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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

     
(Mark One)
þ
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
   FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2004
 
    
OR
 
    
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
   FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 001-49713

ACCENTURE SCA

(Exact name of Registrant as specified in its charter)
     
Luxembourg   98-0351796
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)

1 rue Guillaume Kroll
L-1882 Luxembourg
(Address of principal executive offices)

(352) 26 42 35 00
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes þ No o

     The number of shares of the Registrant’s Class I common shares, par value $0.0000225 per share, outstanding as of December 31, 2004 was 888,769,023 (which number does not include 82,524,431 issued shares held by subsidiaries of the Registrant).

 

 

ACCENTURE SCA

INDEX

             
        Page
Part I.
   Financial Information     3  
Item 1.
   Financial Statements (unaudited)     3  
 
   Consolidated Balance Sheets as of November 30, 2004 and August 31, 2004     3  
 
   Consolidated Income Statements for the three months ended November 30, 2004 and 2003     4  
 
   Consolidated Shareholders’ Equity and Comprehensive Income Statements for the three months ended November 30, 2004     5  
 
   Consolidated Cash Flows Statements for the three months ended November 30, 2004 and 2003     6  
 
   Notes to Consolidated Financial Statements     7  
Item 2.
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     13  
Item 3.
   Quantitative and Qualitative Disclosures About Market Risk     24  
Item 4.
   Controls and Procedures     24  
Part II.
   Other Information     25  
Item 1.
   Legal Proceedings     25  
Item 2.
   Unregistered Sales of Equity Securities and Use of Proceeds     25  
Item 3.
   Defaults under Senior Securities     25  
Item 4.
   Submission of Matters to a Vote of Security Holders     25  
Item 5.
   Other Information     26  
Item 6.
   Exhibits     26  
Signatures
          

2

 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTURE SCA

CONSOLIDATED BALANCE SHEETS
November 30, 2004 and August 31, 2004
(In thousands of U.S. dollars, except share amounts)

                 
    November 30, 2004   August 31,
    (Unaudited)
   2004
ASSETS
CURRENT ASSETS:
                
Cash and cash equivalents
   $ 2,273,522     $ 2,552,958  
Short-term investments
     591,714       285,288  
Receivables from clients, net of allowances of $41,794 and $40,687
     1,825,284       1,662,211  
Unbilled services
     1,489,075       1,049,870  
Deferred income taxes, net
     109,201       105,636  
Other current assets
     624,692       556,053  
 
    
 		      
 		  
Total current assets
     6,913,488       6,212,016  
 
    
 		      
 		  
NON-CURRENT ASSETS:
                
Unbilled services
     260,062       211,705  
Investments
     392,595       340,121  
Property and equipment, net of accumulated depreciation of $1,276,356 and $1,219,500
     656,526       643,946  
Goodwill
     230,109       214,482  
Deferred income taxes, net
     317,278       309,045  
Other non-current assets
     142,163       136,991  
 
    
 		      
 		  
Total non-current assets
     1,998,733       1,856,290  
 
    
 		      
 		  
TOTAL ASSETS
   $ 8,912,221     $ 8,068,306  
 
    
 		      
 		  
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
                
Short-term bank borrowings
   $ 26,765     $ 20,103  
Current portion of long-term debt
     11,725       11,612  
Accounts payable
     733,112       523,931  
Deferred revenues
     982,407       980,461  
Accrued payroll and related benefits
     1,412,645       1,508,126  
Income taxes payable
     904,203       795,948  
Deferred income taxes, net
     47,020       42,744  
Other accrued liabilities
     648,828       610,686  
 
    
 		      
 		  
Total current liabilities
     4,766,705       4,493,611  
 
    
 		      
 		  
NON-CURRENT LIABILITIES:
                
Long-term debt
     1,508       2,161  
Retirement obligation
     559,696       532,307  
Deferred income taxes, net
     22,416       18,769  
Other non-current liabilities
     697,344       608,689  
 
    
 		      
 		  
Total non-current liabilities
     1,280,964       1,161,926  
 
    
 		      
 		  
MINORITY INTEREST
     41,412       37,679  
SHAREHOLDERS’ EQUITY:
                
