
Costs of services, selling and administrative
expenses 1,339,110 1,254,351 1,185,563
Research 12,585 9,960 9,618
-------------------------------------------------------------------------------------------------------------------
1,351,695 1,264,311 1,195,181
-------------------------------------------------------------------------------------------------------------------
Operating earnings before: 229,620 171,697 214,277
-------------------------------------------------------------------------------------------------------------------
Depreciation and amortization of fixed assets 32,536 26,387 27,415
Amortization of contract costs and other
long-term assets 33,460 21,991 20,876
-------------------------------------------------------------------------------------------------------------------
65,996 48,378 48,291
-------------------------------------------------------------------------------------------------------------------
Earnings before the following items 163,624 123,319 165,986
-------------------------------------------------------------------------------------------------------------------
Interest
Long-term debt 4,206 3,624 1,389
Other 335 130 120
Income (2,999) (3,898) (5,310)
-------------------------------------------------------------------------------------------------------------------
1,542 (144) (3,801)
-------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, entity subject to
significant influence and amortization of goodwill 162,082 123,463 169,787
Income taxes (Note 8) 72,165 49,985 69,943
-------------------------------------------------------------------------------------------------------------------
Earnings before entity subject to significant influence
and amortization of goodwill 89,917 73,478 99,844
Entity subject to significant influence 7 64 62
-------------------------------------------------------------------------------------------------------------------
Earnings before amortization of goodwill 89,924 73,542 99,906
Amortization of goodwill, net of income taxes 27,135 17,876 16,090
-------------------------------------------------------------------------------------------------------------------
Net earnings 62,789 55,666 83,816
-------------------------------------------------------------------------------------------------------------------
Weighted average number of outstanding Class A
subordinate shares and Class B shares 299,500,350 270,442,354 267,969,082
-------------------------------------------------------------------------------------------------------------------
Earnings before amortization of goodwill per share 0.30 0.27 0.37
-------------------------------------------------------------------------------------------------------------------
Basic earnings per share 0.21 0.21 0.31
-------------------------------------------------------------------------------------------------------------------
Diluted earnings per share 0.21 0.20 0.31
-------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
Page 2 of 35
CGI GROUP INC.
Consolidated Statements of Retained Earnings
years ended September 30
(in thousands of Canadian dollars)
-------------------------------------------------------------------------------------------------------------------
2001 2000 1999
-------------------------------------------------------------------------------------------------------------------
$ $ $
Retained earnings, beginning of year,
as previously reported 183,156 139,080 55,264
Adjustment for change in accounting policy (Note 2) - (11,590) -
-------------------------------------------------------------------------------------------------------------------
Retained earnings, beginning of year, as restated 183,156 127,490 55,264
Net earnings 62,789 55,666 83,816
-------------------------------------------------------------------------------------------------------------------
Retained earnings, end of year 245,945 183,156 139,080
-------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
Page 3 of 35
CGI GROUP INC.
Consolidated Balance Sheets
as at September 30
(in thousands of Canadian dollars)
-------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 46,008 49,341
Accounts receivable (Note 3) 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 (Note 8) 17,998 7,052
-------------------------------------------------------------------------------------------------------------------
519,421 354,305
Investment in an entity subject to significant influence - 1,261
Fixed assets (Note 4) 123,391 58,900
Contract costs and other long-term assets (Note 5) 272,403 93,716
Future income taxes (Note 8) 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 (Note 8) 21,013 7,963
Current portion of long-term debt (Note 6) 7,528 5,770
-------------------------------------------------------------------------------------------------------------------
429,606 189,681
Future income taxes (Note 8) 43,705 23,929
Long-term debt (Note 6) 32,752 37,644
Deferred credits 74,813 -
-------------------------------------------------------------------------------------------------------------------
580,876 251,254
-------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Capital stock (Note 7) 1,213,542 491,807
Contributed surplus 211 211
Warrants (Note 7) 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
-------------------------------------------------------------------------------------------------------------------
See Notes to the Consolidated Financial Statements.
Approved by the Board
"Signed" Serge Godin, ...............................Director
"Signed" Andre Imbeau,...............................Director
Page 4 of 35
CGI GROUP INC.
Consolidated Statements of Cash Flows
years ended September 30
(in thousands of Canadian dollars)
-------------------------------------------------------------------------------------------------------------------
2001 2000 1999
-------------------------------------------------------------------------------------------------------------------
$ $ $
Operating activities
Net earnings 62,789 55,666 83,816
Adjustments for:
Depreciation and amortization of fixed assets 32,536 26,387 27,415
Loss (gain) on disposal of fixed assets - 1,454 (135)
Amortization of contract costs and other
long-term assets 33,460 21,991 20,876
Amortization of goodwill 28,586 19,153 16,584
Future income taxes 32,589 2,214 12,364
Foreign exchange loss (gain) 4,213 (497) 988
Entity subject to significant influence (7) (64) (62)
Other - - 190
-------------------------------------------------------------------------------------------------------------------
194,166 126,304 162,036
-------------------------------------------------------------------------------------------------------------------
Changes in non-cash operating working capital items:
Accounts receivable (33,786) 17,206 (10,229)
Work in progress (12,277) 31,725 (56,552)
Prepaid expenses and other current assets (556) (5,486) (1,389)
Accounts payable and accrued liabilities 2,073 (92,027) (10,998)
Income taxes (559) (13,647) (16,218)
Deferred revenue 24,941 3,475 9,860
-------------------------------------------------------------------------------------------------------------------
(20,164) (58,754) (85,526)
-------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 174,002 67,550 76,510
-------------------------------------------------------------------------------------------------------------------
Financing activities
Net variation of credit facility (5,000) (16,200) 46,200
Reduction of other long-term debts (65,027) (5,907) (9,670)
Issuance of shares 54,206 10,931 4,992
-------------------------------------------------------------------------------------------------------------------
Cash (used for) provided by financing activities (15,821) (11,176) 41,522
-------------------------------------------------------------------------------------------------------------------
Investing activities
Business acquisitions (net of cash) (Note 9) (86,393) (18,395) (119,106)
Investment in an entity subject to significant influence - (514) -
Purchase of fixed assets (23,993) (18,090) (20,678)
Proceeds from sale of fixed assets 1,270 845 2,201
Contract costs and other long-term assets (48,635) (14,177) (58,884)
-------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (157,751) (50,331) (196,467)
-------------------------------------------------------------------------------------------------------------------
Foreign exchange (loss) gain on cash held
in foreign currencies (3,763) 1,069 (754)
-------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (3,333) 7,112 (79,189)
Cash and cash equivalents at beginning of year 49,341 42,229 121,418
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year 46,008 49,341 42,229
-------------------------------------------------------------------------------------------------------------------
Supplementary cash flow information (Note 11)
See Notes to the Consolidated Financial Statements.
Page 5 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
1. Description of business
CGI Group Inc. (the "Company" or "CGI"), directly or through its
subsidiaries, provides a full range of information technology ("IT")
services including management of IT and business functions, systems
integration and consulting. The Company's primary focus is large-scale
systems integration and outsourcing contracts for both private and
public sector organizations.
2. Summary of significant accounting policies
Preparation of Consolidated Financial Statements
The Consolidated Financial Statements are prepared in accordance with
Canadian generally accepted accounting principles ("GAAP"), which differ
in certain material respects with US GAAP. Significant differences
relevant to the Company are presented in Note 16.
Use of estimates
The preparation of the Consolidated Financial Statements in conformity
with Canadian GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
Consolidated Financial Statements and the reported amounts of revenues
and expenses during the reporting period. Because of the use of
estimates inherent in the financial reporting process, actual results
could differ from those estimates.
Principles of consolidation
The financial statements of entities controlled by the Company are
consolidated; entities jointly controlled by the Company, referred to as
joint ventures, are accounted for using the proportionate consolidation
method; the associated company, which the Company had the ability to
significantly influence, was accounted for using the equity method.
Revenue recognition and work in progress
The Company provides professional services under level-of-effort,
cost-based and fixed-price contracts. Under level-of-effort contracts,
revenue is recorded as services are provided. For cost-based contracts,
revenue is recorded as reimbursable costs are incurred. Revenue from
fixed-price contracts is recorded using the percentage-of-completion
method, whereby revenue and profit are based on a ratio of costs
incurred to total estimated costs of the project. Work in progress is
valued at estimated net realizable value. Deferred revenue principally
represents billings to customers in excess of work in progress. Losses,
if any, on long-term contracts are recognized during the period they are
determined.
Revenue from the sale of software licences is recognized when the
product is delivered to the client and when no significant vendor
obligations remain and the collection of the receivable is reasonably
assured. Where license agreements include multiple elements, revenue
from sale of licenses is recognized on the same basis provided the
services do not include significant customization or modification of the
base product and the payment terms for licenses are not subject to
acceptance criteria. If an acceptance period is stipulated, revenue is
recognized upon the earlier of client acceptance or expiration of the
acceptance period. Revenue from software maintenance and support
agreements is recognized on a straight-line basis over the term of the
related agreements.
Page 6 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (cont'd)
Cash and cash equivalents
Cash and cash equivalents consist primarily of unrestricted cash and
short-term investments having an initial maturity of three months or
less.
Depreciation and amortization
Fixed assets are recorded at cost and are depreciated and amortized over
their estimated useful lives, using principally the straight-line
method. The annual depreciation and amortization periods by fixed asset
category are as follows:
Buildings 10 to 40 years
Leasehold improvements Term of lease plus first renewal option
Furniture and fixtures 3 to10 years
Computer equipment 3 to 5 years
Software 1 to 5 years
Contract costs and other long-term assets
Contract costs and other long-term assets include contract costs, costs
of software acquired and developed as well as costs of software licences
and other.
Contract costs are incurred in the course of IT management contracts
obtained by the Company for periods varying from two to 10 years. These
expenses are recorded at cost and amortized using the straight-line
method over the term of the respective contracts. Contract costs
principally comprise the following:
a) Value assigned to a specific long-term outsourcing contract entered
into by an acquired company;
b) Integration costs incurred on large outsourcing contracts as well
as incentives granted to clients upon the signature of long-term
outsourcing contracts. The unamortized remaining balance would be
refundable upon early termination of contracts, if any.
Costs of software acquired and developed include software specifically
designed or acquired to provide long-term outsourcing contracts to
clients or groups of clients. Costs of software developed are
capitalized only after technological feasibility is established. Costs
of software acquired and developed are recorded at cost and amortized on
a straight-line basis over their respective estimated useful lives.
Goodwill
Goodwill represents the excess of the purchase price over the fair
values of the net assets of entities acquired at the respective dates of
acquisition. Goodwill is amortized on a straight-line basis over its
expected useful life of 20 years.
For business combinations recorded after June 30, 2001, the Company did
not amortize the resulting goodwill created, consistent with transition
recommendations of the Canadian Institute of Chartered Accountants
("CICA") contained in Handbook Sections 1581, Business Combinations, and
3062, Goodwill and Other Intangible Assets. In addition, see "Future
accounting changes", discussed below.
Page 7 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (cont'd)
Impairment of long-lived assets
The Company evaluates the carrying value of its long-lived assets,
including goodwill, on an ongoing basis. In order to determine whether
an impairment exists, management considers the undiscounted cash flows
estimated to be generated by those assets as well as other indicators.
Any permanent impairment in the carrying value of assets is charged
against earnings in the period an impairment is determined. See "Future
accounting changes", discussed below, relating to goodwill and other
intangible assets.
Deferred credits
Deferred credits principally comprise the unused portion of discounts
granted by the Company to customers under long-term outsourcing
contracts.
Stock option plan
The Company has a stock option compensation plan, which is described in
Note 7. No compensation expense is recognized for this plan when stock
options are granted to employees and directors. Any consideration paid
by employees and directors on exercise of stock options is credited to
share capital.
In connection with a business acquisition where outstanding stock
options of the acquiree became options to acquire CGI Class A
subordinate shares, the Company recorded $16,519,000 as capital stock
representing the fair value of outstanding vested stock options of the
acquiree at the acquisition date (see Notes 7 and 9).
Research
Research expenses are charged to earnings in the year they are incurred,
net of related investment tax credits.
Income taxes
On October 1, 1999, the Company adopted the recommendations of CICA
Handbook Section 3465, Income taxes, which replaced the deferral method
with the liability method of tax allocation. The Company applied the
recommendations retroactively without restating prior years.
Future income taxes relate to the expected future tax consequences of
differences between the carrying amount of balance sheet items and their
corresponding tax values. Future tax assets are recognized only to the
extent that, in the opinion of management, it is more likely than not
that the future income tax assets will be realized. Future income tax
assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment or substantive enactment.
Page 8 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (cont'd)
Income taxes (cont'd)
The change had the following cumulative effect on the October 1, 1999
accounts:
Increase Decrease
------------------------------
$ $
Retained earnings 11,590
Goodwill 16,869
Current future income tax assets 9,060
Long-term future income tax assets 4,722
Current future income tax liabilities 15
Long-term future income tax liabilities 8,488
Translation of foreign currencies
Accordingly, self-sustaining subsidiaries are accounted for using the
current-rate method. Assets and liabilities denominated in a foreign
currency are translated into Canadian dollars at exchange rates in
effect at the balance sheet date. Revenue and expenses are translated at
average exchange rates prevailing during the year. Resulting unrealized
gains or losses are accumulated and reported as translation adjustments
in shareholders' equity.
The accounts of foreign subsidiaries, which are financially or
operationally dependent on the parent company, are accounted for using
the temporal method. Under this method, monetary assets and liabilities
are translated at the exchange rates in effect at the balance sheet
dates and non-monetary assets and liabilities are translated at
historical exchange rates. Revenue and expenses are translated at
average rates for the period. Translation exchange gains or losses of
such subsidiaries are reflected in net earnings.
Revenue and expenses denominated in foreign currencies are recorded at
the rate of exchange prevailing at the transaction date. Monetary assets
and liabilities denominated in foreign currencies are translated at
exchange rates prevailing at the balance sheet dates. Other unrealized
translation gains and losses are reflected in net earnings.
Earnings per share
The Company adopted the recommendations of CICA Handbook Section 3500,
Earnings per Share ("EPS"), effective October 1, 2000. The revised
section requires the use of the treasury stock method to compute the
dilutive effect of potential common shares. Basic and diluted EPS
figures for each of the years presented are computed using the treasury
stock method.
Page 9 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
2. Summary of significant accounting policies (cont'd)
Future accounting changes
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. The Company will adopt 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, and therefore has not yet assessed their effect on the
Company's future consolidated net earnings and financial position.
3. Accounts receivable
2001 2000
------------------------------
$ $
Trade 257,669 202,108
Other (1) 62,998 16,830
-----------------------------------------------------------------------
320,667 218,938
-----------------------------------------------------------------------
(1) Other accounts receivable include refundable tax credits on
salaries, calculated at the rate of 25% on salaries paid in Quebec,
for a maximum of $10,000 a year per eligible employee. The Company
became eligible to receive these tax credits starting May 11, 2000,
upon its commitment to relocate to the E-Commerce Place.
Accordingly, other accounts receivable, as at September 30, 2001
and 2000, include, respectively, approximately $32,513,000 and
$7,800,000 in refundable tax credits on salaries. Should the
Company fail to relocate or meet other significant obligations
required under the current tax credits on salaries program, any tax
credits received would have to be refunded to the Quebec
government. Any refund made by the Company would be charged to
earnings in the corresponding period.
Page 10 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
4. Fixed assets
2001
----------------------------------------------
Accumulated
depreciation
and Net book
Cost amortization value
-------------- ------------ ----------
$ $ $
Land 4,191 - 4,191
Buildings 23,397 167 23,230
Leasehold improvements 30,572 6,033 24,539
Furniture and fixtures 30,411 12,884 17,527
Computer equipment 112,276 70,140 42,136
Software 24,496 12,728 11,768
--------------------------------------------------------------------------------------
225,343 101,952 123,391
--------------------------------------------------------------------------------------
2000
----------------------------------------------
Accumulated
depreciation
and Net book
Cost amortization value
-------------- ------------ ----------
$ $ $
Leasehold improvements 25,887 5,917 19,970
Furniture and fixtures 24,260 11,569 12,691
Computer equipment 72,886 52,002 20,884
Software 15,516 10,161 5,355
--------------------------------------------------------------------------------------
138,549 79,649 58,900
--------------------------------------------------------------------------------------
Fixed assets include assets acquired under capital leases totalling
$11,368,000 ($10,549,000 in 2000), net of accumulated depreciation and
amortization of $27,301,000 ($7,981,000 in 2000).
Page 11 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
5. Contract costs and other long-term assets
2001
------------------------------------------------
Accumulated Net book
Cost amortization value
-------------- --------------- -------------
$ $ $
Contract costs 205,195 23,152 182,043
Software acquired and developed 65,988 11,484 54,504
Software licences and other 74,094 38,238 35,856
--------------------------------------------------------------------------------------
345,277 72,874 272,403
--------------------------------------------------------------------------------------
2000
------------------------------------------------
Accumulated Net book
Cost amortization value
-------------- --------------- -------------
$ $ $
Contract costs 58,719 5,414 53,305
Software acquired and developed 42,540 7,855 34,685
Software licences and other 34,988 29,262 5,726
--------------------------------------------------------------------------------------
136,247 42,531 93,716
--------------------------------------------------------------------------------------
Page 12 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
6. Long-term debt
2001 2000
------------------------------
$ $
Unsecured revolving credit facility, bearing interest at bankers'
acceptance rate plus 0.375% with no principal
payments before 2005 (1) 25,000 30,000
Obligations under capital leases, bearing interest at various interest
rates varying from 5.7% to 14.7% and repayable in blended monthly
instalments maturing at
various dates until 2006 14,901 12,777
Other secured and unsecured loans, without interest,
repayable in 2002 379 637
-----------------------------------------------------------------------------------------------------------
40,280 43,414
Current portion 7,528 5,770
-----------------------------------------------------------------------------------------------------------
32,752 37,644
-----------------------------------------------------------------------------------------------------------
(1) An amount of $199,050,000 is available under the terms of this
unsecured revolving credit facility. In addition to this revolving
credit facility, the Company also has available lines of credit
totalling $28,750,000 under which approximately $2,550,000 have
been used to cover letters of credit issued for contracts with
major outsourcing and systems integration clients.
Principal repayments on long-term debt over the next five years are as
follows:
$
2002 379
2003 -
2004 -
2005 25,000
2006 -
Minimum capital lease payments are as follows:
Payment Interest Principal
$ $ $
2002 8,107 958 7,149
2003 4,280 503 3,777
2004 3,341 169 3,172
2005 795 53 742
2006 75 14 61
-----------------------------------------------------------------------------------------
Total minimum capital lease payments 16,598 1,697 14,901
-----------------------------------------------------------------------------------------
Page 13 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
7. Capital stock
Authorized, an unlimited number without par value:
First preferred shares, carrying one vote per share, ranking prior to
second preferred shares, Class A subordinate shares and Class B
shares with respect to the payment of dividends;
Second preferred shares, non-voting, ranking prior to Class A
subordinate shares and Class B shares with respect to the payment of
dividends;
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, convertible at any time at the option of the holder into
Class A subordinate shares.
2001 2000
------------------------------
$ $
Issued and paid
327,032,717 Class A subordinate shares
(240,755,667 in 2000) 1,159,337 490,645
40,799,774 Class B shares
(34,846,526 in 2000) 54,205 1,162
------------------------------------------------------------------------------------
1,213,542 491,807
------------------------------------------------------------------------------------
Page 14 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
7. Capital stock (cont'd)
For 2001, 2000 and 1999 and after giving retroactive effect to the
subdivision of the Company's shares that occurred on January 7, 2000, the
Class A subordinate shares, Class B shares and first preferred shares
changed as follows:
Class A subordinate
shares Class B shares
Number Amount Number Amount
-----------------------------------------------------------------------------------------------------------
$ $
Balance at September 30,
1999 232,097,696 418,624 34,773,652 148
Options exercised 1,790,278 4,992 - -
-----------------------------------------------------------------------------------------------------------
Balance at September 30,
1999 233,887,974 423,616 34,773,652 148
Issued for cash 287,914 4,003 - -
Issued as consideration for
business acquisitions
(Note 9) 5,626,369 57,112 - -
Options exercised 953,410 5,914 72,874 1,014
-----------------------------------------------------------------------------------------------------------
Balance at September 30,
2000 240,755,667 490,645 34,846,526 1,162
Issued for cash - - 5,953,248 53,043
Issued as consideration for
business acquisitions
(Note 9) 85,835,178 651,010 - -
Fair value of outstanding
vested stock options
issued as consideration
for business acquisition
(Notes 2 and 9) - 16,519 - -
Options exercised 441,872 1,163 - -
-----------------------------------------------------------------------------------------------------------
Balance at September 30,
2001 327,032,717 1,159,337 40,799,774 54,205
-----------------------------------------------------------------------------------------------------------
Stock option plan
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 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 shares over the five business days
preceding the date of the grant. Options generally vest one to three
years from the date of grant and must be exercised within a 10-year
period, except in the event of retirement, termination of employment or
death. Options for 36,709,965 Class A subordinate shares have been
reserved for issuance under the stock option plan.
Page 15 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
7. Capital stock (cont'd)
Stock option plan (cont'd)
The following table presents information concerning all stock options
granted to certain employees and directors by the Company for the years
ended September 30:
2001 2000 1999
-----------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
average average average
Number exercise price Number exercise price Number exercise price
of options per share of options per share of options per share
-----------------------------------------------------------------------------------------------------------
$ $ $
Outstanding, beginning
of year 6,413,181 11.46 4,996,414 8.23 5,497,696 4.85
Granted 11,705,381 8.89 2,565,594 15.93 1,415,980 14.65
Granted as consideration
for business
acquisition (Note 9) 8,424,502 12.27 - - - -
Exercised (441,872) 2.63 (1,026,284) 6.75 (1,790,278) 2.79
Forfeited and expired (815,889) 13.90 (122,543) 13.21 (126,984) 9.91
-----------------------------------------------------------------------------------------------------------
Outstanding, end
of year 25,285,303 10.61 6,413,181 11.46 4,996,414 8.23
-----------------------------------------------------------------------------------------------------------
The following table summarizes information about outstanding stock
options granted to certain employees and directors of the Company at
September 30, 2001:
Options outstanding Options exercisable
-----------------------------------------------------------------------------------------------------------
Weighted |
average |
remaining Weighted | Weighted
Range of Number contractual average | Number average
exercise price outstanding life (years) exercise price | exercisable exercise price
--------------------------------------------------------------------------|--------------------------------
$ $ | $
|
0.05 to 2.97 707,941 3 1.42 | 704,747 1.41
3.15 to 5.75 2,596,269 5 4.49 | 1,631,840 5.22
5.87 to 8.99 10,340,369 10 8.50 | 604,471 6.71
9.03 to 13.59 6,179,529 8 10.59 | 1,839,806 11.32
14.00 to 16.86 3,031,794 8 15.71 | 1,905,645 15.57
17.30 to 23.90 1,916,733 7 19.70 | 1,077,192 19.57
24.51 to 29.16 127,216 8 27.98 | 46,834 27.38
31.38 to 36.73 385,452 7 34.71 | 327,467 35.30
--------------------------------------------------------------------------|--------------------------------
25,285,303 7 10.61 | 8,138,002 12.04
-----------------------------------------------------------------------------------------------------------
Page 16 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
7. Capital stock (cont'd)
Warrants
In connection with the signing of a strategic outsourcing contract and
of a business acquisition (see Note 9), 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
the 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 five
years.
Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share for the years ended September 30:
2001 2000 1999
------------------------------------------------
$ $ $
Numerator:
Net earnings 62,789 55,666 83,816
-----------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share -
weighted average shares 299,500,350 270,442,354 267,969,082
Dilutive effect of employee stock options 1,287,291 2,317,858 1,127,202
Dilutive effect of warrants 319,545 - -
-----------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
weighted average shares and assumed
conversions 301,107,186 272,760,212 269,096,284
-----------------------------------------------------------------------------------------------------------
Basic earnings per share 0.21 0.21 0.31
-----------------------------------------------------------------------------------------------------------
Diluted earnings per share 0.21 0.20 0.31
-----------------------------------------------------------------------------------------------------------
Page 17 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
8. Income taxes
As described in Note 2, the Company adopted the recommendations of CICA
Handbook Section 3465, Income Taxes, effective October 1, 1999 and prior
year figures have not been restated. The terminology used to describe
comparative figures is consistent with the terminology used to describe
current year figures calculated using the liability method of tax
allocation. The income tax provision for the years ended September 30,
is as follows:
2001 2000 1999
------------------------------------------------
$ $ $
Current38,244 46,494 57,085
Future (1) 33,921 3,491 12,858
--------------------------------------------------------------------
72,165 49,985 69,943
--------------------------------------------------------------------
(1) Includes $1,451,000 ($1,277,000 in 2000 and $494,000 in 1999) of
future income taxes related to goodwill amortization.
The Company's effective income tax rate differs from the combined
Canadian statutory tax rate for the years ended September 30, for the
following reasons:
2001 2000 1999
------------------------------------------------
% % %
Combined federal and provincial statutory tax rates 38.6 40.6 41.9
Non-deductible items 8.6 7.3 5.1
Utilization of non-recognized tax benefits
of a subsidiary - - (1.1)
Valuation allowance relating to tax benefits on losses 7.8 - -
Other (2.0) (1.1) (0.6)
-----------------------------------------------------------------------------------------------------------
Effective income tax rate after goodwill amortization 53.0 46.8 45.3
Goodwill amortization (8.5) (6.3) (4.1)
-----------------------------------------------------------------------------------------------------------
Effective income tax rate before goodwill amortization 44.5 40.5 41.2
-----------------------------------------------------------------------------------------------------------
Page 18 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
8. Income taxes (cont'd)
Future income taxes at September 30, are as follows:
2001 2000
------------------------------
$ $
Future income tax assets:
Provision for integration costs 26,093 10,415
Tax benefits on losses carried forward 97,415 23,654
Accrued compensation 7,107 -
Fixed assets 6,739 -
Unclaimed research and experimental development expenses - 2,041
Allowance for doubtful accounts 3,507 -
Other 3,742 1,201
-----------------------------------------------------------------------------------------------------------
144,603 37,311
-----------------------------------------------------------------------------------------------------------
Future income tax liabilities:
Fixed assets - 1,958
Contract costs and other long-term assets 35,336 21,550
Work in progress 6,716 7,190
Goodwill 5,467 1,049
Refundable tax credits on salaries 8,997 -
Other 8,202 145
-----------------------------------------------------------------------------------------------------------
64,718 31,892
-----------------------------------------------------------------------------------------------------------
Valuation allowance 93,820 5,789
-----------------------------------------------------------------------------------------------------------
Future income taxes, net (13,935) (370)
-----------------------------------------------------------------------------------------------------------
Future income taxes are classified as follows:
Current future income tax assets 17,998 7,052
Long-term future income tax assets 32,785 24,470
Current future income tax liabilities (21,013) (7,963)
Long-term future income tax liabilities (43,705) (23,929)
-----------------------------------------------------------------------------------------------------------
Future income tax liabilities, net (13,935) (370)
-----------------------------------------------------------------------------------------------------------
Certain of the Company's subsidiaries have losses carried forward
aggregating approximately $300,000,000, of which approximately
$262,000,000 (US$167,000,000) originates from the Company's US
subsidiaries, available to reduce future taxable income and expiring at
various dates to 2021. The benefit of these losses has been reflected in
the Consolidated Financial Statements to the extent that it was
considered to be more likely than not that the related future income tax
assets would be realized.
Page 19 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
9. Business acquisitions
For all business acquisitions, the Company began recording the results
of operations of the acquired entities as of their respective effective
acquisition dates.
During 2001, the Company made the following acquisitions:
- C.U. Processing Inc. ("CUP") - On October 4, 2000, the Company
acquired all the outstanding shares of CUP, a Detroit-based provider
of information management systems primarily to US credit unions;
- AGTI Consulting Services Inc. ("AGTI") - On November 27, 2000, the
Company acquired 49.0% of all outstanding shares of AGTI, a
Montreal-based IT consulting firm. The Company accounts for its
49.0% interest in AGTI using the proportionate consolidation method;
- RSI Realtime Consulting Inc. ("RSI") - On December 12, 2000, the
Company acquired all the outstanding shares of RSI, a Toronto-based
SAP implementation specialist;
- Groupe-conseil CDL Inc. ("CDL") - On January 4, 2001, the Company
acquired all outstanding shares of CDL, a Montreal-based IT
consulting firm in J.D. Edwards enterprise resource planning
solutions;
- Star Data Systems Inc. ("Star Data") - On January 9, 2001, the
Company acquired all the outstanding common shares of Star Data on
the basis of 0.737 Class A subordinate shares of the Company for
each Star Data common share. Star Data is a Canadian-based provider
of IT services and solutions to the financial services industry;
- Conseillers en informatique d'affaires ("CIA") - On January 12,
2001, the Company increased its interest in CIA from 35.0% to 49.0%
and began using the proportionate consolidation method to account
for its investment: prior to January 12, 2001, the Company used the
equity method to account for this investment. CIA is a provider of
IT services primarily in the government and financial sectors;
- Nter Technologies, Limited Partnership ("Nter") - On February 1,
2001, the Company entered into a partnership with Loto-Quebec, which
involved the creation of Nter, an IT consulting firm, and the
acquisition of a 49.9% interest in Nter. The Company accounts for
this interest using the proportionate consolidation method;
- Assets and liabilities of Confederation des caisses populaires et
d'economie Desjardins du Quebec used in data and micro-computing of
Mouvement des caisses Desjardins ("Desjardins") operations - On May
1, 2001, the Company signed a strategic alliance for the management
of data and micro-computing of Desjardins operations. In the context
of this agreement, the Company acquired the related assets, certain
intellectual property rights and assumed liabilities of
Confederation des caisses populaires et d'economie Desjardins du
Quebec used in data and micro-computing of Desjardins. In addition,
approximately 450 Desjardins employees were transferred to the
Company;
Page 20 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
9. Business acquisitions (cont'd)
- CyberBranch Corporation ("CyberBranch") - On May 31, 2001, the
Company acquired CyberBranch, a subsidiary of Stanford Federal
Credit Union of California. CyberBranch is an Internet and intranet
provider of leading-edge technology to credit unions across North
America;
- Larochelle Gratton - On July 1, 2001, the Company acquired all
outstanding shares of Larochelle Gratton, a Quebec-based provider of
a range of systems integration services to leading client
organizations, including areas such as e-commerce and the Internet.
As described in Note 2, goodwill resulting from this acquisition is
not amortized;
- IMRglobal Corp. ("IMRglobal" or "IMR") - On July 27, 2001, the
Company merged with IMRglobal, a US-based leading global provider of
end-to-end IT solutions, acquiring all the outstanding common stock
of IMRglobal on the basis of 1.5974 Class A subordinate share of the
Company for each share of IMRglobal common stock. In addition, each
outstanding IMRglobal stock option as of that date became a 1.5974
stock option to acquire a Class A subordinate share of the Company.
The purchase price allocation shown below is preliminary and is
based on the Company's estimates assisted by 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 identified intangible assets besides goodwill
which will be amortized over their respective estimated useful
lives. As described in Note 2, goodwill resulting from this
acquisition is not amortized.
Non-cash working capital items acquired, reflected below, include
costs totalling $68,000,000 of acquisition and integration
liabilities incurred by the Company for professional fees and costs
to exit and consolidate certain of IMRglobal activities. The
components of the acquisition and integration liabilities assumed
and included in the preliminary allocation of the purchase price to
the net assets acquired are as follows:
Balance
Acquisition and Paid as at remaining as at
integration September 30, September 30,
liabilities 2001 2001
------------------- ----------------- ------------------
$ $ $
Professional fees 17,347 14,513 2,834
Consolidation and closure
of facilities 14,000 1,554 12,446
Severance 12,000 300 11,700
Support structure 20,810 573 20,237
Other 3,843 2,188 1,655
-------------------------------------------------------------------------------------------------------
68,000 19,128 48,872
-------------------------------------------------------------------------------------------------------
Page 21 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
9. Business acquisitions (cont'd)
- LoyalTech - On August 7, 2001, the Company acquired all outstanding
shares of LoyalTech, a Portugal-based consultant and integrator
specialist in customer relationship management solutions and
e-business strategies. As described in Note 2, goodwill resulting
from this acquisition is not amortized;
- Digital 4Sight - On August 27, 2001, the Company signed a joint
venture agreement with former Digital 4Sight owners, which involved
the creation of a new management strategy and research firm. The
Company accounts for its 51.0% interest in Digital 4Sight using the
proportionate consolidation method. As described in Note 2, goodwill
resulting from this acquisition is not amortized;
- EPC Services Conseils Inc. ("EPC") - On September 10, 2001, the
Company acquired all outstanding shares of EPC, a Quebec-based
consulting firm. As described in Note 2, goodwill resulting from
this acquisition is not amortized.
These acquisitions were accounted for using the purchase method, as
follows:
Star
Net assets acquired IMR 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)
Deferred 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 (Note 7) 536,314 102,820 - - - 11,876 651,010
Issuance of 8,424,502
stock options to acquire
Class A subordinate
shares (Notes 2 and 7) 16,519 - - - - - 16,519
4,000,000 warrants at
fair value (Note 7) - - 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
----------------------------------------------------------------------------------------------------------
Page 22 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
9. Business acquisitions (cont'd)
In addition, during 2001, the Company modified the initial purchase
price allocation of APG Solutions & Technologies Inc. ("APG"), acquired
in 2000, following the conclusion of pending arbitration at the
acquisition date, which resulted in a reduction of the consideration
paid and the corresponding value of net assets acquired of approximately
$1,721,000.
During 2000, the Company made the following acquisitions:
- MCM Technology Inc. ("MCM") - On October 26, 1999, the Company
acquired all the outstanding shares of MCM, an information
technology consulting firm serving clients mainly in the healthcare
and telecommunications industries;
- APG - On September 1, 2000, the Company acquired all the outstanding
shares of APG, an information technology consulting firm
specializing in the implementation of enterprise resource planning
solutions, system evolution, electronic commerce and knowledge
management.
These acquisitions, including the fiscal 2001 modification relating to
APG described above, were accounted for using the purchase method, as
follows:
Net assets acquired MCM APG Total
------------------------------------------------------------------------------------------------------------
$ $ $
Non-cash working capital items (1,208) (8,336) (9,544)
Fixed assets 872 2,089 2,961
Contract costs and other long-term assets - 64 64
Future income taxes 363 9,678 10,041
Goodwill 8,925 63,749 72,674
Long-term debt (635) (1,775) (2,410)
-----------------------------------------------------------------------------------------------------------
8,317 65,469 73,786
Cash position at acquisition 1,008 (7,162) (6,154)
-----------------------------------------------------------------------------------------------------------
9,325 58,307 67,632
-----------------------------------------------------------------------------------------------------------
Consideration
Cash 2,900 7,620 10,520
Issuance of 5,626,369 Class A
subordinate shares (Note 7) 6,425 50,687 57,112
-----------------------------------------------------------------------------------------------------------
9,325 58,307 67,632
-----------------------------------------------------------------------------------------------------------
Page 23 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
9. Business acquisitions (cont'd)
During 1999, the Company made the following acquisitions:
- 9061-9313 Quebec Inc. - On January 1, 1999, the Company acquired all
the outstanding shares of 9061-9313 Quebec Inc., a corporation
incorporated by Desjardins and into which the assets of Technologie
Desjardins Laurentienne ("TDL") were transferred;
- DRT Systems International and DRT Systems International L.P.
(jointly, "DRT") - On July 1, 1999, the Company acquired
substantially all of the assets related to the businesses of DRT.
These acquisitions were accounted for using the purchase method, as
follows:
Net assets acquired TDL DRT Total
---------------------------------------------------------------------------------------------------------
$ $ $
Non-cash working capital items 1,072 23,952 25,024
Fixed assets 2,516 3,207 5,723
Contract costs and other long-term assets 1,053 - 1,053
Goodwill 18,541 68,765 87,306
--------------------------------------------------------------------------------------------------------
23,182 95,924 119,106
--------------------------------------------------------------------------------------------------------
Cash consideration 23,182 95,924 119,106
--------------------------------------------------------------------------------------------------------
10. Investments in joint ventures
The Company's proportionate share of its joint venture investees'
operations included in the Consolidated Financial Statements is as
follows:
As at and for the years
ended September 30,
2001 2000
------------------------------
$ $
Balance Sheet
Current assets 18,370 1,347
Non-current assets 21,967 192
Current liabilities 4,275 1,335
Non-current liabilities 45 -
Statement of earnings
Revenue 35,057 10,814
Expenses 34,339 10,312
-----------------------------------------------------------------------------------------------------------
Net earnings 718 502
-----------------------------------------------------------------------------------------------------------
Statement of cash flows Funds provided by:
Operating activities 1,572 502
Financing activities - 234
Investing activities (2,220) -
Page 24 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
11. Supplementary cash flow information
i) Non-cash operating, investing and financing activities:
2001 2000 1999
------------------------------------------------
$ $ $
Operating activities
Deferred credits 14,000 - -
Future income taxes 3,029 - -
-----------------------------------------------------------------------------------------------------------
17,029 - -
-----------------------------------------------------------------------------------------------------------
Investing activities
Business acquisitions 681,800 57,112 -
Purchase of assets under capital leases - 2,882 11,943
Contract costs and other long-term assets 22,413 - -
-----------------------------------------------------------------------------------------------------------
704,213 59,994 11,943
-----------------------------------------------------------------------------------------------------------
Financing activities
Issuance of capital stock and stock options 667,529 57,112 -
Issuance of warrants 19,655 - -
Increase in obligations under capital leases - 2,882 11,943
-----------------------------------------------------------------------------------------------------------
687,184 59,994 11,943
-----------------------------------------------------------------------------------------------------------
ii) Interest paid and income taxes paid for the years ended September
30, are as follows:
2001 2000 1999
------------------------------------------------
$ $ $
Interest paid 4,592 3,754 1,509
Income taxes paid 41,615 67,154 73,303
12. Segmented information
The Company has three strategic business units ("SBU"), organized on the
basis of geographic areas: Canada, US and International. The Company
evaluates each SBU's performance primarily based on its revenue,
operating earnings and net contribution (the latter being defined as
earnings before interest, income taxes, entity subject to significant
influence and amortization of goodwill) by its respective senior
executive, who reports directly to the Chief Executive Officer.
Each segment, with the exception of the corporate segment, offers
end-to-end IT services including management of IT and business
functions, systems integration and consulting services to clients in
industry sectors such as telecommunications, financial services and
manufacturing/retail/ distribution. The corporate segment comprises
management of cash and cash equivalents and general corporate activities
such as strategy and market development, coordination of large projects
and capital investment decisions. Costs which have not been allocated to
the other segments are included in this segment as they represent common
costs and general head office expenses; the allocation of these costs to
the other segments would not assist in the evaluation of the respective
segments' contributions.
Page 25 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
12. Segmented information (cont'd)
Effective October 1, 2001, the Company will change its organizational
structure. The Company will have three SBUs organized according to the
following breakdown: Canada and Europe, US and Asia Pacific, and
Business Process Services. As of that date, the Company will begin to
evaluate SBU performance under this structure and will report segmented
information on that basis. Segmented information presented below is on
the basis of the organizational structure in place at September 30,
2001.
2001
---------------------------------------------------------------------------------------
Intersegment
Canada US International Corporate elimination Total
---------------------------------------------------------------------------------------
$ $ $ $ $ $
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, entity
subject to significant
influence 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
-----------------------------------------------------------------------------------------------------------
2000
---------------------------------------------------------------------------------------
Intersegment
Canada US International Corporate elimination Total
---------------------------------------------------------------------------------------
$ $ $ $ $ $
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, entity
subject to significant
influence 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
-----------------------------------------------------------------------------------------------------------
Page 26 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
12. Segmented information (cont'd)
1999
---------------------------------------------------------------------------------------
Intersegment
Canada US International Corporate elimination Total
---------------------------------------------------------------------------------------
$ $ $ $ $ $
Revenue 1,204,719 140,617 121,179 - (57,057) 1,409,458
Operating expenses 995,938 123,077 108,002 25,221 (57,057) 1,195,181
-----------------------------------------------------------------------------------------------------------
Operating earnings
before: 208,781 17,540 13,177 (25,221) - 214,277
Depreciation and
amortization 41,991 3,992 905 1,403 - 48,291
-----------------------------------------------------------------------------------------------------------
Earnings before
interest, income
taxes, entity subject
to significant
influence and
amortization of
goodwill 166,790 13,548 12,272 (26,624) - 165,986
-----------------------------------------------------------------------------------------------------------
Total assets 500,014 186,315 150,238 29,922 - 866,489
-----------------------------------------------------------------------------------------------------------
Revenue by service line:
2001 2000 1999
------------------------------------------------
$ $ $
Management of IT and business functions
(outsourcing) 1,091,107 891,726 1,009,844
Systems integration and Consulting 490,208 544,282 399,614
-----------------------------------------------------------------------------------------------------------
Total 1,581,315 1,436,008 1,409,458
-----------------------------------------------------------------------------------------------------------
The Canada and International segments comprise revenue from contracts
with a shareholder, its subsidiaries and its affiliated companies. Other
than that group, no single client represents more than 10% of the
Company's revenue (see Note 13).
Page 27 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
13. Related party transactions
In the normal course of business, the Company is party to contracts with
certain of BCE Inc.'s (a shareholder) subsidiaries and affiliated
companies, pursuant to which the Company is its preferred IT supplier.
Transactions and resulting balances, which were measured at exchange
amounts, are presented below:
2001 2000 1999
------------------------------------------------
$ $ $
Revenue 451,344 572,630 526,696
Purchase of services 78,495 114,062 110,009
Accounts receivable 37,549 53,235 11,961
Accounts payable 4,828 12,645 20,960
Work in progress 16,389 12,072 38,561
Deferred revenue 24,010 11,998 5,912
Contract costs and other long-term assets 22,750 25,711 31,200
14. Commitments and contingencies
At September 30, 2001, the Company is committed under the terms of
operating leases with various expiration dates, primarily for rental of
premises and computer equipment used in outsourcing contracts, in the
aggregate amount of approximately $668,586,000. Minimum lease payments
due in each of the next five years are as follows:
$
2002 86,225
2003 79,046
2004 69,288
2005 52,093
2006 44,002
The Company concluded four long-term service agreements representing a
total commitment of $49,317,000. Minimum payments under these agreements
due in each of the next five years are as follows:
$
2002 25,537
2003 20,755
2004 5,477
2005 622
2006 -
Page 28 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
15. Financial instruments
Fair value
At September 30, 2001 and 2000, the estimated fair values of cash and
cash equivalents, accounts receivable, work in progress and accounts
payable and accrued liabilities approximate their respective carrying
values.
The estimated fair values of long-term debt and obligations under
capital leases are not significantly different from their respective
carrying values at September 30, 2001 and 2000.
The Company does not hold or issue financial instruments for trading
purposes.
Credit risk
Credit risk concentration with respect to trade receivables is limited
due to the Company's large client base. Furthermore, as described in
Note 13, the Company generates a significant portion of its revenue from
a shareholder's subsidiaries and affiliates. Management does not believe
that the Company is subject to any significant credit risk.
Currency risk
The Company operates internationally and is exposed to market risks from
changes in foreign currency rates. The Company does not trade derivative
financial instruments.
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP
The material differences between Canadian and US GAAP affecting the
Company's Consolidated Financial Statements are detailed as follows:
Reconciliation of net earnings:
2001 2000 1999
------------------------------------------------
$ $ $
Net earnings - Canadian GAAP 62,789 55,666 83,816
Adjustments
Foreign currency translation (ii) 523 462 389
Goodwill (iii) (500) (500) (142)
Integration costs (iv) (4,842) (1,764) -
Income taxes (i) - - 550
Research (v) - - 2,178
Purchased in-process R&D (vi) - - (741)
Warrants (vii) (11,605) - -
Unearned compensation (viii) (150) - -
-----------------------------------------------------------------------------------------------------------
Net earnings - US GAAP 46,215 53,864 86,050
-----------------------------------------------------------------------------------------------------------
Basic EPS - US GAAP 0.15 0.20 0.32
-----------------------------------------------------------------------------------------------------------
Diluted EPS - US GAAP 0.15 0.20 0.32
-----------------------------------------------------------------------------------------------------------
Page 29 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
Reconciliation of shareholders' equity:
2001 2000 1999
------------------------------------------------
$ $ $
Shareholders' equity - Canadian GAAP 1,481,917 677,301 563,055
Adjustments
Adjustment for change in accounting policy (i) 9,134 9,134 -
Foreign currency translation (ii) 581 1,659 1,562
Goodwill (iii) 27,578 (642) (142)
Integration costs (iv) (6,606) (1,764) -
Income taxes (i) - - (2,456)
Warrants (vii) (11,605) - -
Unearned compensation (viii) (3,694) - -
-----------------------------------------------------------------------------------------------------------
Shareholders' equity - US GAAP 1,497,305 685,688 562,019
-----------------------------------------------------------------------------------------------------------
(i) Income taxes and adjustment for change in accounting policy
On October 1, 1999, the Company adopted the recommendations of
CICA Handbook Section 3465, Income taxes (see Note 2). The
recommendations of Section 3465 are similar to the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes issued by the Financial Accounting
Standards Board ("FASB"). Upon the implementation of Section 3465,
the Company recorded an adjustment to reflect the difference
between the assigned value and the tax basis of assets acquired in
a purchase business combination, which resulted in a future income
tax liabilities; the Company recorded this amount through a
reduction of retained earnings as part of the cumulative
adjustment. US GAAP, this amount would have been reflected as
additional goodwill.
Prior to the issuance of Section 3465, under Canadian GAAP,
accounting for income taxes was similar to the provisions of the
US Accounting Principles Board No. 11. Under US GAAP, the Company
would have followed the provisions of SFAS No. 109.
Page 30 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
(ii) Translation of foreign currencies
Under Canadian GAAP, the financial statements of the Company's
foreign subsidiaries, which are considered integrated operations,
have been translated using the temporal method. Under this method,
monetary assets and liabilities are translated at the exchange
rates in effect at the balance sheet dates and non-monetary assets
and liabilities are translated at historical exchange rates.
Revenues and expenses are translated at average rates for the
period. Translation exchange gains or losses of such subsidiaries
are reflected in net earnings.
Under US GAAP, SFAS No. 52, Foreign Currency Translation, requires
companies to translate functional-currency financial statements
into reporting currency using the current exchange rate method
whereby the rates in effect on the balance sheet dates for assets
and liabilities and the weighted average rate for statement of
earnings elements are used. Any translation adjustments, resulting
from the process of translating the financial statements of
foreign subsidiaries into Canadian dollars, are excluded from the
determination of net earnings and are reported as a separate
component in shareholders' equity.
(iii) Goodwill
As described in (i) above, goodwill recorded by the Company would
be greater for US GAAP purposes than for Canadian GAAP purposes.
The adjustment reflects the additional goodwill amortization
expense for US GAAP purposes.
The goodwill adjustment to shareholders' equity results from the
difference in the value assigned to stock options issued to
IMRglobal employees. Under Canadian GAAP, the fair value of
outstanding vested stock options is recorded as part of the
purchase allocation (see Notes 2 and 9), whereas under US GAAP,
the fair value of both vested and unvested outstanding stock
options granted as a result of the business acquisition is
recorded. See (viii) below for a further discussion relating to
this item.
(iv) Integration costs
Under Canadian GAAP, prior to January 1, 2001, certain
restructuring costs relating to the purchaser may be recognized in
the purchase price allocation when accounting for business
combinations, subject to certain conditions. Under US GAAP, only
costs relating directly to the acquired business may be considered
in the purchase price allocation. The adjustment represents the
charge to net earnings, net of goodwill amortization recorded for
Canadian GAAP purposes and of income taxes.
Page 31 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
(v) Research
Under US GAAP, software and development costs capitalized by a
subsidiary company would have been expensed. The adjustment
represents the reversal of the amortization expense, net of income
taxes.
(vi) Purchased in-process research and development ("R&D")
As a result of the acquisition of a subsidiary company, an amount
was allocated to software and development costs incurred by a
subsidiary company prior to its acquisition. Under US GAAP, this
charge would be considered as purchased in-process R&D. Purchased
in-process R&D that represents products in the development stage
and not considered to have reached technological feasibility at
the time of the acquisition is required to be expensed. The
adjustment represents the reversal of the amortization expense,
net of income taxes.
(vii) Warrants
Under Canadian GAAP, the fair value of warrants issued in
connection with long-term outsourcing contracts is recorded as
contract costs and amortized on a straight-line basis over the
initial contract term. Under US GAAP, the fair value of equity
instruments issued is subtracted from the initial proceeds
received in determining revenue. The adjustment represents the
subtraction to revenue, net of contract costs amortization
recorded for Canadian GAAP purposes and net of income taxes.
(viii) Unearned compensation
Under Canadian GAAP, unvested stock options granted as a result of
a business combination are not recorded. The adjustment reflects
the intrinsic value of unvested stock options (see (iii) above),
net of income taxes, that would have been recorded as a separate
component of shareholders' equity for US GAAP purposes, relating
to the IMRglobal acquisition described in Note 9. This unearned
compensation is amortized over approximately three years, being
the estimated remaining future vesting (service) period.
Page 32 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
(ix) Comprehensive income
Cumulative other comprehensive income is comprised solely of
foreign currency translation adjustments which result from the
process of translating the financial statements of foreign
subsidiaries (see (ii) above). As at September 30, 2001, 2000 and
1999, cumulative other comprehensive income amounts to $3,329,000,
$2,889,000 and $3,042,000, respectively.
The following table represents comprehensive income in accordance
with SFAS No. 130, Reporting Comprehensive Income:
2001 2000 1999
------------------------------------------------
$ $ $
Net earnings - US GAAP 46,215 53,864 86,050
Other comprehensive income:
Foreign currency translation adjustment,
net of tax 837 1,762 134
-----------------------------------------------------------------------------------------------------
Comprehensive income 47,052 55,626 86,184
-----------------------------------------------------------------------------------------------------
(x) Proportionate consolidation
The proportionate consolidation method is used to account for
interests in joint ventures. Under US GAAP, entities in which the
Company owns a majority of the share capital would be fully
consolidated and those which are less than majority-owned but over
which the Company exercises significant influence, would be
accounted for using the equity method. This would result in
reclassifications in the consolidated balance sheets and
statements of earnings as at and for the years ended September 30,
2001 and 2000. However, the differences in the case of
majority-owned joint ventures were not considered material and
have consequently not been presented (see Note 10). In accordance
with practices prescribed by the U.S. Securities and Exchange
Commission, the Company has elected, for the purpose of this
reconciliation, to account for interests in joint ventures using
the proportionate consolidation method.
(xi) Earnings before amortization of goodwill
In Canada, the Accounting Standards Board approved an addendum to
CICA Handbook Section 1580, Business Combinations, subsequently
superceded by Section 1581 Business Combinations, that permits
goodwill amortization expense to be presented net-of-tax on a
separate line in the Consolidated Statements of Earnings. This
presentation is not currently permitted under US GAAP. Under US
GAAP, $29,086,000 (as adjusted for US GAAP purposes) of
amortization of goodwill would have been included in operating
expenses.
Page 33 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
(xii) Depreciation and amortization
Under US GAAP, depreciation and amortization amounts would be
included in operating expenses.
(xiii) Consolidated statements of cash flows
The Company's consolidated statements of cash flows for each of
the years in the three-year period ended September 30, 2001 were
prepared in accordance with CICA Handbook Section 1540, Cash Flow
Statements, the provisions of which are substantially similar to
those of SFAS No. 95, Statement of Cash Flows.
(xiv) Recent accounting pronouncements
a) In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 addresses the accounting and
reporting of acquired goodwill and other intangible assets.
SFAS No. 142 discontinues amortization of acquired goodwill and
instead requires annual impairment testing of acquired
goodwill. Intangible assets will be amortized over their useful
economic life and tested for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. Intangible assets with
an indefinite useful economic life should not be amortized
until the life of the asset is determined to be finite. The
Company has adopted SFAS No. 142, effective October 1, 2001.
The Company is currently evaluating the impact of SFAS No.121
on its future earnings and financial position.
Also in June 2001, the FASB issued SFAS No. 141, Business
Combinations. SFAS No. 141 requires that all business
combinations be accounted for under the purchase method and
defines the criteria for identifying intangible assets for
recognition apart from goodwill. SFAS No. 141 applies to all
business combinations initiated after June 30, 2001 and all
business combinations accounted for using the purchase method
for which the acquisition date is July 1, 2001 or later. The
Company adopted SFAS No. 141 effective July 1, 2001.
The provisions of SFAS No. 141 and No. 142 are substantially
similar to those of Sections 1581 and 3062 of the CICA Handbook
described in Note 2.
Page 34 of 35
CGI GROUP INC.
Notes to the Consolidated Financial Statements
years ended September 30, 2001, 2000 and 1999
(tabular amounts only are in thousands of Canadian dollars)
--------------------------------------------------------------------------------
16. Reconciliation of results reported in accordance with Canadian GAAP to
US GAAP (cont'd)
(xv) Recent accounting pronouncements (cont'd)
b) In August 2001, the FASB issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which retains,
in general, the requirements of SFAS No. 121 and addresses
significant implementation issues. The provisions of SFAS No.
144 are effective for financial statements issued for fiscal
years beginning after December 15, 2001 and, generally, are to
be applied prospectively. Early application is encouraged. The
Company does not intend to adopt the new standard early;
however, it is currently evaluating the effect that
implementation of the new standard will have on its results of
operations and financial position.
c) Furthermore, the Company determined that the adoption of Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements, had no material adverse effect on the business,
results of operations and financial condition.
17. Comparative figures
Certain comparative figures have been reclassified in order to conform
to the presentation adopted in 2001.
18. 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 cash consideration of approximately
$38,100,000. This transaction was accounted for using the purchase
method.
Page 35 of 35
Samson Belair/Deloitte & Touche, S.E.N.C.
Assurance and Advisory Services
1 Place Ville-Marie
Suite 3000
Montreal QC H3B 4T9
Canada
Tel.: (514) 393-7115
Fax: (514) 390-4113
www.deloitte.ca
[GRAPHIC OMITTED]
Independent Auditors' Consent
We hereby consent to the incorporation by reference in CGI Group Inc.'s
Registration Statements on Form S-8 (Reg. Nos. 333-13350 and 333-66044) of our
audit report dated November 5, 2001 which is included in this Report of Foreign
Private Issuer on Form 6-K.
(signed)
Samson Belair/Deloitte & Touche
Chartered Accountants
Montreal, Quebec
December 5, 2001
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
NOTICE OF
ANNUAL GENERAL MEETING OF SHAREHOLDERS
Montreal, Quebec, December 12, 2001
Notice is hereby given that an Annual General Meeting (the <>) of
Shareholders of CGI GROUP INC. (the <>) will be held at the Hilton
Montreal Bonaventure hotel, Montreal Ballroom, 1 Place Bonaventure, Montreal,
Quebec, on Monday, January 21, 2002 at 11:00 a.m. (local time) for the following
purposes:
1) to receive the report of the directors, together with the balance sheet
and the statements of income, retained earnings and changes in
financial position, and the auditors' report for the fiscal year ended
September 30, 2001;
2) to elect directors;
3) to appoint auditors and authorize the directors to
fix their remuneration;
4) to transact such other business as may properly come
before the Meeting or any adjournment thereof.
The Information Circular and form of proxy for the Meeting are enclosed with
this Notice.
BY ORDER OF THE BOARD OF DIRECTORS
Paule Dore (signed)
Secretary
Note: Since it is desirable that as many shares as possible be represented
and voted at the Meeting, you are requested, if unable to attend the
Meeting in person, to complete and return the enclosed form of proxy in
the postage prepaid envelope provided for that purpose.
CGI GROUP INC.
INFORMATION CIRCULAR
The Information Circular is provided in connection with the solicitation of
proxies by the management of CGI GROUP INC. (the "Company" or "CGI") for use at
the Annual General Meeting of Shareholders of the Company which will be held on
January 21, 2002, and at any adjournment thereof (the <>). Unless
otherwise indicated, the information provided herein is as at November 21, 2001.
The solicitation of proxies will be made primarily by mail. However, proxies
could be solicited personally or by telephone by regular employees of the
Company at minimal costs. The Company does not expect to pay any compensation
for the solicitation of proxies, but will pay brokers and other persons holding
shares for others in their own names or in the names of their nominees, the
reasonable expenses for sending proxy material to beneficial owners in order to
obtain voting instructions. The Company will bear all expenses in connection
with the solicitation of proxies.
PROXIES
In order to be voted at the Meeting, a proxy must be received by the Secretary
of the Company prior to the Meeting. A proxy may be revoked at any time by the
person giving it to the extent that it has not yet been exercised. A proxy may
be revoked by filing a written notice with the Secretary of the Company. The
powers of the proxy holders may also be revoked if the shareholder attends the
Meeting in person and so requests.
The persons, whose appointment to act under the accompanying form of proxy is
solicited by the Company, are Directors of the Company.
The persons whose names are printed on the enclosed form of proxy will vote all
the shares in respect of which they are appointed to act, in accordance with the
instructions given on the form of proxy. In the absence of specification on any
matter or if more than one choice is indicated, the shares represented by the
enclosed form of proxy will be voted FOR that matter.
Every proxy given to any person in the enclosed form of proxy will confer
discretionary authority with respect to amendments or variations to the matters
identified in the Notice of Meeting and with respect to any other matters that
may properly come before the Meeting.
Every shareholder has the right to appoint a person to act on his behalf at the
Meeting other than any other persons whose names are printed in the enclosed
form of proxy. To exercise this right, the shareholder should insert his
nominee's name in the space provided for such purpose in the enclosed form of
proxy or prepare another proxy in proper form appointing his nominee.
2
VOTING SHARES AND PRINCIPAL HOLDERS OF VOTING SHARES
Only the holders of Class A Subordinate Shares and the holders of Class B Shares
(multiple voting) on record at the close of business on December 3, 2001 will be
entitled to receive notice and to vote at the Meeting. Each Class A Subordinate
Share (<>) will entitle its holder to one vote and
each Class B Share (multiple voting) (<>) will entitle its
holder to ten votes. As at December 3, 2001, the Company had 327,438,159 Class A
Subordinate Shares and 40,799,774 Class B Shares outstanding.
As at December 3, 2001, to the knowledge of the senior executives of the
Company, the only person who exercised control or direction over 10% or more of
the outstanding Class A Subordinate Shares is BCE Inc., directly and indirectly
through its wholly-owned subsidiary 3588513 Canada Inc., which exercised control
or direction over an aggregate number of 113,000,794 Class A Subordinate Shares,
representing 34.51% of the Class A Subordinate Shares outstanding. As at
December 3, 2001, only Mr. Serge Godin, indirectly through 9058-0705 Quebec Inc.
and 3727912 Canada Inc. (companies controlled by Mr. Serge Godin), Mr. Andre
Imbeau, indirectly through 9061-9354 Quebec Inc. and 9102-7003 Quebec Inc.
(companies controlled by Mr. Andre Imbeau), and BCE Inc., directly and
indirectly through its wholly-owned subsidiary 3588513 Canada Inc., exercised
control or direction over 10% or more of the outstanding Class B Shares. Mr.
Serge Godin, indirectly through 9058-0705 Quebec Inc. and 3727912 Canada Inc.,
beneficially owns or controls 28,216,507 Class B Shares, Mr. Andre Imbeau,
indirectly through 9061-9354 Quebec Inc. and 9102-7003 Quebec Inc., beneficially
owns or controls 4,221,165 Class B Shares, and BCE Inc., directly and indirectly
through its wholly-owned subsidiary 3588513 Canada Inc., beneficially owns or
controls 7,027,606 Class B Shares, representing respectively 69.16%, 10.35% and
17.23% of the outstanding Class B Shares, representing respectively 69.16%,
10.35% and 17.23% of the votes attaching to the outstanding Class B Shares, and
representing respectively 38.44%, 5.75% and 24.92% of the votes attaching to all
outstanding voting shares of the Company.
As at December 3, 2001, the directors and officers of the Company, as a group,
beneficially owned, directly or indirectly, 22,487,261 Class A Subordinate
Shares and 33,772,168 Class B Shares.
ELECTION OF DIRECTORS
The persons whose names are printed in the enclosed form of proxy intend to vote
for the election as directors of the proposed nominees whose names are set forth
in the following table. Each director elected will hold office until the next
annual meeting or until that director's successor is duly elected, unless the
office is earlier vacated, in accordance with the relevant provisions of the
applicable laws.
The following table lists the name of each person proposed by management for
election as a director, his principal occupation, the year when he first became
a director and the number of shares of the Company beneficially owned, directly
or indirectly, or over which control or direction was exercised, as at November
21, 2001.
Information as to shares they beneficially owned, or over which control or
direction was exercised, as at November 21, 2001, has been furnished by the
proposed nominees individually.
3
----------------------------------------------------------------------------------------------------------------------
Number of Shares Beneficially
Owned or Controlled
Class A
First Year Subordinate Class B
Name Principal Occupation as Director Shares Shares
----------------------------------------------------------------------------------------------------------------------
YVAN ALLAIRE (a) Emeritus Professor (UQAM), 1999 172 -
President, Governance Value Added
Inc.
WILLIAM D. ANDERSON (b) President 1999 1,000 -
BCE Ventures Inc.
CLAUDE BOIVIN (a) Director of Companies 1993 106,596 -
JEAN BRASSARD Vice-chairman, 1978 51,296 1,334,496
CGI Group Inc. and
Director of Companies
CLAUDE CHAMBERLAND (b) Director of Companies 1998 11,396 -
PAULE DORE Executive Vice-President and 1996 471,948 -
Chief Corporate Officer and
Secretary
CGI Group Inc.
SERGE GODIN (c) Chairman and Chief Executive 1976 563,288 28,216,507
Officer
CGI Group Inc.
ANDRE IMBEAU Executive Vice-President and 1976 47,386 4,221,165
Chief Financial Officer and
Treasurer
CGI Group Inc.
DAVID L. JOHNSTON.(b) President and Vice-Chancellor 1994 73,120 -
University of Waterloo
EILEEN A. MERCIER (a) President 1996 15,278 -
Finvoy Management Inc.
SATISH K. SANAN President 2002 19,543,949 -
U.S. and Asia Pacific
CGI Group Inc.
C. WESLEY M. SCOTT Director of Companies 2001 1,000 -
CHARLES SIROIS Chairman and 1998 2,642 -
Chief Executive Officer
Telesystem Ltd.
SIIM A. VANASELJA Chief Financial Officer 2002 5,000 -
BCE Inc.
----------------------------------------------------------------------------------------------------------------------
(a) Member of the Audit Committee
(b) Member of the Human Resources and Corporate Governance Committee
(c) Ex-officio member of the Human Resources and Corporate Governance Committee
For the past five years, all of the nominees have been engaged in their present occupation or in other management
capacities with the companies with which they currently hold positions, except for: Mr. Yvan Allaire who, prior to
July 3, 2001, was Executive Vice-President, Bombardier Inc. and Chairman, Bombardier Capital; Mr. William D.
Anderson who, prior to December 1st, 2000, was Chief Financial Officer of BCE Inc.; Mr. Jean Brassard who, prior to
October 1, 2000, was President and Chief Operating Officer of CGI Group Inc.; Mr. Claude Chamberland who, prior to
May 1, 2001, was President of Alcan International Ltd.; Mr. C. Wesley M. Scott who, prior to March 1, 2001 was Chief
Corporate Officer of BCE inc.; Mr. Charles Sirois who, prior to February 15, 2000, was Chairman and Chief Executive
Officer of Teleglobe Inc.; Mr. Satish Sanan who, prior to July 27, 2001, was Chairman and Chief Executive officer,
IMRglobal Corp.; and Mr. Siim A. Vanaselja who, prior to January 15, 2001, was Executive Vice-President and Chief
Financial Officer of BCI Inc.
4
REPORT OF THE HUMAN RESOURCES AND CORPORATE GOVERNANCE
COMMITTEE ON THE REMUNERATION OF DIRECTORS AND NAMED
EXECUTIVE OFFICERS
Composition of the Human Resources and Corporate Governance Committee
The Human Resources and Corporate Governance Committee of the Board of Directors
(the "Human Resources Committee") has responsibility for the administration of
the compensation policy covering the Company's senior officers. The Human
Resources Committee makes recommendations on the compensation of senior officers
to the Board of Directors for approval.
The Human Resources Committee is composed of Messrs. David L. Johnston,
Chairman, William D. Anderson and Claude Chamberland. Mr. Godin currently
participates to Human Resources Committee meetings as an ex-officio member. The
Committee met three times during fiscal 2001.
Remuneration of Named Executive Officers
o Compensation Policy
In order to support its strategic plan, the Company has adopted a
compensation policy for its senior officers whereby emphasis is put on
incentive compensation.
The compensation level provided for senior officers is based on a
targeted positioning in comparison with a reference group comprised,
according to the role of the senior officer, of Canadian and U.S.
companies of the high technology industry, including other information
technology consulting firms, or of companies where the information
technology function is of strategic importance. The Company believes
that this reference group constitutes a good representation of the
market for recruiting high performing managers and the talents CGI
needs to continue its successful expansion.
The compensation policy aims at providing the Company's senior officers
with a compensation package defined, according to a specific position
within the reference group, as follows:
-- the fixed components, which include base salary, benefits and
perquisites, are aligned with the median of the Canadian reference
group;
-- the annual incentive is positioned at the median of the Canadian and
the U.S. reference groups (referred to as the North American
reference group);
-- the long-term incentive is set at the level required to position the
total compensation toward the upper quartile of the North American
reference group.
The North American reference group is composed of the Canadian
reference group combined with the U.S. reference group, where each
group is equally weighted thus reflecting the global scope of the
Company.
5
o Components of Total Compensation
The components of CGI's senior officers total compensation are:
1) a competitive base salary;
2) short-term incentives in the form of variable annual plans and
programs based on the responsibilities of the officer and the
achievement of objectives;
3) a benefits package providing the officer with protection in
the event of death or disability, as well as medical and
dental care plans;
4) a perquisites package required to respond to the officer's
business requirements; and
5) two long-term incentive plans, one being a management stock
incentive plan, the other a share option plan, both intended
for senior executive officers.
o Base Salary
Base salaries are reviewed annually by the Human Resources Committee,
based on each senior officer's responsibilities, competencies and
contribution to the Company's success. The Human Resources Committee
submits all salary increases granted to officers to the Board of
Directors for approval.
o Short-Term Incentive
The senior officers participate in an annual bonus plan adapted to
their responsibilities within the organization. The purpose of this
plan is to provide these key employees with an incentive to increase
the growth and profitability of the Company and offer a cash reward
based on the achievement of performance objectives derived from the
Company's strategic plan, as reflected in the annual budget.
These senior executive officers are eligible for a bonus (the "Target
Bonus") for fully meeting the objectives, as defined early in the year
by the Human Resources Committee for short-term incentive plan
purposes. The actual bonus can reach two times the Target Bonus for
exceptional performance. The Human Resources Committee has the
discretion to waive minimum profitability requirements when exceptional
strategic achievements are realized during a year which could increase
the value of the Company over the long-term.
The Target Bonus varies between 40% and 55% of the senior officer's
base salary and is adjusted by a performance factor. The performance
measures are Company and/or Strategic Business Units profitability,
based on earnings before amortization of goodwill and income taxes, and
growth in net revenues for the year.
6
o Long-Term Incentive
(a) Management Stock Incentive Plan
Senior management members, excluding the Chairman and Chief Executive
Officer and the Executive Vice-President and Chief Financial Officer,
are eligible to participate in a Management Stock Incentive Plan (the
"Incentive Plan"). The purpose of the Incentive Plan is to promote
synergy among business units of the Company, to provide key managers
with an opportunity to share in the creation of economic value to the
Company, and to promote shareholding among management with an
opportunity for capital accumulation.
Under the Incentive Plan, eligible senior officers are provided with
the opportunity to purchase, at the beginning of a performance cycle, a
specific number of Company shares, as determined by the Human Resources
Committee at the beginning of the performance cycle. Purchases are made
on the market, at fair market value, with the purchase commissions
being paid by the Company. Purchases are financed through loans
arranged with financial institutions, the interest on such loans being
paid by the Company for the duration of the performance cycle. The
shares are used as collateral for the loan and are held in trust for
the duration of the performance cycle.
In the course of the performance cycle, each participant is entitled to
earn a bonus, which will be first applied in reimbursement of the
participant's loan. The Target Bonus is earned for achieving expected
results, in relation to the Company's total cumulative contribution
margin over the performance cycle. A bonus equal to two times the
Target Bonus may be earned for exceptional results. However, no bonus
is paid if performance falls below a minimum or threshold level. The
Target Bonus is equal to 100% of the loan taken out by the officer for
purchase of the shares. The performance cycle is three years from the
date of purchase of the shares, and the performance objectives for
purposes of the plan are defined by the Human Resources Committee at
the beginning of the cycle.
The third three-year performance cycle under the Incentive Plan started
on October 1, 1999 and will end on September 30, 2002.
(b) Share Option Plans
Share option plans for certain employees of the Company and its
subsidiaries were in force at the end of fiscal 2001.
Share option plan for employees, officers and directors of CGI Group
Inc., its subsidiaries and its associates (the "CGI Share Option Plan")
Under the CGI Share Option Plan, the Human Resources Committee may
grant, at its own discretion, options to purchase Class A Subordinate
Shares to certain employees of the Company. The exercise price is
established by the Human Resources Committee but may not be lower than
the closing price for Class A Subordinate Shares on the business day
preceding the date of the grant. Each option may be exercised within a
period not exceeding 10 years, except in the event of retirement,
termination of employment or death.
Five Named Executive Officers were granted options during fiscal 2001.
The details of these grants are shown on the table "Options granted
during the most recently completed fiscal year".
7
Some of the options granted during 2001 to the Named Executive Officers
have special terms and conditions. These special terms and conditions
apply to grants of 285,000, 105,000, 110,000 and 20,000 options to
Messrs. Godin, Roach, Imbeau and Chasse, respectively. Each of these
options may be exercised within a period not exceeding 10 years. Half
of these options vest on the first anniversary of their grant if the
officer is still employed by the Company on that date.
The vesting of the other half is tied to the profitability and growth
in net revenues of the Company in the fiscal year ending September 30,
2002. The Company must meet minimum levels of profitability and growth
for these options to vest, and they will all vest if the Company
exceeds its profitability and growth objectives for the year. However,
any option that does not vest according to the Company's performance
may still vest later at the rate of 1/3 on the third, fourth and fifth
anniversary of the option grant.
IMRglobal Share Option Plans
Pursuant to the acquisition of IMRglobal Corp. ("IMR") in July 2001,
CGI continued the stock option plans of IMR, being the Directors' Stock
Option Plan (the "IMR Directors' Plan"), the First Amended and Restated
Stock Incentive Plan (the "IMR Incentive Plan") and the 1999 Employee
Stock Incentive Plan (the "IMR 1999 Incentive Plan") (together the "IMR
Option Plans"). As a result of the acquisition of IMR, all outstanding
options to purchase shares of IMR became options to acquire Class A
Subordinate Shares of the Company. Although each IMR option issued
prior to the IMR acquisition remains subject to the terms of the IMR
Option Plan under which it was issued, no new options will be granted
under the IMR Option Plans.
The IMR Directors' Plan was available to non-employee directors of IMR
or of any of its subsidiaries. Options subject to the terms of the IMR
Directors' Plan were granted at an exercise price equal to the fair
market value of the underlying shares on the date of grant. The fair
market value was defined as being the closing price of IMR stock on the
Nasdaq national Market on the business day preceding the date of grant.
Such options are exercisable until December 31, 2001.
The IMR Incentive Plan was available to employees of IMR or any one of
its subsidiaries as well as to non-employee directors of IMR,
consultants or other persons who rendered valuable services to IMR or
any one of its subsidiaries. Options subject to the IMR Incentive Plan
were granted at an exercise price equal to the fair market value of the
underlying shares on the date of grant. The fair market value was
defined as being the closing price of IMR stock on the Nasdaq national
Market on the business day preceding the date of grant. Options issued
under the IMR Incentive Plan may generally be exercised within a period
not exceeding 10 years, except in the event of retirement, termination
or death.
The IMR 1999 Incentive Plan was available to employees of IMR or any of
its subsidiaries. Executive officers and directors of IMR were not
permitted to participate in such plan. Options subject to the terms of
the IMR 1999 Incentive Plan were granted at an exercise price equal to
the fair market value of the underlying shares on the date of grant.
The fair market value was defined as being the closing price of IMR
stock on the Nasdaq national Market on the business day preceding the
date of grant. Options issued under the IMR 1999 Incentive Plan may
generally be exercised within a period not exceeding 10 years, except
in the event of retirement, termination or death.
8
Furthermore, options granted under the IMR Incentive Plan and the IMR
1999 Incentive Plan will vest and become fully exercisable if the
employment of the employee is terminated without cause within 12 months
after the acquisition of IMR by CGI.
The Named Executive Officers do not hold options subject to the terms
of the IMR Option Plans.
o Remuneration of the Chairman and Chief Executive Officer
Mr. Godin's compensation is determined according to the same
compensation policy that applies to the other senior officers of the
Company. Accordingly, Mr. Godin's base salary reflects the median value
of similar positions in the Canadian high technology industry as well
as his level of competency and contribution to the success of the
Company. The rest of Mr. Godin's compensation is mostly delivered
through incentive compensation with particular emphasis on long-term
incentive to promote creation of shareholder value.
Based on the provisions of the current bonus plan, the Chairman and
Chief Executive Officer is eligible for a Target Bonus equal to 55% of
his base salary. During fiscal 2001, the Chairman and Chief Executive
Officer earned a bonus of $280,095 given that the Company's financial
goals were exceeded. The Chairman and Chief Executive Officer does not
participate in the Incentive Plan.
o Separation Policy for Senior Officers
The Company adopted a separation policy for its senior management to
ensure that the senior officers receive appropriate and equitable
treatment should their employment be terminated by the Company. The
separation policy provides for compensatory payments to the senior
officers in case of termination without cause by the Company or their
resignation following important reductions in their responsibilities
and/or compensation. The separation policy provides for a severance
payment equal to two times the sum of the annual salary and annual
bonus of the senior officer. Group benefits, but disability coverage,
continue for a period of 24 months following the departure of the
senior officer without exceeding the reemployment date of the senior
officer, as the case may be. Eligibility to other fringe benefit plans
and to specific benefits ceases or continues, as the case may be,
subject to the detailed provisions set out in the separation policy.
Unvested rights to exercise options granted under the CGI Share Option
Plan at the time of the departure of the senior officer are cancelled
except otherwise decided by the Chairman and Chief Executive Officer or
the Human Resources Committee. Vested options granted under the Share
Option Plan and still unexercised at the time of the departure of the
senior officer can be exercised for three months from the date of
departure, without exceeding the normal term of the options. The
Company undertakes to pay the fees for outplacement services up to a
maximum of 10% of the senior officer's annual salary.
Report submitted by the Human Resources and Corporate Governance Committee on
November 5, 2001:
David L. Johnston, Chairman
William D. Anderson
Claude Chamberland
9
REMUNERATION OF NAMED EXECUTIVE OFFICERS
The summary compensation table shows detailed information on total compensation
for the Chairman and Chief Executive Officer and the four other most highly paid
executive officers for services rendered during the fiscal years ended on
September 30, 2001, 2000 and 1999. This information is as follows:
o salary earned;
o bonus earned under the Company's annual bonus plan;
o any other compensation, including perquisites and other personal
benefits;
o options granted under the CGI Share Option Plan;
o bonus earned under the Incentive Plan;
o any other compensation not otherwise declared elsewhere.
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------
Name and Principal Annual Compensation Long-Term Compensation Any Other
Position as at Compensation
September 30, 2001
-------------------------------------------------------------------------------------------------------------
Long-Term
Other Annual Securities Incentive
Compensation Under Options Plans
Salary ($) Bonus ($) ($) Granted (#) Payouts ($) ($)
---------- --------- --- ----------- ----------- ---
Serge Godin 2001 500,287 280,095 224,570 (a) 285,000 - 17,318 (c)
Chairman and Chief 2000 485,162 - 229,177 155,000 - 16,908 (c)
Executive Officer 1999 459,657 345,000 229,249 65,000 (b) - 16,099 (c)
Michael Roach 2001 384,327 297,450 (d) 155,000 - 13,051 (c)
President, Canada 2000 333,365 - 34,349 78,000 (e) - 11,547 (c)
and Europe 1999 290,693 125,000 (d) - - 7,671 (c)
Andre Imbeau 2001 372,788 230,835 (d) 120,000 - 12,922 (c)
Executive 2000 361,739 - (d) 115,000 - 12,624 (c)
Vice-President and 1999 344,347 258,750 (d) 50,000 (b) - 12,074 (c)
Chief Financial
Officer
Paule Dore 2001 308,827 139,075 (d) 90,000 - 10,706 (c)
Executive 2000 299,800 - 32,385 60,000 - 10,465 (c)
Vice-President and 1999 286,440 143.500 (d) 25,000 (b) 10,045 (c)
Chief Corporate
Officer
Francois Chasse 2001 355,594 50,000 56,363 (f) 30,000 - 12,304 (c)
Executive 2000 343,077 - 47,850 53,000 (e) - 11,967 (c)
Vice-President, 1999 322,464 125,000 (d) 7,500 (b) - 11,105 (c)
Mergers &
Acquisitions
-------------------------------------------------------------------------------------------------------------
(a) This amount includes $190,200 representing the amount of interest and capital paid by CGI on behalf
of Mr. Godin on loans taken out by him for purchase of Company stock.
(b) Number of securities before 2 for 1 stock split effective January 7, 2000.
(c) This amount represents the Company's contribution in the name of the executive toward the Stock
Purchase Plan available to all the Company's employees. Officers may contribute up to 3.5% of their
base salary, an amount fully matched by the Company. Contributions are used to purchase Company
stock.
(d) As the value of perquisites and other personal benefits does not exceed the lower of $50,000 or 10%
of the aggregate salary and bonus for the fiscal year being considered, its disclosure is not
required under current disclosure rules.
(e) 18,000 of those securities are before 2 for 1 stock split effective January 7, 2000.
(f) This amount includes $37,032 representing the value of automobile benefit provided to Mr. Chasse.
10
Share Options
o Options Granted During the Last Fiscal Year
The table below shows, for the Named Executive Officers, the options
granted during fiscal 2001.
OPTIONS GRANTED DURING THE MOST RECENTLY
COMPLETED FISCAL YEAR
-----------------------------------------------------------------------------------------------------
Name Securities % of Total Options Exercise Market Value of Expiration Date
Under Granted Price Securities Under
Options to Employees ($) Options at the
Granted During the Fiscal Date of Grant
(#) Year ($)
-----------------------------------------------------------------------------------------------------
Serge Godin 285,000 2.67% 8.90 8.90 September 18, 2011
Michael Roach 105,000 0.99% 8.90 8.90 September 18, 2011
50,000 0.47% 6.73 6.73 April 23, 2011
Andre Imbeau 110,000 1.03% 8.90 8.90 September 18, 2011
10,000 0.09% 6.73 6.73 April 23, 2011
Paule Dore 80,000 0.75% 8.90 8.90 September 18, 2011
10,000 0.09% 6.73 6.73 April 23, 2011
Francois Chasse 20,000 0.19% 8.90 8.90 September 18, 2011
10,000 0.09% 6.73 6.73 April 23, 2011
-----------------------------------------------------------------------------------------------------
o Options Exercised During the Last Fiscal Year
The following table shows, for each Named Executive Officer, the number
of shares covered by the options granted, if any, exercised during the
fiscal year ended on September 30, 2001, and the aggregate value
realized at the time of exercise.
The table also shows the total number of shares covered by unexercised
options, if any, held as at September 30, 2001, and the value of
unexercised in-the-money options at year-end.
OPTIONS EXERCISED DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
AND VALUE OF OPTIONS AT YEAR-END
---------------------------------------------------------------------------------------------------------
Value of Unexercised
Unexercised Options In-The-Money Options at
at Year-End Year-End (a)
(#) ($)
----------------------------------------------------------
Securities Aggregate
Acquired on Value
Exercise Realized Non- Non-
Name (#) ($) Exercisable Exercisable Exercisable Exercisable
---------------------------------------------------------------------------------------------------------
Serge Godin -- -- 140,075 299,925 -- 42,750
132,500 (b)
Michael Roach -- -- 55,200 159,800 1,589,564 131,986
3,000 (b) 15,000 (b)
120,000 (c)
Andre Imbeau -- -- 103,925 131,075 829,800 39,680
110,000 (b)
22,500 (d)
Paule Dore -- -- 55,200 94,800 -- 35,180
52,500 (b)
Francois Chasse -- -- 32,600 32,400 -- 26,180
13,500 (b) 12,000 (b)
--------------------------------------------------------------------------------------------------------
(a) Based on the closing price on the Toronto Stock Exchange of Class A Subordinate Shares as of
September 28, 2001, namely $9.05.
(b) Number of securities before 2 for 1 stock split effective January 7, 2000.
(c) Number of securities before 2 for 1 stock splits effective May 21, 1998 and January 7, 2000.
(d) Number of securities before 2 for 1 stock splits effective December 15, 1997, May 21, 1998 and
January 7, 2000.
11
Performance Graph
The following graph compares the annual variations in the total cumulative
return on the Class A Subordinate Shares with the total cumulative return of the
TSE 300 and NASDAQ stock indexes, for the past five financial years of the
Company.
[GRAPHIC OMITTED]
Remuneration of Directors
Members of the Board of Directors who are employees of the Company are not
compensated for their services as directors or members of committees of the
Board of Directors of the Company.
Members of the Board of Directors who are not employees of the Company are paid
an annual retainer fee of $15,000. An additional compensation of $2,000 per year
is paid to members of a committee and $3,000 per year to a Chairman of a
committee. Attendance fees are $1,000 per Board or committee meeting, except for
members of the Audit Committee who receive $2,500 per meeting attended.
12
Members who join the Board of Directors for the first time are entitled to
receive a grant of 2,000 stock options on the date of their nomination. In
addition, members of the Board of Directors receive annually a grant of 4,000
options.
Members of the Board of Directors may choose to convert part or all of their
retainer in deferred stock units ("DSU"). The number of DSUs granted to a member
is equal to the chosen annual retainer amount divided by the average closing
price of Class A Subordinate Shares on the Toronto Stock Exchange over the five
business days preceding the calculation date. Once granted, the value of DSUs is
determined based on the quoted market price of the Class A Subordinate Shares.
The value of DSUs is payable only upon the member's departure from the Board.
The amount paid corresponds to the number of DSUs accumulated to the credit of
the member multiplied by the average closing price of Class A Subordinate Shares
during the 30 working days preceding the member's departure. The amount is paid
in cash, after statutory deductions. For each DSU purchased with the retainer,
the member of the Board of Directors is granted two stock options under the CGI
Share Option Plan. Each option may be exercised within a period not exceeding 10
years. The exercise price is equal to the closing price of Class A Subordinate
Shares on the Toronto Stock Exchange on the date preceding the date of grant.
The members of the Board of Directors have 30 days following their election or
reelection as directors to notify the Company's Secretary of the portion of the
retainer they wish to receive in DSUs for the next fiscal year.
For the year ended September 30, 2001, a total cash remuneration of $197,029 has
been paid to the directors.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
As of November 21, 2001, no directors, senior officers, former directors or
senior officers of the Company were indebted to the Company.
CORPORATE GOVERNANCE
The Company supports and conducts its business in accordance with the Toronto
Stock Exchange guidelines for effective corporate governance. These guidelines
address such matters as the constitution and independence of Boards of
Directors, the functions to be performed by boards and their committees, and the
relationship between the Board of Directors, management and shareholders. A
brief description of the Company's corporate governance practices is set out, in
tabular form, and is attached to this Information Circular as Appendix A.
Decisions Requiring Prior Approval by BCE Inc.
Under the terms of the options agreement (the "Options Agreement") entered into
in 1998, as since amended, among, inter alia, Serge Godin, Andre Imbeau, Jean
Brassard (collectively, the "Majority Shareholders"), their respective holding
companies, Bell Canada, BCE Inc. and CGI, until the earlier of January 5, 2006
and the date on which BCE Inc. acquires Control (as defined in the Options
Agreement) of CGI, certain matters are subject to the prior approval of the
chief executive officer or the chief operating officer of BCE Inc. Specifically,
BCE Inc. must approve:
o any change in the dividend policy of CGI;
o any arrangement, amalgamation or merger of CGI with any person other
than wholly-owned subsidiaries of CGI or other public corporations with
market capitalizations less than 10% of that of CGI;
13
o any transaction with a value in excess of $10 million between CGI and
its subsidiaries on the one hand, and any person or persons acting in
concert with 10% or more of the voting power of CGI, other than BCE
Inc. and its affiliates;
o any transaction or operation involving CGI or one of its consolidated
subsidiaries as a result of which certain financial ratios would not be
met;
o the appointment, from time to time, of a Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer of CGI other than Serge
Godin, Jean Brassard or Andre Imbeau;
o amendments to articles of incorporation or by-laws of CGI;
o redemptions, purchases or offers to purchase or redeem equity shares of
CGI;
o acquisitions or agreements of CGI to acquire any person or business
primarily engaged in an activity other than information technology
services;
o making by CGI or its subsidiaries of any acquisition or disposition of
assets or securities in excess of 10% of the market capitalization of
CGI;
o any agreement or commitment by CGI or any of its consolidated
subsidiaries to guarantee or pay any indebtedness of any person (other
than CGI or any of its consolidated subsidiaries);
o launching of new lines of business for CGI or material changes in CGI's
corporate strategy;
o adoption of any annual business plan or budget of CGI or the making of
any amendment thereto showing a pre-tax margin of less than 7%; and
o any material alliance or joint venture by CGI that BCE Inc. reasonably
concludes is or would likely be:
>> outside the normal course of CGI's business;
>> in any significant manner, inconsistent with CGI's strategic
business plan; or
>> in any significant manner, inconsistent with the commercial
interests of the BCE group.
The Majority Shareholders, in their capacity as directors of CGI, subject to
their fiduciary duties as directors, and the Majority Shareholders (and their
respective holding companies), in their capacity as shareholders of CGI, have
agreed to vote in accordance with BCE Inc.'s position on these matters when
brought before the Board of Directors or shareholders of CGI.
In recognition of BCE Inc.'s and the Majority Shareholders' respective
significant ownership interests and voting rights in CGI, and of BCE Inc.'s
rights under the Options Agreement (including those described above), the advice
of BCE Inc.'s nominees on CGI Board of Directors, and of the Majority
Shareholders, in their capacity as directors, will be sought prior to CGI's
undertaking (directly or indirectly) any proposed acquisitions of any business
and any proposed agreements or arrangements with any one customer and affiliates
of one customer with revenues and/or obligations per annum in excess of $25
million.
Board of Directors Designees
So long as BCE Inc. (and any of its wholly-owned subsidiaries) holds at least
20% of the outstanding shares in the share capital of CGI, the Majority
Shareholders and their respective holding companies have undertaken to vote to
elect to the Board of Directors of CGI the number of board designees nominated
by BCE Inc. as shall represent 25% of the total number of directors on the CGI
Board. Furthermore, until the date on which BCE Inc. acquires Control (as
defined in the Options Agreement) of CGI, BCE Inc. (and its wholly-owned
subsidiaries holding shares of CGI) has undertaken to vote in favor of the
election of each of Messrs. Godin and Imbeau as a director of CGI to the extent
that each of them is at that time a senior executive of CGI.
14
APPOINTMENT OF AUDITORS
The persons whose names are printed in the enclosed proxy form intend to vote
for the appointment of Samson Belair/Deloitte & Touche, Chartered Accountants,
as auditors of the Company and to vote for authorization of the Board of
Directors to fix the remuneration of the auditors. The auditors will hold office
until the next annual meeting of shareholders of the Company or until their
successors are appointed. Samson Belair/Deloitte & Touche were first appointed
at the general meeting of shareholders held on January 27, 1988.
GENERAL
The management of the Company is not aware of any matter which could be
submitted at the Meeting other than the matters set forth in the Notice of
Meeting. If other unknown matters are regularly submitted at the Meeting, the
persons appointed in the attached form of proxy will vote to the best of their
judgment.
APPROVAL OF DIRECTORS
The directors of the Company have approved the content and the delivery of this
Circular.
Dated December 12, 2001.
Serge Godin (signed)
Chairman and
Chief Executive Officer
15
APPENDIX A
GUIDELINE COMPLIANCE TABLE
----------------------------------------------------------------------------------------------------------------------------
Guidelines Comments
----------------------------------------------------------------------------------------------------------------------------
1. The Board of Directors should explicitly
assume responsibility for the stewardship of
the Company, including:
(a) adoption of a strategic planning process; (a) The Board of Directors is involved in the
preparation of the 3-year strategic plan of the
Company and such plan is reviewed annually by
the Board of Directors.
(b) identification of the principal risks of the (b) The Audit Committee identifies the major
Company's business, and implementation of financial and operating risks undertaken by the
appropriate systems to manage these risks; Company and reviews the various policies and
practices of the Company to manage such risk.
The Audit Committee regularly reports on such
matters to the Board of Directors.
(c) succession planning, including appointing, (c) The Human Resources Committee reviews,
training and monitoring senior management; reports and, where appropriate, provides
recommendations to the Board of Directors on
succession planning matters.
(d) the Company's communication policy; and (d) The Board of Directors has adopted "Guidelines
on Timely Disclosure" which address matters such
as the essential principles of the disclosure
rules of the regulatory authorities and
disclosure guidelines.
Under the Guidelines, the Board of Directors has
the responsibility to oversee the content of the
Company's major communications to its
shareholders and the investing public. However,
the Board believes that it is management's role
to communicate on behalf of the Company with its
shareholders and the investment community. The
Company maintains an effective investor
relations process to espond to shareholder
questions and concerns.
The Board of Directors reviews and, where
required, approves statutory disclosure
documents prior to their distribution to
shareholders.
(e) integrity of the Company's internal control The Board of Directors' duties include the
and management information systems. assessment of the integrity of the Company's
internal control and information system. The Audit
Committee also has the responsibility to review the
internal control and management information systems
of the Company. The Committee reports to the Board
of Directors with respect to such controls and
systems.
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16
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2. The Board of Directors should be constituted The Board of Directors will be composed of 14
with a majority of individuals who qualify as directors, seven of whom are unrelated directors.
unrelated directors.
The Board of Directors has determined that its seven
unrelated directors do not have interests in or
relationships with CGI's significant shareholder,
Mr. Serge Godin, Chairman of the Board and Chief
Executive Officer of CGI, that could be considered
to materially interfere with the directors' ability
to act in the best interests of the Company. The
Company believes that such representation fairly
reflects the investment of minority shareholders in
the Company.
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3. The analysis of the application of the Related:
principles supporting the conclusion in
paragraph 2 above. William D. Anderson President,
BCE Ventures Inc.
Jean Brassard Vice-Chairman, CGI and
Director of Companies
Paule Dore Executive Vice-President and
Chief Corporate Officer and
Secretary, CGI
Serge Godin Chairman of the Board and
Chief Executive Officer, CGI
Andre Imbeau Executive Vice-President
and Chief Financial Officer
and Treasurer, CGI
Satish Sanan President
U.S. and Asia Pacific, CGI
Siim A. Vanaselja Chief Financial Officer,
BCE Inc.
Unrelated:
Yvan Allaire
Claude Boivin
Claude Chamberland
David L. Johnston
Eileen A. Mercier
C. Wesley M. Scott
Charles Sirois
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17
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4. The Board of Directors should appoint a The Human Resources and Corporate Governance
committee of directors: Committee is comprised of three outside directors
and two of whom are unrelated. The Chairman of the
a) composed exclusively of outside directors, Board and Chief Executive Officer currently
i.e. non-management directors, a majority of participates to the Human Resources and Corporate
whom are unrelated directors; and Governance Committee meetings as an ex-officio
member.
b) with the responsibility for proposing to the
full Board of Directors new nominees to the The Chairman of the Board submits to the Human
Board of Directors and for assessing directors Resources and Corporate Governance Committee
on an ongoing basis. candidates to fill vacancies on the Board of
Directors; if the candidacies are endorsed by the
Human Resources Committee, they are then submitted
to the approval of the Board of Directors.
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5. The Board of Directors should implement a The Human Resources and Corporate Governance
process to be carried out by the Nominating Committee is responsible for making an annual
Committee or other appropriate committee for assessment of the overall performance of the
assessing the effectiveness of the Board of contribution of the Board of Directors and of its
Directors as a whole, the committees of the committees. The annual assessment is communicated
Board of Directors and the contribution of by the chairman of the committee to the Board of
individual directors. Directors.
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6. Existence of an orientation and education Each new director has access to a formal orientation
program for new recruits to the Board of and education program of the Company and receives a
Directors. record of historical public information on the
Company together with prior minutes of applicable
committees of the Board of Directors.
In addition, presentations on various topics are
given, by management, on a regular basis to the
Board of Directors and directors are given updates
on business and governance initiatives and in
response to questions raised by the members of the
Board of Directors.
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7. Size of the Board of Directors and the The Board of Directors is of the view that its size
impact of the number upon effectiveness. and composition are well suited to the
circumstances of the Company and allow for the
efficient functioning of the Board of Directors as a
decision-making body.
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18
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8. Adequacy and form of the compensation of The Human Resources and Corporate Governance
directors that realistically reflects the Committee reviews periodically directors'
responsibilities and risk involved in being an compensation. In determining directors'
effective director. remuneration, the Committee considers time
commitment, comparative fees, risks and
responsibilities.
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9. Committees of the Board of Directors should Each committee operates according to the Board of
generally be composed of: Directors' approved written mandate outlining its
duties and responsibilities and are composed
(a) outside directors; and exclusively of outside directors, a majority of
whom are unrelated to the Company.
(b) a majority of whom are unrelated directors.
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10. The Board of Directors' responsibility for All corporate governance matters are dealt with by
(or a committee of the Board of Directors' the Human Resources and Corporate Governance
general responsibility for) developing the Committee. The scope of the mandate of such
Company's approach to governance issues. committee was confirmed in a "Role Statement"
adopted by the Board of Directors.
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11. The Board of Directors has developed: The Board of Directors has delegated to senior
management the responsibility for day to day
(a) position descriptions for the Board of management of the business of the Company. In
Directors and for the CEO, involving the addition to those matters, which must by law be
definition of the limits to management's approved by the Board of Directors, the Board of
responsibilities; and Directors retains responsibility for significant
changes in the Company's affairs.
(b) the corporate objectives for which the CEO
is responsible for meeting.
----------------------------------------------------------------------------------------------------------------------------
12. The structure and procedures ensuring that The Board of Directors acts independently of
the Board of Directors can function management.
independently of management.
The Board of Directors has concluded, for various
reasons, that the fact that Mr. Serge Godin occupies
the office of Chairman of the Board and Chief
Executive Officer of the Company does not impair the
ability of the Board of Directors to act
independently of management. Mr. David L. Johnston
acts as Lead Director of the Company and a meeting
of the outside directors is held annually and
chaired by the Lead Director.
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19
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(a) The Audit Committee of the Board of The Audit Committee is comprised of only outside
Directors should be composed only of outside directors.
directors.
(b) The roles and responsibilities of the Audit The Audit Committee is mandated by the Board of
Committee should be specifically defined so Directors to review with the auditors the scope of
as to provide appropriate guidance to Audit the audit review; review with the auditors and
Committee members as to their duties. management the effectiveness of the Company's
accounting policies and practices, the Company's
internal control procedures, programs and policies
and the adequacy and effectiveness of the Company's
internal controls over the accounting and financial
reporting systems within the Company; review related
party transactions; and review and recommend the
approval to the Board of Directors of the Company's
interim and audited financial statements and all
public disclosure documents containing audited or
unaudited financial information.
(c) The Audit Committee should have direct The Audit Committee reviews with the Company's
communication channels with the internal and auditors and management the effectiveness of the
external auditors to discuss and review Company's accounting policies and practices, the
specific issues as appropriate. Company's internal control procedures, programs and
policies and the adequacy and effectiveness of the
Company's internal controls over the accounting and
financial reporting systems within the Company;
reviews related party transactions; and reviews
the Company's audited financial statements with the
auditors prior to their submission to the Board of
Directors for approval.
(d) The Audit Committee duties should include The Audit Committee reviews the Company's internal
oversight responsibility for management control procedures, programs and policies and the
reporting on internal control, and should adequacy and effectiveness of the Company's
ensure that management has designed and internal controls over the accounting and financial
implemented an effective system of internal reporting systems within the Company.
control.
----------------------------------------------------------------------------------------------------------------------------
13. Existence of a system which enables an Individual directors may engage outside advisors
individual director to engage an outside with the authorization of the Chairman of the Board.
advisor at the expense of the Company in
appropriate circumstances.
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20
This proxy is solicited by the management of CGI Group Inc. from holders of
Class A Subordinate Shares. Reference is made to accompanying Information
Circular.
The undersigned, holder of Class A Subordinate Shares of CGI Group Inc. (the
"Company"), hereby appoints Serge Godin, a director, or in his absence, Andre
Imbeau, a director, or in his absence, Paule Dore, a director, or (*)
................................................................................
as agent for the undersigned at the Annual General Meeting of Shareholders of
the Company to be held at the Hilton Montreal Bonaventure Hotel, Salle de bal, 1
Place Bonaventure, Montreal, Quebec, on Monday, January 21, 2002 at 11:00 a.m.
(local time), and at any adjournment thereof, with full power of substitution
and with all the powers which the undersigned could exercise if personally
present and with authority to vote at the said agent's discretion unless herein
otherwise specified. I hereby revoque any proxy previously given.
The said agent is hereby specifically directed to:
a) VOTE [ ] OR REFRAIN FROM VOTING [ ] for the election of directors; and
b) VOTE [ ] OR REFRAIN FROM VOTING [ ] for the appointment of the auditors
and to authorize the directors to fix their remuneration.
This proxy will be voted as directed where a choice is specified. In the absence
of specification on any matter or if more than one choice is indicated, the
shares represented by this proxy will be voted for that matter.
To vote this proxy, the shareholder must sign in the space provided on this
form.
(Please sign exactly as the name appears hereon and in which the shares are
registered. If the shareholder is a corporation, its corporate seal must be
affixed. If this proxy is not dated in the space provided for, the proxy shall
be deemed to be of the date on which it was mailed to the shareholder).
(*) A shareholder may appoint as proxyholder a person other than those whose
names are printed hereon. In such a case, he should strike out said printed
names and insert the name of his chosen proxyholder in the blank space provided
for that purpose. A person acting as proxyholder need not be a shareholder of
the Company.
Please return promptly in the enclosed self-stamped envelope.
Dated this...................... day of........................................
................................................................................
Signature of Shareholder
[GRAPHIC OMITTED]
PROXY
This proxy is solicited by the management of CGI Group Inc. from holders of
Class B Shares (multiple voting). Reference is made to accompanying Information
Circular.
The undersigned, holder of Class B Shares of CGI Group Inc. (the "Company"),
hereby appoints Serge Godin, director, or in his absence, Andre Imbeau,
director, or in his absence, Paule Dore, director or (*)........................
................................................................................
as agent for the undersigned at the Annual General Meeting of Shareholders of
the Company to be held at the Hilton Montreal Bonaventure hotel, Montreal
Ballroom, 1 Place Bonaventure, Montreal, Quebec, on Monday, January 21, 2002 at
11:00 a.m. (local time), and at any adjournment thereof, with full power of
substitution and with all the powers which the undersigned could exercise if
personally present and with authority to vote at the said agent's discretion
unless herein otherwise specified. I hereby revoke any proxy previously given.
The said agent is hereby specifically directed to:
1) VOTE [ ] or REFRAIN FROM VOTING [ ] for the election of directors
2) VOTE [ ] or REFRAIN FROM VOTING [ ] for the appointment of the auditors
and to authorize the directors to fix their remuneration
This proxy will be voted as directed where a choice is specified. In the absence
of specification on any matter or if more than one choice is indicated, the
shares represented by this proxy will be voted FOR that matter.
To vote this proxy, the shareholder must sign in the space provided on this
form.
(Please sign exactly as the name appears hereon and in which the shares are
registered. If this proxy is not dated in the space provided for, the proxy
shall be deemed to be of the date on which it was mailed to the shareholder.)
(*) A shareholder may appoint as proxyholder a person other than those whose
names are printed hereon. In such a case, he should strike out said printed
names and insert the name of his chosen proxyholder in the blank space provided
for that purpose. A person acting as proxyholder need not be a shareholder of
the Company.
Please return promptly this proxy duly completed and signed to the National Bank
Trust in the enclosed self-addressed stamped envelope.
Dated this................... day of............................., ...........
------------------------------------
Signature of Shareholder
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 15, 2002 By /s/ Paule Dore
Name: Paule Dore
Title: Executive Vice President
and Chief Corporate Officer
and Secretary