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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

     
x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2005

OR

     
¨
  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: 001-16565

ACCENTURE LTD

(Exact name of Registrant as specified in its charter)
     
Bermuda
(State or other jurisdiction of
incorporation or organization) 		  98-0341111
(I.R.S. Employer
Identification No.)

Canon’s Court
22 Victoria Street
Hamilton HM 12, Bermuda
(Address of principal executive offices)

(441) 296-8262
(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 x No ¨

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

     The number of shares of the Registrant’s Class A common shares, par value $0.0000225 per share, outstanding as of April 1, 2005 was 574,934,605 (which number does not include 21,731,624 issued shares held by subsidiaries of the Registrant). The number of shares of the Registrant’s Class X common shares, par value $0.0000225 per share, outstanding as of April 1, 2005 was 342,476,342.

 

 

ACCENTURE LTD

INDEX

                 
            Page  
Part I.
   Financial Information     3  
Item 1.
   Financial Statements     3  
 
   Consolidated Balance Sheets as of February 28, 2005 (unaudited) and August 31, 2004     3  
 
   Consolidated Income Statements (unaudited) for the three and six months ended February 28,        
 
   2005 and February 29, 2004     4  
 
   Consolidated Shareholders’ Equity and Comprehensive Income Statements (unaudited) for the        
 
   six months ended February 28, 2005     5  
 
   Consolidated Cash Flows Statements (unaudited) for the six months ended February 28, 2005        
 
   and February 29, 2004     6  
 
   Notes to Consolidated Financial Statements (unaudited)     7  
Item 2.
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     15  
Item 3.
   Quantitative and Qualitative Disclosures About Market Risk     32  
Item 4.
   Controls and Procedures     32  
Part II.
   Other Information     33  
Item 1.
   Legal Proceedings     33  
Item 2.
   Unregistered Sales of Equity Securities and Use of Proceeds; Issuer Purchases of Equity Securities     34  
Item 3.
   Defaults under Senior Securities     35  
Item 4.
   Submission of Matters to a Vote of Security Holders     35  
Item 5.
   Other Information     35  
Item 6.
   Exhibits     36  
Signatures
                

2

 

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

ACCENTURE LTD

CONSOLIDATED BALANCE SHEETS
February 28, 2005 and August 31, 2004
(In thousands of U.S. dollars, except share and per share amounts)

                 
    February 28, 2005        
    (Unaudited)     August 31, 2004  
ASSETS
                
 
CURRENT ASSETS:
                
Cash and cash equivalents
   $ 3,060,203     $ 2,552,958  
Short-term investments
     406,456       285,288  
Receivables from clients, net of allowances of $36,396 and $40,687
     1,816,354       1,662,211  
Unbilled services
     1,459,331       1,049,870  
Deferred income taxes, net
     83,558       105,636  
Other current assets
     520,146       501,231  
 
            
Total current assets
     7,346,048       6,157,194  
 
            
NON-CURRENT ASSETS:
                
Unbilled services
     288,306       211,705  
Investments
     321,823       340,121  
Property and equipment, net of accumulated depreciation of $1,361,767 and $1,219,500
     657,444       643,946  
Goodwill
     242,926       214,482  
Deferred income taxes, net
     357,779       309,045  
Other non-current assets
     128,513       136,991  
 
            
Total non-current assets
     1,996,791       1,856,290  
 
            
TOTAL ASSETS
   $ 9,342,839     $ 8,013,484  
 
            
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
CURRENT LIABILITIES:
                
Short-term bank borrowings
   $ 33,012     $ 20,103  
Current portion of long-term debt
     12,593       16,612  
Accounts payable
     734,995       523,931  
Deferred revenues
     1,321,505       980,461  
Accrued payroll and related benefits
     1,429,326       1,508,126  
Income taxes payable
     848,471       795,948  
Deferred income taxes, net
     47,605       42,744  
Other accrued liabilities
     527,062       550,864  
 
            
Total current liabilities
     4,954,569       4,438,789  
 
            
NON-CURRENT LIABILITIES:
                
Long-term debt
     36,736       32,161  
Retirement obligation
     562,484       532,307  
Deferred income taxes, net
     22,756       18,769  
Other non-current liabilities
     679,186       578,689  
 
            
Total non-current liabilities
     1,301,162       1,161,926  
 
            
MINORITY INTEREST
     1,200,007       940,963  
 
SHAREHOLDERS’ EQUITY:
                
Preferred shares, 2,000,000,000 shares authorized, 0 shares issued and outstanding
     —       —  
Class A common shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 596,388,750 and 591,496,780 shares issued as of February 28, 2005 and August 31, 2004, respectively
     13       13  
Class X common shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 361,762,016 and 365,324,882 shares issued and outstanding as of February 28, 2005 and August 31, 2004, respectively
     8       9  
Restricted share units (related to Class A common shares) 32,608,718 and 28,278,704 units issued and outstanding as of February 28, 2005 and August 31, 2004, respectively
     599,249       475,240  
Deferred compensation
     (251,567 )     (150,777 )
Additional paid-in capital
     1,662,272       1,643,652  
Treasury shares, at cost, 21,941,046 and 6,098,122 shares at February 28, 2005 and August 31, 2004, respectively
     (520,997 )     (132,313 )
Treasury shares owned by Accenture Ltd Share Employee Compensation Trust, at cost, 0 and 13,120,050 shares at February 28, 2005 and August 31, 2004, respectively
     —       (296,894 )
Retained earnings
     448,462       46,636  
Accumulated other comprehensive loss
     (50,339 )     (113,760 )
 
            
Total shareholders’ equity
     1,887,101       1,471,806  
 
            
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 9,342,839     $ 8,013,484  
 
            

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

3

 

ACCENTURE LTD

CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended February 28, 2005 and February 29, 2004
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)

                                 
    Three Months Ended     Six Months Ended  
    February 28, 2005     February 29, 2004     February 28, 2005     February 29, 2004  
REVENUES:
                                
Revenues before reimbursements
   $ 3,813,522     $ 3,302,209     $ 7,543,877     $ 6,563,794  
Reimbursements
     402,862       380,095       743,879       692,998  
 
                        
Revenues
     4,216,384       3,682,304       8,287,756       7,256,792  
 
OPERATING EXPENSES:
                                
Cost of services:
                                
Cost of services before reimbursable expenses
     2,638,950       2,212,547       5,154,389       4,363,437  
Reimbursable expenses
     402,862       380,095       743,879       692,998  
 
                        
Cost of services
     3,041,812       2,592,642       5,898,268       5,056,435  
Sales and marketing
     376,919       358,662       735,862       709,259  
General and administrative costs
     361,478       316,133       752,293       655,489  
Reorganization (benefits) and restructuring costs
     (35,777 )     107,438       (28,769 )     21,040  
 
                        
Total operating expenses
     3,744,432       3,374,875       7,357,654       6,442,223  
 
                        
 
OPERATING INCOME
     471,952       307,429       930,102       814,569  
 
Gain on investments, net
     93       3,332       14,633       3,830  
Interest income
     28,063       15,187       48,184       25,610  
Interest expense
     (6,300 )     (5,816 )     (12,616 )     (11,567 )
Other (expense) income
     (2,846 )     17,765       (5,173 )     19,291  
Equity in losses of affiliates
     —       (516 )     —       (1,202 )
 
                        
 
INCOME BEFORE INCOME TAXES
     490,962       337,381       975,130       850,531  
 
Provision for income taxes
     150,350       117,408       314,967       295,984  
 
                        
 
INCOME BEFORE MINORITY INTEREST
     340,612       219,973       660,163       554,547  
 
Minority interest in Accenture SCA and Accenture Canada Holdings Inc.
     (128,688 )     (96,987 )     (250,369 )     (257,145 )
Minority interest — other
     (2,138 )     103       (3,735 )     27  
 
                        
 
NET INCOME
   $ 209,786     $ 123,089     $ 406,059     $ 297,429  
 
                        
 
Weighted Average Class A Common Shares:
                                
Basic
     591,694,862       544,052,062       590,746,753       531,738,351  
Diluted
     979,750,161       998,003,396       979,880,579       1,009,403,593  
Earnings Per Class A Common Share:
                                
Basic
   $ 0.35     $ 0.23     $ 0.69     $ 0.56  
Diluted
   $ 0.35     $ 0.22     $ 0.67     $ 0.55  

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

4

 

ACCENTURE LTD

CONSOLIDATED SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME STATEMENTS
For the Six Months Ended February 28, 2005
(In thousands of U.S. dollars and in thousands of share amounts)
(Unaudited)

                                                                                                                                 
            Class A     Class X     Restricted                                                                        
            Common     Common     Share Units                     Treasury     Treasury             Accumulated        
            Shares     Shares     Common Shares                     Shares     Shares—SECT             Other        
                                                            Deferred     Additional                                         Compre-        
    Preferred             No.             No.             No.     Compen-     Paid-in             No.             No.     Retained     hensive        
    Shares     $     Shares     $     Shares     $     Shares     sation     Capital     $     Shares     $     Shares     Earnings     Income (Loss)     Total  
Balance at August 31, 2004
   $ —     $ 13       591,497     $ 9       365,325     $ 475,240       28,279     $ (150,777 )   $ 1,643,652     $ (132,313 )     (6,098 )   $ (296,894 )     (13,120 )   $ 46,636     $ (113,760 )   $ 1,471,806  
Comprehensive income
                                                                                                                                