Class I common shares, par value 1.25 euros per share, 19,782,549,738 shares authorized, 753,843,192 issued as of November 30, 2004 and August 31, 2004
     845,307       845,307  
Class I-A common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
     5,435       5,435  
Class I-B common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
     5,435       5,435  
Class I-C common shares, par value 1.25 euros per share, 10,000,000 shares authorized, issued and outstanding
     10,870       10,870  
Class I-D common shares, par value 1.25 euros per share, 10,000,000 shares authorized, issued and outstanding
     10,870       10,870  
Class I-E common shares, par value 1.25 euros per share, 15,000,000 shares authorized, issued and outstanding
     16,304       16,304  
Class I-F common shares, par value 1.25 euros per share, 15,000,000 shares authorized, issued and outstanding
     16,304       16,304  
Class I-G common shares, par value 1.25 euros per share, 20,000,000 shares authorized, issued and outstanding
     21,739       21,739  
Class I-H common shares, par value 1.25 euros per share, 25,000,000 shares authorized, issued and outstanding
     27,174       27,174  
Class I-I common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
     5,435       5,435  
Class I-J common shares, par value 1.25 euros per share, 5,000,000 shares authorized, issued and outstanding
     5,435       5,435  
Class I-K common shares, par value 1.25 euros per share, 16,050,000 shares authorized, issued and outstanding
     18,074       18,074  
Class I-L common shares, par value 1.25 euros per share, 5,025,720 shares authorized, issued and outstanding
     5,540       5,540  
Class I-M common shares, par value 1.25 euros per share, 68,626,707 shares authorized, issued and outstanding
     78,398       78,398  
Class I-N common shares, par value 1.25 euros per share, 12,747,835 shares authorized, issued and outstanding
     18,301       18,301  
Class II common shares, par value 1.25 euros per share, 20,000,000,000 shares authorized, 470,958,308 shares issued and outstanding
     529,281       529,281  
Restricted share units (related to Accenture Ltd Class A common shares), 32,397,602 and 28,278,704 units issued and outstanding as of November 30, 2004 and August 31, 2004, respectively
     589,049       475,240  
Deferred compensation
     (254,145 )     (150,777 )
Additional paid-in capital
     2,955,637       2,976,655  
Treasury shares, at cost, 79,060,943 and 83,869,278 Class I common shares at November 30, 2004 and August 31, 2004, respectively
     (1,794,346 )     (1,898,744 )
Investment in Accenture Ltd shares, at cost, 1,621,976 and 1,421,944 shares at November 30, 2004 and August 31, 2004, respectively
     (40,877 )     (35,697 )
Retained deficit
     (181,436 )     (497,729 )
Accumulated other comprehensive loss
     (70,644 )     (113,760 )
 
    
 		      
 		  
Total shareholders’ equity
     2,823,140       2,375,090  
 
    
 		      
 		  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 8,912,221     $ 8,068,306  
 
    
 		      
 		  

The accompanying notes are an integral part of these consolidated financial statements.

3

 

ACCENTURE SCA

CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended November 30, 2004 and 2003
(In thousands of U.S. dollars)
(Unaudited)

                 
    2004
   2003
REVENUES:
                
Revenues before reimbursements
   $ 3,730,355     $ 3,261,585  
Reimbursements
     341,017       312,903  
 
    
 		      
 		  
Revenues
     4,071,372       3,574,488  
OPERATING EXPENSES:
                
Cost of services:
                
Cost of services before reimbursable expenses
     2,500,439       2,150,890  
Reimbursable expenses
     341,017       312,903  
 
    
 		      
 		  
Cost of services
     2,841,456       2,463,793  
Sales and marketing
     360,943       350,597  
General and administrative costs
     403,815       339,356  
Reorganization costs (benefits)
     7,008       (86,398 )
 
    
 		      
 		  
Total operating expenses
     3,613,222       3,067,348  
 
    
 		      
 		  
OPERATING INCOME
     458,150       507,140  
Gain on investments, net
     14,540       498  
Interest income
     20,121       10,423  
Interest expense
     (6,316 )     (5,751 )
Other income (expense)
     (2,327 )     1,526  
Equity in losses of affiliates
     —       (686 )
 
    
 		      
 		  
INCOME BEFORE INCOME TAXES
     484,168       513,150  
Provision for income taxes
     164,617       178,576  
 
    
 		      
 		  
INCOME BEFORE MINORITY INTEREST
     319,551       344,574  
Minority interest
     (3,258 )     (2,417 )
 
    
 		      
 		  
NET INCOME
   $ 316,293     $ 332,157  
 
    
 		      
 		  

The accompanying notes are an integral part of these consolidated financial statements.

4

 

ACCENTURE SCA

CONSOLIDATED SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME STATEMENTS
For the Three Months Ended November 30, 2004
(In thousands of U.S. dollars and in thousands of share amounts)
(Unaudited)

                                                                                                                                         
    Class I   Class II   Restricted                                          
    Common   Common   Share Units                   Treasury   Investment in               Accumulated
Other
Compre-		    
    Shares   Shares   Common Shares                   Shares   Accenture Ltd                
   
 
 
  Deferred   Additional  
 
      Retained      
            No.           No.           No.   Compen-   Paid-in           No.           No.       Earnings   hensive    
    $
   Shares
   $
   Shares
   $
   Shares
   sation
   Capital
   $
   Shares
   $
   Shares
       (Deficit)
   Income (Loss)
   Total
Balance at August 31, 2004
   $ 1,090,621       971,294     $ 529,281       470,958     $ 475,240       28,279     $ (150,777 )   $ 2,976,655     $ (1,898,744 )     (83,869 )   $ (35,697 )   (1,422 )       $ (497,729 )   $ (113,760 )   $ 2,375,090              
Comprehensive income
                                                                                                                                        
Net income
                                                                                                         316,293               316,293              
Other comprehensive income (loss):
                                                                                                                                        
Unrealized loss on marketable securities, net of reclassification adjustments
                                                                                                                 (1,877 )     (1,877 )              
Foreign currency translation adjustments
                                                                                                                 44,993       44,993          
 
                                                                                                                
 		          
Other comprehensive income (loss)
                                                                                                                 43,116                        
 
                                                                                                                
 		  
Comprehensive income
                                                                                                                         359,409  
Income tax benefit on stock-based compensation plans
                                                             4.720                                                           4,720              
Purchase of Accenture Ltd Class A common shares
                                                             (3,100 )                     (5,180 )     (200 )                         (8,280 )
Stock-based compensation expense
                                                     18,072                                                                   18,072              
Purchases/redemptions of Accenture SCA Class I common shares and Canada Holdings Inc. exchangeable shares
                                                             (1 )     (30,848 )     (1,289 )                                         (30,849 )
Issuance of Class A common shares:
                                                                                                                                        
Employee share purchase plan
                                                             (8,023 )     82,422       3,586                                           74,399  
Employee stock options
                                                             (11,746 )     42,570       2,087                                           30,824              
Restricted share units
                                     113,809       4,119       (121,440 )     (2,623 )     10,254       424                                           —  
Minority interest
                                                             (245 )                                                         (245 )            
 
    
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		          
 		      
 		      
 		  
Balance at November 30, 2004
   $ 1,090,621       971,294     $ 529,281       470,958     $ 589,049       32,398     $ (254,145 )   $ 2,955,637     $ (1,794,346 )     (79,061 )   $ (40,877 )     (1,622 )       $ (181,436 )   $ (70,644 )   $ 2,823,140  
 
    
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		      
 		          
 		      
 		      
 		  

The accompanying notes are an integral part of these consolidated financial statements.

5

 

ACCENTURE SCA

CONSOLIDATED CASH FLOWS STATEMENTS
For the Three Months Ended November 30, 2004 and 2003
(In thousands of U.S. dollars)
(Unaudited)

                 
    2004
   2003
CASH FLOWS FROM OPERATING ACTIVITIES:
                
Net income
   $ 316,293     $ 332,157  
Adjustments to reconcile net income to net cash (used in) provided by operating activities —
                
Depreciation and amortization
     52,935       62,709  
Reorganization costs (benefits)
     7,008       (86,398 )
Gains on investments, net
     (14,540 )     (498 )
Losses on disposal of property and equipment, net
     1,791       1,805  
Stock-based compensation expense
     18,072       14,437  
Deferred income taxes, net
     (2,036 )     (4,443 )
Minority interest
     3,258       2,417  
Other items, net
     4,927       833  
Change in assets and liabilities —
                
Increase in receivables from clients, net
     (73,755 )     (46,721 )
Increase in other current assets
     (39,438 )     (48,229 )
Increase in unbilled services, current and non-current
     (408,733 )     (175,759 )
Increase in other non-current assets
     (9,178 )     (12,094 )
Increase (decrease) in accounts payable
     174,868       (82,018 )
Decrease in deferred revenues
     (87,347 )     (27,005 )
(Decrease) increase in accrued payroll and related benefits
     (165,480 )     71,007  
Increase in income taxes payable
     99,372       118,508  
Increase (decrease) in other accrued liabilities
     5,870       (1,776 )
Increase in other non-current liabilities
     55,230       8,665  
 
    
 		      
 		  
Net cash (used in) provided by operating activities
     (60,883 )     127,597  
 
    
 		      
 		  
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from sales of available-for-sale investments
     169,567       5,535  
Purchases of available-for-sale investments
     (507,596 )     —  
Proceeds from sales of property and equipment
     959       2,241  
Purchases of property and equipment
     (54,897 )     (46,738 )
Purchases of businesses and investments, net of cash acquired
     —       (6,131 )
 
    
 		      
 		  
Net cash used in investing activities
     (391,967 )     (45,093 )
 
    
 		      
 		  
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Payment of retirement benefits to former pre-incorporation partners
     (2,284 )     (1,710 )
Proceeds from issuance of Accenture Ltd Class A common shares
     105,223       1,549,882  
Purchases of common shares
     (39,129 )     (1,721,351 )
Proceeds from issuance of long-term debt
     499       481  
Repayments of long-term debt
     (1,197 )     (1,116 )
Proceeds from issuance of short-term bank borrowings
     17,217       27,713  
Repayments of short-term bank borrowings
     (11,427 )     (36,823 )
Decrease in restricted cash of Accenture Share Employee Compensation Trust
     —       78,923  
 
    
 		      
 		  
Net cash provided by (used in) financing activities
     68,902       (104,001 )
Effect of exchange rate changes on cash and cash equivalents
     104,512       18,987  
 
    
 		      
 		  
NET DECREASE IN CASH AND CASH EQUIVALENTS
     (279,436 )     (2,510 )
CASH AND CASH EQUIVALENTS, beginning of period
     2,552,958       2,332,161  
 
    
 		      
 		  
CASH AND CASH EQUIVALENTS, end of period
   $ 2,273,522     $ 2,329,651  
 
    
 		      
 		  

The accompanying notes are an integral part of these consolidated financial statements.

6

 

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)

1. BASIS OF PRESENTATION

     The accompanying unaudited interim consolidated financial statements of Accenture SCA, a Luxemburg partnership limited by shares, and its controlled subsidiary companies (together, “Accenture” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These consolidated financial statements should therefore be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2004 included in the Company’s Annual Report on Form 10-K filed with the SEC on November 5, 2004. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three months ended November 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2005. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

7

 

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands of U.S. Dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)

2. PRO FORMA IMPACT OF EMPLOYEE STOCK OPTIONS AND SHARE PURCHASE PLANS

     Accenture follows the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, to account for its employee stock options and share purchase rights. Accordingly, no compensation expense is recognized for share purchase rights granted in connection with the issuance of stock options under the Company’s employee share incentive plan and through its employee share purchase plan; however, compensation expense is recognized in connection with the issuance of restricted share units granted under the Company’s share incentive plan. Beginning September 1, 2005, Accenture will be required to record compensation cost for its employee stock options and share purchase rights as a result of a revision to SFAS No. 123 issued in December 2004. Had compensation cost for employee stock options granted under the Company’s share incentive plan and employee share purchase rights under its share purchase plan been determined based on fair value at the grant date consistent with SFAS No. 123, Accounting for Stock-Based Compensation, with stock options expensed using the accelerated expense attribution method, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

                 
    Three Months Ended November 30,
    2004
   2003
Net income as reported
   $ 316,293     $ 332,157  
Add: Stock-based compensation expense already included in net income as reported, net of tax and minority interest
     16,735       13,020  
Deduct: Pro forma employee compensation cost related to stock options, restricted share units and employee share purchase plan, net of tax and minority interest
     (38,692 )     (40,442 )
 
    
 		      
 		  
Subtotal
     (21,957 )     (27,422 )
 
    
 		      
 		  
Pro forma income
   $ 294,336     $ 304,735  
 
    
 		      
 		  

3. RESTRUCTURING AND REORGANIZATION COSTS (BENEFITS)

Restructuring

     In fiscal 2002, Accenture recognized restructuring costs of $110,524 (“Fiscal 2002 Restructuring”) related to a global consolidation of office space, consisting of $67,112 to consolidate various locations and $43,412 to abandon the related fixed assets. In the second quarter of fiscal 2004, Accenture recognized restructuring costs of $107,256 (“Fiscal 2004 Restructuring”), primarily in the United States and the United Kingdom, consisting of $89,331 to consolidate various locations and $17,925 to abandon the related fixed assets.

     The Company’s restructuring activity for the period is as follows: