Good morning, ladies and gentlemen. Welcome to the CGI Third Quarter 2013 Results Conference Call. I would now like to turn the meeting over to Mr. Lorne Gorber, Senior Vice President, Global Communications and Investor Relations. Please go ahead, Mr. Gorber.

Thank you, Valerie, and good morning. With me to discuss CGI's third quarter fiscal 2013 results are Michael Roach, our President and CEO; and David Anderson, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 a.m. on Wednesday, July 31, 2013. Supplemental slides, as well as the press release we issued earlier this morning are available for download, along with our Q3 MD&A, financial statements and accompanying notes, all of which are being filed with both SEDAR and EDGAR. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. The complete safe harbor statement is available in both our MD&A and press release, as well as on cgi.com. We encourage our investors to read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards or IFRS. As before, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed in this call are Canadian, and unless otherwise noted, rounded to the nearest million. I'll turn it over to David first to review our Q3 financials, and then Mike will comment on our performance and provide an update on the Logica integration. So with that, David?

Thank you, Lorne, and good morning. I'm pleased to share the financial details of another good quarter. Third quarter revenue was $2.6 billion, representing a year-over-year increase of 141%, and up 1.6% on a sequential basis. Adjusted EBIT was $291 million, up 114% year-over-year, and up $30 million sequentially. Adjusted EBIT margin improved to 11.3%, up from 10.4% last quarter. The improvement is due primarily to the realization of accelerated integration to assets that caused improved performance in our North American operations. Integration costs for the quarter were $53 million, while the tax benefit of $15 million came from the expiration of a statute of limitation period. Looking at the operational performance, and thus excluding both the integration cost and tax benefit, net earnings were $200 million, up 115% from Q3 last year. Diluted earnings per share were $0.63, up 80% from the same period last year, and up 12.5% from the previous quarter. Net earnings in Q3 on a GAAP basis, which includes the integration costs and the tax benefit, were $178 million or $0.56 in diluted earnings per share. This compares with last quarter's net earnings of $114 million or $0.36 per share. The effective tax rate, excluding the impact of the integration cost and the tax benefit, was 24.4% for the quarter. And when compared sequentially on the same basis, it was relatively stable. It should be noted that on July 2, the U.K. government passed a bill to lower the corporate income tax rate from 23% to 20% by 2015. As a result, in Q4, we will record a tax expense of approximately $19 million from the revaluation of our deferred tax assets. Thus in Q4, our effective income tax rate will be in the range of 23% to 25%, excluding the impact of the recent…

Thank you, David, and good morning, everyone. As we approach the 1 year anniversary of the Logica acquisition, I am very pleased with our overall business performance, and the progress we have made in integrating and transforming our Europe and Asia operations. I'll begin my review with some comments on our third quarter results. Our top line continues to hold. In fact, revenue increased nearly 2% sequentially to $2.6 billion, as 6 of our 7 strategic business units grew at constant currency from quarter 2. This is significant as we continue to focus on improving revenue quality, ensuring our business development investments are in those areas, which create incremental value for our clients and for our shareholders. As expected, our strategy is putting some pressure on revenue growth in Europe, but this is more than offset by the strength of our U.S. operations, up 18% year-over-year. With respect to our U.S. operations, we continue seeing significant growth in both the commercial, as well as the state and local markets. Globally, our Health Care sector grew 90% year-over-year, largely driven by the impact of U.S. health care reform. We expect this trend to continue as additional states stand up new health exchanges, while others expand the capabilities of those already in place or under development. A good indication of this forward movement is the recent announcement by the State of Illinois that they have awarded us the 66.5 million mandate to build its health exchange. Including this award, we're currently involved with 9 states, building platforms for consumers to shop for, review and select an appropriate health care plan. In addition, we are building the federal-facilitated marketplace, a platform to be used by consumers in the 26 states currently without their own exchanges. Our U.S. commercial pipeline has expanded by nearly…

Just a reminder that a replay of the call will be available either via our website or by dialing 1 (800) 408-3053 and using the passcode 2831186 until August 9. As well, a podcast of this call will be available for download at either cgi.com or through iTunes within a few hours. Follow-up questions as usual can be directed to me at (514) 841-3355. Valerie, if we could poll for questions from the investment community?

[Operator Instructions] Our first question is from Richard Tse with Cormark Securities.

Mike, you guys have made some incredible inroads on the margin side. Can you maybe give us a bit of color to the extent that you can on what that could be over the next 12 months, just from a cost perspective? And then, maybe talk about when you would see some of those revenue synergies from Logica surface.

Richard, I think if you look ahead here, in Europe in particular, over time, as we improve the mix of our revenue, it affords us an opportunity to gradually improve our margins. As we run off the low-margin business as well, the churn factor will provide us an opportunity. We also need to increase our utilization rates. As Dave mentioned, as we bring on our CGI financial system, we're able to give much higher visibility to our operators in the field to jump on the integration -- or on the utilization rates much faster. While we've brought down the SG&A rate, we're not down to the levels that we're targeting and we see further opportunity to reduce SG&A. There's other parts of our integration plan that are still ahead of us in terms of consolidating our data centers and continuing to drive down our real estate cost. So all of those, again, are things that we continue to target and will focus heavily in our 2014 plan, which should continue to allow us to gradually expand the margins. In the U.S., the EBIT, as you can see, is continuing to expand. We're working on a very good mix of business. We're executing on time and on budget, so we have a very little margin leakage on those contracts and we're operating at very high utilization rates. And we continue to hire there against the growth that we see in the U.S. So I think on the EBIT and earnings per share, we continue to see opportunities to expand our margins and our EPS. On the revenue synergies, as I mentioned, and just to remind everybody, we don't build revenue synergies into our accretion rate. But clearly, we see opportunities on the revenue side. Again, what we're focusing immediately here is in terms of ensuring that as we renew contracts and expand contracts, that we're doing them on terms that are much more balanced in terms of delivering benefit to the client, and also benefits for our shareholders. We're also focusing heavily and will continue as part of our 2014 plan, is to increase our effectiveness of our account management of our very large clients. So I will be reviewing the top 10 global accounts and each SBU leader will be reviewing their top 10 accounts. So that will be over 80 large accounts where we'll be looking to increase the effectiveness of our marketing and business development and -- with the goal of increasing our share of wallet with some very, very large companies. As well, we'll target a number of new logos where we believe we have competitive advantage in terms of knowledge in the sector, IP or -- and some differentiator in terms of global delivery capabilities. So again, I think you'll see that materialize in the -- in 2014, as we begin to see the outcomes of those efforts that we've been applying here over the last quarter or so.

Okay. And just one other question. In regards to the booking strength this quarter, I see the segmentation in your filing. Can you maybe just give us a bit of color in terms of the source of the strength overall? Whether it's a product area? Vertical? And what you're seeing on that side?

Well, I wouldn't say it's product at this time. I mean, I think, as I mentioned, that's a future opportunity on the mix side. We're clearly investing in reviewing the Logica IP and also looking at our own IP that we can take more globally. I think this is, again, a focus on us getting our -- getting in front of more customers and in a number of cases, actually expanding the early signs of us expanding our market share with existing clients. And also, focusing on emerging opportunities. As you know, last year, we made investments on the cloud side. We also made investments on the health care side, and again, both those investments, we’re seeing the benefits of those in the growth in the health care sector, in the HICSS, as just one significant example, and also on the cloud side. So it's fairly broad-based. Obviously, we're seeing a nice recovery in the U.S. economy, which is also opening up a higher demand for the type of services that we sell.

Our next question is from Scott Penner with TD Securities.

Mike, just further to Richard's question on the -- just you're looking at the $375 million of annualized cost synergy target. Is there any way to describe either quantitatively or qualitatively how far along that -- how far along you are in terms of getting to that $375 million?

Well, again, it's difficult because also, we're moving through various seasonal impacts of the revenue. But clearly, if you look at the accretion rate, we've captured a significant amount of that. But the reason we increased it is we clearly saw that we had, at least an additional $75 million from our original target still ahead of us. And as I mentioned, we have a number of areas that we will require 2014 timelines to address. So we've got a good part of it, but again, we're still seeing significant opportunities to increase our earnings ability here. Even as you know, Scott, in our normal course of business, we have a mindset of constantly restructuring to ensure that we're doing the job differently in terms of creating value here. So I would say we've got a good piece of it, though we haven't got it at all.

And just the -- if you could give an update just on the progress of what you termed the red level contracts, both the exposure and then, I guess, when I look at the book-to-bill, and essentially the Logica regions of being pretty close to 1:1, it would appear that a lot of those -- a lot of those customers, the red level contracts, are simply either renewing or extending existing deals.

Yes. Again, I think on that again, just to kind of give some context. As you know, we had the customer satisfaction appraisal process. In Europe, what we're really pushing is to get out and do that appraisal with as many clients as we can. To be transparent, I'm less concerned about the score, I'm more interested in how customers view the level of service and the level of engagement from the former Logica team, and whether they see a difference with CGI now operating under our model. And we're getting some very good, obviously, constructive feedback on areas where we need to improve. One of them as you mentioned is clearly our ability to keep our promises with respect to delivering projects on time and on budget, hence, the red yellow focus. The number of red yellows are continuing to decrease. And we continue to address many legacy issues that were there at the time of purchase. So we're working through those. Again, we have built into our 2014 plan, a significant reduction in red yellow calls, on a go forward basis, which I think will again help our ability to generate profitable growth. Customers in Europe have been very good about having a very open and frank discussion. I think if you look at the litigation provisions, we have brought those down over time because most customers want to engage, they want to work with us, they're intrigued and very supportive of the CGI model. Our issue is we need to continue to explain it. And secondly, we need to demonstrate the effectiveness. So that is going on. And as a result, we are renewing, as I mentioned, and rolling over contracts. Again, putting them in a more balanced state. And in some cases, that means expanding the scope. It means that how we distribute the labor and how we manage those projects, all are opportunities for us to increase the traditional Logica margins and bring them back to a level that we are more used to in terms of doing business.

Sorry, so the 30 -- you said last quarter, through 35 -- sorry, through 35% of exposure to red level deals. Just what is that number now?

I don't have that on the thing, but I think on those things, what you see is a gradual decrease. They don't flip overnight because in some cases, we have to run the contracts out. So again, we continue to work through those, but we're certainly beyond the 35% level, probably pushing closer to 50% now.

Our next question is from Thanos Moschopoulos from BMO Capital Markets.

Mike, I was a little surprised to see the sequential revenue uptick in Logica since I thought you guys were still in the revenue pruning mode. And so, should the take away be that we're now at the point where new business wins can more than offset the impact of ongoing pruning? Or is it maybe a little too early to make that call?

I think it's a little too early. I mean, again, we got our foot on the brake and on the gas. And quarters, you don't necessarily see the full impact, as I mentioned to the previous question, some of the roll-off is timing-based. In other cases, it's also whether in some cases, we can actually find somebody who wants to acquire some of this business that's not core to us. So there will still be some time here before we cross over totally. I think the message I wanted to give this morning is that we're doing both. We're focusing on the quality of revenue, pruning where we can, and also focusing on increasing share of wallet of existing clients and targeting new logos. So that will continue to transition throughout the integration period. But again, over time, we're tilting now, more and more focusing on the revenue synergies as we continue to capture the cost synergies associated with the merger.

Great. Now I saw you bought back some stock in the quarter. Can you provide some color in terms of how you're thinking about the caps allocation, as far as debt repayment versus buybacks? And what the right capital structure might be for the company in the current environment?

We love our stock. So I wish we'd bought back more, given that we bought it under $30. But again, we haven't really changed our view of capital allocation. I mean, clearly, I think if you look at our return on invested capital, it's over 12%. So investing back into our business is still the most accretive use of our cash. We've been working down the debt. I think we paid off about $500 million from the peak. The net debt to capitalization continues to drop, it's at $41. I think at the peak, we were close to $46. And then, again, our shares -- buying back our shares are very accretive. So we continue to look at all those avenues. We do have the buyback program. We continue to look for opportunities to utilize it, and we'll continue to do that for the balance of the year and into 2014.

Would it be fair to say that you'd like to get the leverage ratio a little bit more down from where it is currently, is that correct?

Well, again, we're working it downward, certainly, well within our covenants there. So we keep an eye on that, and we keep an eye on the share price, and -- but again, I think we are looking at the long-term capital structure of the company. As you know, we don't currently take on the long -- a lot of long-term debt, that's something that we're looking at relative to our 2014 budget.

Our next question is from Maher Yaghi with Desjardins.

I wanted to ask you about we're recently seeing competitors in Europe, such as Cap Gemini, mentioning you at -- as being more active in the space. Can you talk a little bit about what opportunities you have right now in front of you in Europe? Thanos mentioned the revenue line in Europe seems to have stabilized. Also, it seems in Europe, can you talk a little bit about the seasonality going into Q4? How we should look at that in terms of modeling, and because we don't have, really comparables to look at?

Okay. Well, if I take the first one. Clearly, our competitors will start to see us more in Europe. Again, in the first part of an integration, that you're very much heads down on working through your current book of business, as I say, to try and segregate the high-margin business from the low-margin business. Address the issues around utilization rate, overheads, SG&A in total. So we've been very busy doing that since last August, but I think we're -- we start to be noticed more now as -- it's an indication of the second wave here, where we're starting now to focus on the revenue synergies more. The first thing we have to do there is get out and explain to people who we are, how we're differentiated from local competitors, and how we really think about the business, and our commitment to be in the business for the long haul. So that's -- you'll see and hear more of that, I think, of our presence in those markets as that second wave here focus on revenue synergies continues to take hold. On your second question, the seasonality. Again, we have not gone through, as you know, a full fourth quarter with Logica. But again, I can tell you that obviously, there is much heavier vacation period in the European operations in quarter 4. So again, that clearly will put some seasonality pressure on the top line. On the other hand, if we look at the difference from this fourth quarter to last year's, where we had 6 weeks of Logica, we have taken considerable amount of cost out of the fixed cost over there, so that the ratios between the revenue and fixed cost are going to be much more favorable in terms of the impact on the P&L than they were when we only had 6 months of revenue in our quarter 4. I think the other thing I’d just point out is when you're looking at quarter 4, Dave talked about the tax adjustment, negative tax adjustment that we're going to have in quarter 4. We'll clearly pull that out, so that you'll be able to see an apples-to-apples comparison. But I think when you look at quarter 4, those are 2 things that you should take note of.

Great. And just one question on future growth mode activities. When you look at Logica, you seem to have your hands around it very well right now. If we look down the road, still very competitive market, but still fragmented markets in areas where you might be looking at, maybe Australia or the U.S. even. Can you talk a little bit about the potential for additional M&A transactions and what you're looking for in your next opportunities there?

Yes. Again, I think you -- I think investors that follow our company, is that we are clearly a consolidator. We do believe the market will continue to consolidate at a -- even a faster clip. Our strategy is to be at the table so we can have these discussions. Our strategy also encompasses constant dialogue with companies that we might have an interest with, so that we build up relationships. Again, I'll remind you, in Logica, we started that conversation in 2007, so it does take some time to talk through that. Clearly, the U.S. is an area where we believe an acquisition would be very accretive. It's a big, big market. And while we're doing exceptionally well down there, we could even do better with a larger platform and a go-to-market capability. And again, this is why I talked about earlier about how we construct the long-term capital structure of the company. We want to do that in a way that obviously allows us, not only to look at the menu but actually continue to be an active player here if the right opportunity comes up. Having said that, our immediate focus is to continue to drive out and realize the full top line, bottom line benefits of our merger with Logica. And so in the near term, while we continue to look, continue to talk, continue to be open, the management team here is very much focused on execution.

Our next question is from Justin Kew with Cantor Fitzgerald.

So, Mike, just on the European EBITDA. You talked in the past about a goal of 8% to 9% with upside on IP, selling it to that geography. Can you talk a bit more or can you give a bit more granularity on now that we're coming up to 1 year anniversary, what the -- what kind of traction you're having selling IP into the European markets?

I think it's a little early, Justin, on that, to be honest, because as I say, if you look at really what we have to do, as I mentioned, we've got to get out to our existing clients. We have to secure our position with our existing clients, we've got to renew the contracts, and then, we've got to start with them looking at bringing forward our full capabilities, which include the IP. In some cases, we have to make some investment in that IP to make it useful in Europe. On the new clients, again, we're really starting from introducing again who we are, why we're different and including our capabilities in the IP area. So that is clearly something that you'll see more traction in 2014. It's clearly a part of our strategy, and we clearly see the demand for that. I think, again, if you look at the margins in Canada, you see what can happen if you have a very good mix between intellectual property, long-term outsourcing contracts, and we're seeing some of that in the U.S. market now as our margins continue to strengthen there. So we think it's obviously the right strategy, but it does take time to execute, and in the case of Europe, it will also take some time for us to make the investments to ensure that the IP there is in a -- is adjusted to that market. We also got a situation coming the other way, where we've picked up some very strong IP coming out of Europe and we do need to make some investments there. I mentioned BESS as an example, the payment platform, that's embedded in 4 of the largest banks in Canada. So that's an example where we're able now to have different conversations, make investments to modernize those platforms and put ourselves in a position to actually take on a maintenance role of those platforms on a go-forward basis.

Okay, good. And I know this has been discussed before, but on the immigration reform side, so we've see some of the old Indian-based competitors talking about very minimal impact. What are you seeing on the ground and how are you taking advantage of it? They may not necessarily be the reform that maybe optics around it? How are you working with that -- what were you seeing and how are you working with that?

Again, I think the first thing we've seen is much more awareness of the issue itself. And not just immigration, but where work is done, and what type of work is done in various locations. And I think customers are also starting to understand the better between in-source -- or outtasking and outsourcing. And again, as you know, many of the Indian pure-plays are primarily outtaskers, where they're actually selling bodies in that model. The customer continues to bear the risk of the delivery. And also, any geographic or political risk associated where the work is done. So I think what you're seeing is really different reactions across the spectrum. Some companies are kind of rebalancing, not necessarily bringing work back, but looking at more of the future work to be done in near-shore sites in-country. And others are looking at the mix of the work they have in these various geographies and ensuring that they're getting value for money. And as you know, the value equation includes price, it includes quality in terms of service levels and on-time delivery and it includes risk. So I -- my sense is there's a continuing rebalancing across that spectrum. Our view is this is absolutely in line with our strategy from the get-go. As you know, we have never bet our business on moving everything to an offshore site. With the Logica transaction, we have a very deep, probably one of the most balanced global delivery models in the sector. We have home-shore sites in many countries, including Canada and the U.S. We continue to add sites there. We continue to see demand in Canada and the U.S. to have more of these sites. We also have them in countries like France, we have home-shore sites there, and in other geographic areas.…

Our next question is from Kris Thompson with National Bank.

Dave, maybe a quick one for you. On the short-term debt, it looks like you recategorized the -- I think, that's the term Loan A, which is pound sterling, about $310 million due next year. Can you give us an update on your plans for refinancing that chunk of the loan?

Well, we haven't finalized any particular plan. We have more than enough credit facility that we can just roll it over into that in the short term if we wish to do so. As Mike had mentioned, we are looking at some of the longer-term financing alternatives. There is no rush for that, and we're just continuing to have the dialogue internally as to what is the right direction that we would like to go there.

Okay, that makes sense. And Mike, for you, just looking at the European culture, and now that you have Logica for almost a year, and you've got a bit of a consulting practice, and we're hearing some rumblings about Accenture looking to acquire Booz Allen & Co. in the states, is that an area where CGI wants to potentially expand in the future from your experience so far? Or are you really still more focused on adding more pure kind of IT and BPO services and software to your portfolio of solutions?

We're probably more heavily focused on the latter, but I would tell you that we're extremely pleased with the strength and the capability of the consulting -- business consulting piece that we acquired from Logica. Some very talented people that understand their domains and are appreciated by the customers. This is a key part of our strategy in the sense that over time, we want to continue focusing, of course, on the CIO part of a company, but we also want to engage more with the business side of a company. This is where a lot of our IP is actually sold is to the business side of any company, and not purely on a IT CIO role. So the business consulting afford us to do that. It also gets us into many more companies where, over time, we can pull through a discussion on what more CGI can do. So if we look at it right now, and we look at the number of customers where we're doing an ongoing amount of business, it's still only a proportion of the total number of customers that we're engaged with, because in many cases, we're engaged only on the consulting side. And this affords us an opportunity over time, through the consulting business, not necessarily to automatically pull through business, but to certainly get in front of a customer and leverage the relationships that the business consulting team have developed. So again, we're not somebody that's likely to buy a high-end strategic firm, but more to be focused on that intersection point between business and technology consulting.

Our next question is from Paul Treiber with RBC Capital Markets.

I just want to dig into a little bit more into European margins this quarter. Your Nordics and France regions grew revenue sequentially, but it looks like margins slightly declined. What was the reason for the sequential decline in some of those European regions?

On the revenue side?

On the margin side.

Well, again, part of that is as you -- as we churn the revenue, in some cases, we're obviously running off contracts and it's going to add to the bench, which is going to put pressure on utilization rate, which is going to put pressure on the cost, which is going to drag down the EBIT. So this is why you need to look at many of these indicators, especially going through an integration in merger over a period of time, and not necessarily quarter by quarter, because there's a lot of things that are going on in there, in those entities, that you wouldn't see in the normal course of business as we're restructuring the cost base and churning the revenue. So that would certainly be a factor there.

If I could, Paul, I'd just like to also add, whenever we are getting involved in some of this restructuring activity and we're looking at the margin impact, sometimes it goes through spurts, where with the initiatives that we're putting in place, then we're able to kind of jump ahead, we're able to realize some good savings, but then it takes us a little bit of time and it costs -- and it incurs cost as we're getting set up for the next one. So if you're looking -- if you're lowering the microscope a little bit too much, you're going to see a little bit of waffling back and forth between quarters, if you're trying to cut it down a little bit too finely. But what we try to do here is look over the longer term, because it's that longer-term direction where we want to have that improved, sustaining improvement to the operations.

I think -- like I mean it sounds like there's a lot -- a number of moving parts. When you look at it at a very high level, and you mentioned gradually a number of times or gradual improvement. Now it looks like this quarter, the European margins were effectively in line with that 8.5% to 9% target that you mentioned in the past. But in the MD&A, you mentioned that there's room as cost synergies are realized for further margin expansion. So should we expect like that 8.5% to 9%, is there a potential upside to that target over time as you realize those savings and transform the business?

Yes. I mean, our goal, as you know, is obviously to operate our business in the most effective manner. We continue to see opportunities here to execute better against our operating model. And as we increase visibility through implementation not only of our management model, but through the work that David and his team are doing on the financial system, it's going to give our managers and leaders much more visibility and things that they can action a lot quicker, which we believe will help improve the performance of the company over time. Including, as I mentioned, what's been a challenge here on a year-to-date basis because we don't have a single financial system, is to get a better segmentation of the business. So this is something, when we look at our 2014 plan, we'll be in a better position to segment the business, so we will know those areas of the business where the value to the customer is high and where the value to the shareholders is high, and in those areas we want to invest more to drive growth in those areas. We'll also get a better idea, as I say, of the segment revenue where the return is low to the shareholder and the value that we provide the client is also low, because it's not our core business. And as I say, we're going to continue to target those. In some cases, we're looking to divest pieces of that, which will help change the mix in a favorable way going forward. So this is an ongoing process. I mean, it is a $10 billion company, so it does take some time to work through this and make sure that we understand clearly what the implications of that segmentation is. And we're learning a lot about that over the first 9 months, and we see opportunities going ahead. And as we action those opportunities, it does afford us to continue to deliver more value in terms of earnings and profitable revenue to our shareholders. That is the attempt. I mean, we understand that we're paid to improve the business on an ongoing basis and to create more value. We're also significant shareholders ourselves, so we're very aligned to the shareholders in terms of getting a good return on their investment.

Just one more question. You changed your Head of France this past quarter. Do you think you have the right team now in place in Europe to drive the long-term transformation of that business? And then also, can you just describe at a high level, how the former or the European management team and the employee base are adapting to the CGI model?

Well, again, I have to take the second one. As I mentioned in my comments, I'm very pleased how they're adapting. Our turnover rates on a company basis are approaching a 3-year low, so we're not getting hit by heavy attrition here. I think people, clearly, are beginning to see the value that's embedded in our model. Again, our model isn't designed for clients and shareholders alone. I mean, the execution of our model actually creates increased career opportunities for our people. It also provides much more stability in terms of their livelihood in that we're a very strong financial company. Employees want to join and stay with the company that's strong financially. So from that standpoint, I'm happy with the engagement. We're having good, healthy dialogues. We're communicating on why we have to operate the way we do and how we think about the business. And that's all very, very positive. I don't comment on specific leadership changes other than to say that if you look at, in the final analysis, what we're looking for in our leaderships are people who understand how business operates, who are committed to creating value for the 3 stakeholders and who embrace the accountability that comes with our model. And it's not unusual in an integration, as you go through quarter after quarter and as our model generates much more visibility on performance by BU, is that some people decide that this is not the model that they want to operate in. Or we decide that it's not the leaders that we require in the model. And there are ongoing changes there. Having said that, I'm very, very pleased with the people that we have. They have -- as you can see -- it produced very strong results in a very short period of time. So our sense is we're not expecting any radical changes in leadership here, it's more of an evolution than a revolution. And so, again, just to reinforce, we've got a very good team on the field. They’re putting up what I consider are outstanding results 9 months into a massive integration, which means that they're embracing the model, they understand it and more importantly, they're taking action here to improve the results.

Our next question is from Edward Caso with Wells Fargo Securities.

In the U.S. federal business, could you comment on the impact -- any impact you might see from the furloughs, which are now just starting to kick in on the word activity in the key September quarter, on the ability to get on the client site and so forth?

Yes, I've got a federal board meeting, Ed, after this call, but again, as I mentioned in my remarks, that we've got to put all this into perspective. It's a massive market. As I said, we're on vehicles, hunting license that total $200 billion. We've got bids in there that -- worth $2 billion awaiting on approval. 70% of that is new work, so you can tell that we're leveraging those vehicles. So there will be an impact here. Again, I think the key for us is to stay on our game plan, focus on where those services of the government need to stay in business, and to operate the business, which will continue, regardless of the furloughs. The U.S. will continue to issue visas, they'll continue to issue passports, they'll continue to have to have their monthly financial results published, the Health Care Reform Act continues to be implemented. So we're shifting and making sure that we're very sensitive. When we talk to the customers, they're obviously very interested in cost control, but they're also interested in security of their applications and they're very interested in companies that can help them transform. So again, I don't think any player has been through the kind of thing that we're going through. Our approach is to stick to our strategy, double down on execution, streamline our overhead, make sure that we're best value there. And as I mentioned, I'm extremely pleased with our team. We have a book-to-bill over 100% on a trailing basis and we will have grown our top line and bottom line this year, which is I think, probably quite unique amongst the pure plays. But will it be bumpy? Absolutely. But we expect that and we're being proactive to make sure that we can manage through that and help the customers through a difficult time. It is a big market though, and a big market means big opportunities for those that are focused and for those that are hungry, and we're both.

I read an article where your Head of the U.K. had some issues with efforts by the U.K. government to try to drive business to smaller companies. Could you sort of give us a sense about how big an impact that might be?

I think, first off, while our leader, who is an excellent leader, was making comments on how the government procures, I would tell you that those are not remarks that are exclusive to CGI, that's an industry view that Tim was expressing over there. I'm not sure that there was anything there that the government themselves weren't aware of or as I say, other competitors. I think what we're trying to do is put a spotlight on there, which we do with all our customers, whether they're commercial customers or government customers. We, obviously, as part of our role as a trusted advisor is to give advice on how they procure their services to ensure that they get maximum value for their dollar. So I took it as -- in that vein, and I believe our customer has as well. We haven't got any blowback, we don't expect any. We expect that in a country like the U.K., these types of dialogues are encouraged. And as you could tell by the article, they're always very frank and to the point, which is very British. But again, the British government is a very important client to us, and will continue to be, but we're merely exercising what we believe is part of our role to dialogue with our customers in terms of how we view the procurement process and opportunities to improve it.

Our next question is from Bryan Keane with Deutsche Bank.

This is Ashish Sabadra calling on behalf of Bryan Keane. I had a quick question regarding your free cash flow. I was wondering if you have the number -- the free cash flow number for the quarter after you exclude the integration expenses? And just to follow up on that, what's the expectation for annualized free cash flows going forward once you have, excluding -- once you have excluded all the integration expenses for the Logica acquisition?

Well, in regards to the free cash flow for the quarter, right, the $133 million plus the $92 million of integration-related payments that we had made, you're looking at about $225 million there. We haven't provided any guidance as to what the future outlook is, but what we have provided is that we know that there's $126 million sitting in the accounts payable right now related to the provision. And there's $127 million of expenses that we have yet to incur over the next 5 quarters. So -- and we've also put a focus on trying to get through as much of the integration activity before the end of this fiscal year. So I think with that, and you can draw your own model as to where you think the -- how the cash is going to move forward on those items.

Okay. So just -- and I understand you don't give guidance, but just in terms of looking forward or for -- looking at this particular quarter, free cash flow, would you consider the free cash flow in the quarter to be -- excluding obviously, the restructuring expenses, to be representative of the free cash flow going forward?

I think so. I think we'll continue, though, to push a little bit more on some of the work in process that we have to see if we can just maybe trim a couple more days off that, but it's going to be pretty close to being represented.

The second question was about just the accounting for the projects. Have you -- like, if you can provide any color on what percentage of the revenues are based on percentage of completion method for your projects? And with the Logica acquisition, did you move any of your projects to percentage of completion? And how much was it before or after the acquisition?

Those questions have made the guys to [indiscernible].

We'll take it off-line. We'll gather those figures and talk to you separately.

Our next question is from Paul Steep with Scotia Capital.

Mike, maybe talk a little bit about the bookings trend in Canada and bounce back there? And then secondly, I guess for David, if you could talk to the contract costs trend? Has it sort of trended down? We've seen an uptick in outsourcing. Should we expect that, that's going to sort of rebound towards the back end of the year?

A lot of the bookings trends in Canada, as I said numerous times, I don't see Canada as a mature market here. We have a nice market share in Canada, but I can assure you that there's a lot of room here to grow market share in Canada. So I think our team there now have been focusing on creating opportunities. The bookings are starting to come through, which as you know is a good indicator of future growth. The margins are strong and have grown in Canada. So I think the outlook is good here going into 2014. And so, again, we certainly see opportunities for organic growth in Canada, not only on the SI&C business, but again, we're very focused on creating additional outsourcing opportunities in Canada. And we have a good track record of managing those, and that's a significant competitive advantage in talking to customers about outsourcing.

In regards to the contract cost, again, with the acquisition of Logica, there was some cleanup that had to be done at the very start to reset or rebound the contract cost for the differences in accounting policy that we had, which we pushed through back in the September timeframe. But also going forward, we do expect to see the contract cost rebound or bounce back up again. But, again, that's going be driven from the acquisition of the winning of those contracts. And as Mike has mentioned in the past, it does take a little bit of time to be able to get those positioned, then to be able to win those. So at the moment, we're seeing that the contract costs are floating down, but I wouldn't get too excited about that because as we look to continue to win and grow in our business space, we'll see more outsourcing contracts come in and then they'll -- we'll see some additions coming into that line.

Our last question is from Julio Quinteros with Goldman Sachs.

This is Jac Charles on behalf Julio Quinteros. I was wondering if you guys could give us some color around the incremental margins you're seeing in Europe, specifically if the new ones from Logica are in the range you're expecting? And what the trend might be going forward?

Yes. Again, they're running obviously ahead of where we saw them in our original integration plan, Jac, that's why we cut the period from 3 years to 2 years. And again, our strategy has always been to operate either at the top or in the very top of the margin ranges of the competitors in Europe. Against that measure, we're progressing very well. And as I say, we see continued opportunities to execute against the levers that I spoke about earlier to gradually improve our margins over time.

Okay, great. And as a follow-up on that, can you maybe just give us a little incremental color around the revenue growth you're expecting out of these?

Well, again, I think, as I mentioned earlier, we've got both a headwind and tailwind on the revenue. The headwind is we will continue to address low margin business, so you've got that runoff that will put some pressure on the top line. On the other side, we are renewing and extending with existing customers and we are beginning to be much more visible in the markets. As we move through the restructuring part, we begin to free up more of the time of our people, frankly, to get out and meet new customers and explain the full depth and breadth that we have to offer. And over time, and likely, as I say in 2014, we'll start seeing some of that impact.

Thank you. And thank you, everyone, for joining us this morning, and we'll see you back in November for our year-end results. Thank you.

Thank you, gentlemen. This conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.