Net income
                                                                                                             406,059               406,059  
Other comprehensive income:
                                                                                                                                
Unrealized losses on marketable securities, net of reclassification adjustments
                                                                                                                     (3,340 )     (3,340 )
Foreign currency translation adjustments
                                                                                                                     66,761       66,761  
 
                                                                                                                              
Other comprehensive income
                                                                                                                     63,421          
 
                                                                                                                              
Comprehensive income
                                                                                                                             469,480  
Income tax benefit on stock-based compensation plans
                                                                     10,775                                                       10,775  
Purchase of Class A common shares
                     (132 )                                             (3,699 )     (126,019 )     (4,897 )     (30,481 )     (1,275 )                     (160,199 )
Transfer of shares from SECT
                                                                             (327,375 )     (14,395 )     327,375       14,395                       —  
Grants of restricted share units, net
                                             138,356       5,222       (138,356 )                                                             —  
Stock-based compensation expense
                                                             37,566       306                                                       37,872  
Purchase/redemption of Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares
                             (1 )     (3,563 )                             (86,641 )                                                     (86,642 )
Issuance of Class A common shares:
                                                                                                                                
Employee share purchase plan
                     2,065                                               46,580       27,819       1,622                                       74,399  
Employee stock options
                     2,266                                               28,822       33,352       1,628                       (4,468 )             57,706  
Restricted share units
                     693                       (14,347 )     (892 )             10,573       3,539       199                       235               —  
Transaction fees
                                                                     3,427                                                       3,427  
Minority interest
                                                                     8,477                                                       8,477  
 
                                                                                                
Balance at February 28, 2005
   $ —     $ 13       596,389     $ 8       361,762     $ 599,249       32,609     $ (251,567 )   $ 1,662,272     $ (520,997 )     (21,941 )   $ —       —     $ 448,462     $ (50,339 )   $ 1,887,101  
 
                                                                                                

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

5

 

ACCENTURE LTD

CONSOLIDATED CASH FLOWS STATEMENTS
For the Six Months Ended February 28, 2005 and February 29, 2004
(In thousands of U.S. dollars)
(Unaudited)

                 
    February 28,     February 29,  
    2005     2004  
CASH FLOWS FROM OPERATING ACTIVITIES:
                
 
Net income
   $ 406,059     $ 297,429  
Adjustments to reconcile net income to net cash provided by operating activities –
                
Depreciation and amortization
     121,906       142,819  
Reorganization benefits
     (28,769 )     (86,216 )
Gains on investments, net
     (14,633 )     (3,830 )
Losses on disposal of property and equipment, net
     3,415       4,446  
Stock-based compensation expense
     37,872       31,863  
Deferred income taxes, net
     (16,682 )     (12,518 )
Minority interest
     254,104       257,118  
Other items, net
     (2,654 )     2,771  
Change in assets and liabilities –
                
(Increase) decrease in receivables from clients, net
     (115,116 )     47,667  
(Increase) decrease in other current assets
     (2,540 )     1,456  
Increase in unbilled services, current and non-current
     (415,141 )     (178,381 )
Decrease (increase) in other non-current assets
     741       (23,363 )
Increase (decrease) in accounts payable
     231,846       (81,697 )
Increase in deferred revenues
     281,637       214,047  
(Decrease) increase in accrued payroll and related benefits
     (151,331 )     164,254  
Increase in income taxes payable
     49,840       190,137  
(Decrease) increase in other accrued liabilities
     (2,513 )     47,436  
Increase (decrease) in other non-current liabilities
     87,966       (21,943 )
 
            
Net cash provided by operating activities
     726,007       993,495  
 
            
 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
 
Proceeds from sales of available-for-sale investments
     606,022       103,303  
Purchases of available-for-sale investments
     (691,646 )     (400,251 )
Proceeds from sales of property and equipment
     2,325       3,114  
Purchases of property and equipment
     (116,213 )     (101,240 )
Purchases of businesses and investments, net of cash acquired
     —       (6,131 )
 
            
Net cash used in investing activities
     (199,512 )     (401,205 )
 
            
 
CASH FLOWS FROM FINANCING ACTIVITIES: