AMENDMENT NO. 4 TO FORM S-1
As filed with the Securities and Exchange Commission on July 18, 2001.
Registration No. 333-59194
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ACCENTURE LTD
(Exact Name of Registrant as Specified in its Charter)
Bermuda
(State or Other Jurisdiction of
Incorporation or Organization)
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54161
(Primary Standard Industrial
Classification Code Number)
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98-0341111
(I.R.S. Employer
Identification No.)
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Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
(441) 296-8262
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
Douglas G. Scrivner
Accenture Ltd
1661 Page Mill Road
Palo Alto, CA 94304
(650) 213-2000
(Name and Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
John B. Tehan
Alan D. Schnitzer
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telephone: (212) 455-2000
Facsimile: (212) 455-2502
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John J. Huber
Raymond Y. Lin
Latham & Watkins
555 11th St., N.W.
Washington, DC 20004-1304
Telephone: (202) 637-2200
Facsimile: (202) 637-2201
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Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, check the following
box. ¨
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Explanatory Note:
This Registration Statement contains two forms of a prospectus: one to be used in connection with an offering in the
United States and one to be used in a concurrent international offering outside the United States. The two prospectuses are identical except for the front cover page, the Underwriting section and the back cover page. Each of these pages
for the U.S. prospectus is followed by the alternate page to be used in the international prospectus. Each of the alternate pages for the international prospectus is labeled Alternate Page For International Prospectus. Final forms of
each prospectus will be filed with the Securities and Exchange Commission under Rule 424(b).
[Inside Front Cover Artwork:
A photograph of one woman and two men looking at a computer occupies the full page. The following text is written across the page approximately 5.5" from the bottom of
the page: Argentina Australia Austria Belgium Brazil Canada Columbia Czech Republic Denmark Finland France Germany Greece*. A footnote on the lower left hand corner of the page reads, *Accenture has offices in these
countries.]
[Front Gatefold Artwork:
The left side of the 11x17" gatefold is solid orange except for the following text which is left justified and begins 4.5" from the bottom of the page:
Accenture Helping clients accelerate their vision from innovation to execution. The right side of the gatefold is a full page photograph of three women looking at a document. The following text is written across the gatefold
approximately 5.5" from the bottom of the gatefold: Hungary India Indonesia Ireland Italy Japan Luxembourg Malaysia Mexico The Netherlands New Zealand Nigeria Norway Peoples Republic of China The Philippines Poland Portugal
Russia Saudi Arabia Singapore Slovak Republic South Africa*. A footnote on the lower left hand corner of the gatefold reads, *Accenture has offices in these countries.]
Subject to Completion. Dated July 18, 2001.
115,000,000 Class A Common Shares
This is an initial public offering of Class A common shares of Accenture Ltd. This prospectus relates to an offering of
shares in the United States. In addition, shares are being offered outside the United States in an international offering. All of the 115,000,000 Class
A common shares are being sold by Accenture Ltd.
Prior to this offering, there has been no public market for the Class A common shares. It is currently estimated that the initial public offering price per share will be
between $13.00 and $15.00. The Class A common shares have been approved for listing on the New York Stock Exchange under the symbol ACN.
Upon completion of the offering, our partners will own or control shares representing, in the aggregate, approximately 82% of the voting interest in Accenture Ltd, or
approximately 80% if the underwriters exercise their overallotment option in full, and will effectively control all matters put to a vote of Accenture Ltd shareholders.
See Risk Factors beginning on page 11 to read about factors you should consider before buying the Class A common shares.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial public offering price |
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$ |
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$ |
Underwriting discount |
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$ |
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$ |
Proceeds, before expenses, to Accenture Ltd |
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$ |
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$ |
To the extent that the underwriters sell more than Class A common shares, the underwriters have the
option to purchase up to an additional Class A common shares from Accenture Ltd at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares in New York, New York on
, 2001.
Goldman, Sachs & Co.
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Morgan Stanley
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Credit Suisse First Boston
Deutsche Banc Alex.
Brown
Salomon Smith Barney
Banc of America Securities LLC
Prospectus dated , 2001.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
[Alternate Page For International Prospectus]
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated July 18, 2001.
115,000,000 Class A Common Shares
This is an initial public offering of Class A common shares of Accenture Ltd. This prospectus relates to an offering of
shares outside the United States. In addition, shares are being offered in the United States. All of the 115,000,000 Class A common shares are being
sold by Accenture Ltd.
Prior to this offering, there has been no public market for the Class A common shares. It is currently estimated that the initial public offering price per share will be
between $13.00 and $15.00. The Class A common shares have been approved for listing on the New York Stock Exchange under the symbol ACN.
Upon completion of the offering, our partners will own or control shares representing, in the aggregate, approximately 82% of the voting interest in Accenture Ltd, or
approximately 80% if the underwriters exercise their overallotment option in full, and will effectively control all matters put to a vote of Accenture Ltd shareholders.
See Risk Factors beginning on page 11 to read about factors you should consider before buying the Class A common shares.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial public offering price |
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$ |
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$ |
Underwriting discount |
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$ |
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$ |
Proceeds, before expenses, to Accenture Ltd |
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$ |
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$ |
To the extent that the international underwriters sell more than Class A common shares, the
international underwriters have the option to purchase up to an additional Class A common shares from Accenture Ltd at the initial public offering price less the underwriting
discount.
The international underwriters expect to deliver the shares in New York, New York on
, 2001.
Goldman Sachs International |
Morgan Stanley
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Credit Suisse First Boston
Deutsche Bank
JPMorgan
Salomon Smith Barney
Banc of America Securities Limited
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Lehman Brothers |
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Merrill Lynch International |
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UBS Warburg |
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ABN AMRO Rothschild |
Prospectus dated , 2001.
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you
with different information. We are not making an offer to sell these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the
date on the front cover of this prospectus.
The Bermuda Monetary Authority has classified us as non-resident of Bermuda for exchange control purposes. Accordingly,
the Bermuda Monetary Authority does not restrict our ability to convert currency, other than Bermuda dollars, held for our account to any other currency, to transfer funds in and out of Bermuda or to pay dividends to non-Bermuda residents who are
shareholders, other than in Bermuda dollars. The permission of the Bermuda Monetary Authority is required for the issue and transfer of our shares under the Exchange Control Act 1972 of Bermuda and regulations under it.
We have obtained the permission of the Bermuda Monetary Authority for the issue of the Accenture Ltd Class A common
shares that we may sell in the offering described in this prospectus. In addition, we have obtained the permission of the Bermuda Monetary Authority for the free issue and transferability of the Accenture Ltd Class A common shares following the
offering. Approvals or permissions received from the Bermuda Monetary Authority do not constitute a guaranty by the Bermuda Monetary Authority as to our performance or our creditworthiness. Accordingly, in giving those approvals or permissions, the
Bermuda Monetary Authority will not be liable for our performance or default or for the correctness of any opinions or statements expressed in this document.
We have filed this document as a prospectus with the Registrar of Companies in Bermuda under Part III of the Companies
Act 1981 of Bermuda. In accepting this document for filing, the Registrar of Companies accepts no responsibility for the financial soundness of any proposals or for the correctness of any opinions or statements expressed in this
document.
This summary highlights some of the information contained elsewhere in this prospectus. We urge you to read the
entire prospectus carefully, including the Risk Factors and Pro Forma Financial Information sections and our historical financial statements and related notes included elsewhere in this prospectus, before making an investment
decision.
Accenture
Accenture is the worlds leading provider of management and technology consulting services and solutions. We have
more than 75,000 employees based in more than 110 offices in 46 countries delivering to our clients a wide range of consulting, technology and outsourcing services. We operate globally with one common brand and business model. We work with clients
of all sizes and have extensive relationships with the worlds leading companies and governments. We serve 84 of the Fortune Global 100 and more than half of the Fortune Global 500. In total, we have served more than 4,000 clients
on nearly 18,000 engagements over the past five fiscal years.
Our business consists of using our industry knowledge, our service offering expertise and our insight into and access to
existing and emerging technologies to identify new business and technology trends and formulate and implement solutions for clients under demanding time constraints. We help clients around the world identify and enter new markets, increase revenues
in existing markets and deliver their products and services more effectively and efficiently. We deliver our services and solutions through five global market units, which together comprise 18 industry groups. Our industry focus enables our
professionals to provide business and management consulting, technology and outsourcing services with an understanding of industry evolution, business issues and applicable technologies, and ultimately to deliver solutions tailored to each
clients industry. Our five global market units and 18 industry groups are:
Communications
& High Tech |
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Financial
Services |
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Products |
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Resources |
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Government |
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Communications |
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Banking |
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Automotive |
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Chemicals |
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Government |
Electronics
& |
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Health
Services |
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Consumer
Goods |
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Energy |
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High Tech |
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Insurance |
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& Services |
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Forest
Products |
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Media
& |
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Industrial |
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Metals &
Mining |
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Entertainment |
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Equipment |
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Utilities |
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Pharmaceuticals & |
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Medical Products |
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Retail |
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Transportation & |
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Travel Services |
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Percent of revenues before reimbursements for the year ended August 31, 2000 |
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29% |
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26% |
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19% |
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17% |
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8% |
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We develop and deliver a full spectrum of services and solutions that address business opportunities and challenges
common across industries through the following eight service lines:
Strategy & Business Architecture
Customer Relationship
Management
Supply Chain Management
Human Performance
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Finance & Performance Management
Technology Research &
Innovation
Solutions Engineering
Solutions Operations
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Our affiliates, alliances and venture capital activities enhance our management and technology consulting services and
solutions business. If a capability that we do not already possess is of strategic importance and value to us but is in an area that is best developed in a business model outside our client service business, we may form a new business, often with
one or more third parties, to develop that capability. We call these businesses affiliates. In general, we expect the capabilities developed by these new businesses to be used by our own professionals as well as by other companies. We
enter into alliances because todays business environment demands more speed, flexibility and resources than typically exist at any single company. We seek to form alliances with leading companies and organizations whose capabilities complement
our own, whether by extending or deepening a service offering, delivering a new technology or business process or helping us extend our services to new geographies. Our venture capital business, Accenture Technology Ventures, gives us insight into
and access to emerging business models, products and technologies through investments in portfolio companies. Although we have not generated material revenues from our affiliates, alliances and venture capital activities, we believe that our
approach, which we refer to as our network of businesses, provides us with a fundamental advantage in delivering value to our clients.
Revenues are driven by our partners and senior executives ability to secure contracts for new engagements
and to deliver products and services that add value to our clients. We derive substantially all of our revenues from contracts for management and technology service offerings and solutions that we develop, implement and manage for our clients.
Substantially all of our contracts include time-and-materials or fixed-price terms.
Our leading position in the management and technology consulting services and solutions markets results from the fact
that we have more consulting professionals than any other consulting firm, with more than 57,000 professionals working within our global market units, complemented by more than 8,000 professionals dedicated full time to our service lines. In
addition, we have deep industry knowledge in 18 distinct industry groups and broad service offering expertise through our eight service lines. In total, we have more than 75,000 employees who provide global scale and reach through more than 110
offices in 46 countries. Based on our knowledge of our business and the business of our competitors, we believe that no other consulting firm provides as broad a range of management and technology consulting services and solutions to as many
industry groups in as many geographic markets as we do.
Our Corporate Information
Accenture Ltd is organized under the laws of Bermuda. We maintain a registered and principal executive office in Bermuda
at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda. Our telephone number in Bermuda is (441) 296-8262. We also have major offices in the worlds leading business centers, including New York, Chicago, Dallas, Los Angeles, San
Francisco, London, Frankfurt, Madrid, Milan, Paris, Sydney and Tokyo. In total, we have more than 110 offices in 46 countries around the world. Our Internet address is www.accenture.com. Information contained on our Web site is not a part of this
prospectus.
We use the term partner in this prospectus to refer to the partners and shareholders of the series of
related partnerships and corporations through which we operated our business prior to our transition to a corporate structure. These individuals have become our executive employees following our transition to a corporate structure but will retain
the partner title. Where the context permits, the term also refers to our employees and others who have been or are in the future named as partners in this executive sense. In using the term partner, we do not
mean to imply any intention of the parties to create a separate legal entity.
Until August 7, 2000, we had contractual relationships with Andersen Worldwide and Arthur Andersen. Following
arbitration proceedings between us and Andersen Worldwide and Arthur Andersen that were completed in August 2000, we separated from Andersen Worldwide and Arthur Andersen. On January 1, 2001, we began to conduct business under the name Accenture.
See Certain Relationships and Related TransactionsRelationship with Andersen Worldwide and Arthur Andersen.
Organizational Structure
Accenture Ltd is a Bermuda holding company with no material assets other than Class I and Class II common shares in our
subsidiary, Accenture SCA, a Luxembourg partnership limited by shares. Each Class I common share and each Class II common share of Accenture SCA entitles its holder to one vote on all matters submitted to a vote of shareholders of Accenture SCA.
Each Accenture SCA Class II common share entitles Accenture Ltd to receive a dividend or liquidation payment equal to 10% of any dividend or liquidation payment to which an Accenture SCA Class I common share entitles its holder. Accenture Ltd holds
all of the Class II common shares of Accenture SCA and has a majority voting interest in Accenture SCA. When we refer to Accenture SCA Class I and Class II common shares, we are referring to partnership interests. In the opinion of our counsel,
under Accenture SCAs articles of association, shares in Accenture SCA held by Accenture Ltd are actions de commandité, or general partnership interests, and shares in Accenture SCA held by our partners are actions de
commanditaires, or limited partnership interests. Accenture Ltd, as general partner of Accenture SCA, has unlimited liability for the liabilities of Accenture SCA. Accenture Ltds only business is to hold these shares and to act as the sole
general partner of Accenture SCA. As the general partner of Accenture SCA and as a result of Accenture Ltds majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCAs management and operations and will consolidate
Accenture SCAs results in its financial statements. We operate our business through subsidiaries of Accenture SCA.
None of our partners will be selling shares in the offering, and, immediately following the offering, our partners will
own approximately 82% of the equity in our business, or approximately 80% if the underwriters exercise their overallotment option in full. Upon completion of the offering, our partners will own or control shares representing, in the aggregate,
approximately 82% of the voting interest in Accenture Ltd, or approximately 80% if the underwriters exercise their overallotment option in full. Immediately following the offering, our public shareholders (including our non-partner employees) will
own approximately 18% of the equity in our business, or approximately 20% if the underwriters exercise their overallotment option in full, and will own shares representing approximately 18% of the voting interest in Accenture Ltd, or approximately
20% if the underwriters exercise their overallotment option in full.
Our organizational structure immediately following the offering will be as shown in the diagram below. The diagram does
not display the subsidiaries of Accenture SCA and does not reflect exercise of the underwriters overallotment option.
(1)
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Includes non-partner employees.
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(2)
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Generally consists of our partners in countries other than Australia, Canada, Denmark, France, Italy, New Zealand, Norway,
Spain, Sweden and the United States.
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(3)
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Generally consists of our partners in Australia, Canada, Denmark, France, Italy, New Zealand, Norway, Spain, Sweden and the
United States. Our partners in Canada and New Zealand do not hold Accenture Ltd Class A common shares or Accenture SCA Class I common shares, but instead hold Accenture Canada Holdings exchangeable shares. Each of these exchangeable shares is
exchangeable at the option of the holder for an Accenture Ltd Class A common share on a one-for-one basis and entitles its holder to receive distributions equal to any distributions to which an Accenture Ltd Class A common share entitles its
holder.
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We intend to make all distributions to all of our equity holders pro rata based on economic ownership. Based on the
shares outstanding immediately after the offering and assuming no exercise of the underwriters overallotment option, our public shareholders would receive approximately 18% of any distribution. You should read Accenture Organizational
Structure, Certain Relationships and Related Transactions and Description of Share Capital for additional information about our corporate structure.
The Offering
Class A common shares offered in the
offering |
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115,000,000 Class A common shares. |
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Class A common shares to be outstanding
immediately following the offering(1) |
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394,981,896 Class A common shares (or
990,444,700 Class A common shares if our partners
holdings of Accenture SCA Class I common shares
and Accenture Canada Holdings exchangeable
shares are redeemed or exchanged for newly issued
Class A common shares on a one-for-one basis). |
(1)
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Class A common shares to be outstanding immediately following the offering and the other information in the prospectus based
thereon reflects:
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115,000,000 Class A common shares offered in the offering;
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212,257,239 Class A common shares held by our partners (or 807,720,043 Class A common shares if our partners holdings
of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares are redeemed or exchanged for newly issued Class A common shares on a one-for-one basis); and
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67,724,657 Class A common shares underlying restricted share units that are fully vested or are scheduled to fully vest prior
to the end of the current fiscal year. Information in the prospectus also reflects the assumed issuance of an equivalent number of Accenture SCA Class I common shares to be issued to Accenture Ltd in connection with these restricted share
units.
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Class A common shares to be outstanding immediately following the offering and the other information in the prospectus based
thereon does not reflect:
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17,250,000 Class A common shares issuable upon exercise of the underwriters overallotment option;
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6,695,091 Class A common shares underlying restricted share units that will not fully vest prior to the end of the current
fiscal year; and
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99,295,000 Class A common shares issuable pursuant to options.
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See Accenture Organizational Structure and ManagementEmployee Awards.
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Use of proceeds:
By Accenture Ltd |
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Accenture Ltd intends to use the net proceeds from
the offering to subscribe for Accenture SCA Class I
common shares. |
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By Accenture SCA |
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Accenture SCA intends to use the proceeds it
receives from the issuance of its Class I common
shares as follows: |
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approximately $839 million for costs and
expenses incurred in connection with our
transition to a corporate structure; |
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approximately $338 million to repay amounts outstanding under our revolving credit facilities; and
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the balance for working capital, which previously was funded by our partners, and for general corporate purposes.
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Voting rights
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Each Class A common share and each Class X common share will entitle its holder to one vote per share on all matters submitted to a
vote of shareholders of Accenture Ltd. Immediately following the offering, our partners will own or control Class A common shares and Class X common shares representing, in the aggregate, approximately 82% of the voting interest in Accenture Ltd, or
approximately 80% if the underwriters exercise their overallotment option in full. All of our partners who hold Class A or Class X common shares have entered into a voting agreement that requires them to vote as a group with respect to all matters
voted upon by shareholders of Accenture Ltd. For a discussion of the voting agreement, see Certain Relationships and Related TransactionsVoting Agreement. Our partners will effectively control us for as long as they continue to
hold a significant block of voting rights.
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Dividend and distribution policy
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We currently do not anticipate that Accenture Ltd or Accenture SCA will pay dividends.
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Transfer restrictions
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The equity interests that our partners own are subject to transfer restrictions that generally restrict sales for one year and then
permit sales in increasing amounts over the subsequent seven years. For a discussion of the terms of the transfer restrictions, see Certain Relationships and Related TransactionsVoting Agreement and Accenture SCA
Transfer Rights Agreement and Risk FactorsRisks That Relate to Your Ownership of Our Class A Common SharesOur share price may decline due to the large number of Class A common shares eligible for future
sale.
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New York Stock Exchange symbol
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ACN
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Risk factors
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For a discussion of some of the factors you should consider before buying our Class A common shares, see Risk
Factors.
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Summary Financial Data
The following unaudited summary historical and pro forma financial information should be read in conjunction with
Selected Financial Data, Pro Forma Financial Information, our historical financial statements and related notes included elsewhere in this prospectus and Managements Discussion and Analysis of Financial Condition
and Results of Operations.
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Historical
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Pro forma
as adjusted
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Historical
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Pro forma
as adjusted
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Year ended August 31,
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Year ended
August 31,
2000
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Nine months
ended May 31,
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Nine months
ended May 31, |
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1996
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1997
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1998
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1999
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2000
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2000
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2001
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2001
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(in millions, except share and per share data) |
Income Statement Data: |
Revenues: |
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Revenues before reimbursements |
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$4,942 |
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$6,275 |
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$8,215 |
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$ 9,550 |
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$ 9,752 |
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$ 9,752 |
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$7,245 |
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$ 8,666 |
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$ 8,666 |
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Reimbursements |
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768 |
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1,172 |
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1,425 |
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1,529 |
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1,788 |
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1,788 |
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1,301 |
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1,475 |
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1,475 |
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Revenues |
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5,710 |
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7,447 |
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9,640 |
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11,079 |
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11,540 |
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11,540 |
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8,546 |
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10,141 |
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10,141 |
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Operating expenses:* |
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Cost of services:* |
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Cost of services before reimbursable expenses* |
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2,678 |
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3,470 |
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4,700 |
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5,457 |
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5,486 |
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6,138 |
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4,000 |
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4,509 |
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5,243 |
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Reimbursable expenses |
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768 |
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1,172 |
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1,425 |
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1,529 |
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1,788 |
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1,788 |
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1,301 |
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1,475 |
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1,475 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services* |
|
3,446 |
|
|
4,642 |
|
|
6,125 |
|
|
6,986 |
|
|
7,274 |
|
|
7,926 |
|
|
5,301 |
|
|
5,984 |
|
|
6,718 |
|
Sales and marketing* |
|
532 |
|
|
611 |
|
|
696 |
|
|
790 |
|
|
883 |
|
|
1,192 |
|
|
651 |
|
|
771 |
|
|
1,065 |
|
General and administrative costs* |
|
659 |
|
|
819 |
|
|
1,036 |
|
|
1,271 |
|
|
1,297 |
|
|
1,441 |
|
|
936 |
|
|
1,131 |
|
|
1,176 |
|
Reorganization and rebranding costs* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
777 |
|
|
332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses* |
|
4,637 |
|
|
6,072 |
|
|
7,857 |
|
|
9,047 |
|
|
9,454 |
|
|
10,559 |
|
|
6,888 |
|
|
8,663 |
|
|
9,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income* |
|
1,073 |
|
|
1,375 |
|
|
1,783 |
|
|
2,032 |
|
|
2,086 |
|
|
981 |
|
|
1,658 |
|
|
1,478 |
|
|
850 |
|
Gain on investments, net |
|
|
|
|
|
|
|
|
|
|
92 |
|
|
573 |
|
|
573 |
|
|
534 |
|
|
180 |
|
|
180 |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
60 |
|
|
67 |
|
|
67 |
|
|
45 |
|
|
59 |
|
|
59 |
|
Interest expense |
|
(16 |
) |
|
(19 |
) |
|
(17 |
) |
|
(27 |
) |
|
(24 |
) |
|
(35 |
) |
|
(18 |
) |
|
(26 |
) |
|
(41 |
) |
Other income (expense) |
|
(4 |
) |
|
4 |
|
|
(6 |
) |
|
(5 |
) |
|
51 |
|
|
51 |
|
|
32 |
|
|
21 |
|
|
21 |
|
Equity in losses of affiliates |
|
|
|
|
|
|
|
(1 |
) |
|
(6 |
) |
|
(46 |
) |
|
(46 |
) |
|
(9 |
) |
|
(53 |
) |
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes* |
|
1,053 |
|
|
1,360 |
|
|
1,759 |
|
|
2,146 |
|
|
2,707 |
|
|
1,591 |
|
|
2,242 |
|
|
1,659 |
|
|
1,016 |
|
Provision for taxes (1) |
|
116 |
|
|
118 |
|
|
74 |
|
|
123 |
|
|
243 |
|
|
636 |
|
|
194 |
|
|
420 |
|
|
406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and cumulative
change in accounting* |
|
937 |
|
|
1,242 |
|
|
1,685 |
|
|
2,023 |
|
|
2,464 |
|
|
955 |
|
|
2,048 |
|
|
1,239 |
|
|
610 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
573 |
|
|
|
|
|
|
|
|
366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative change in accounting* |
|
937 |
|
|
1,242 |
|
|
1,685 |
|
|
2,023 |
|
|
2,464 |
|
|
$ 382 |
|
|
2,048 |
|
|
1,239 |
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income before partner distributions* (2) |
|
$ 937 |
|
|
$1,242 |
|
|
$1,685 |
|
|
$ 2,023 |
|
|
$ 2,464 |
|
|
|
|
|
$2,048 |
|
|
$ 1,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.97 |
|
|
|
|
|
|
|
|
$ 0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.96 |
|
|
|
|
|
|
|
|
$ 0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
394,981,896 |
|
|
|
|
|
|
|
|
396,320,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
991,114,209 |
|
|
|
|
|
|
|
|
992,285,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Historical information excludes payments for partner distributions.
|
(1)
|
Provision for taxes is not the same as income taxes of a corporation. For the historical periods, we operated through
partnerships in many countries. Therefore, we generally were not subject to income taxes in those countries. Taxes related to income earned by our partnerships were the responsibility of the individual partners. In other countries, we operated
through corporations, and in these circumstances we were subject to income taxes.
|
(2)
|
Partnership income before partner distributions is not comparable to net income of a corporation similarly determined.
Partnership income in historical periods is not executive compensation in the customary sense because partnership income is comprised of distributions of current earnings. Accordingly, compensation and benefits for services rendered by partners have
not been reflected as an expense in our historical financial statements.
|
|
|
Historical
|
|
Historical
|
|
Pro forma
as adjusted
|
|
|
As of August 31,
|
|
As of May 31,
|
|
As of
May 31,
|
|
|
1996
|
|
1997
|
|
1998
|
|
1999
|
|
2000
|
|
2000
|
|
2001
|
|
2001
|
|
|
(in millions) |
Balance Sheet Data: |
Cash and cash equivalents |
|
$ 438 |
|
$ 325 |
|
$ 736 |
|
$1,111 |
|
$1,271 |
|
$1,297 |
|
$ 724 |
|
|
$1,816 |
Working capital |
|
280 |
|
175 |
|
531 |
|
913 |
|
1,015 |
|
1,023 |
|
(1,394 |
) |
|
44 |
Total assets |
|
2,323 |
|
2,550 |
|
3,704 |
|
4,615 |
|
5,451 |
|
5,491 |
|
4,929 |
|
|
6,062 |
Long-term debt |
|
226 |
|
192 |
|
157 |
|
127 |
|
99 |
|
127 |
|
31 |
|
|
31 |
Total partners capital |
|
696 |
|
761 |
|
1,507 |
|
2,208 |
|
2,368 |
|
2,579 |
|
|
|
|
|
Shareholders equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,255 |
) |
|
117 |
You should carefully consider each of the risks described below and all of the other information in this prospectus
before deciding to invest in our Class A common shares.
Risks That Relate to Our Business
A significant or prolonged economic downturn could have a material adverse effect on our results of operations.
Our results of operations are affected by the level of business activity of our clients, which in turn is affected by
the level of economic activity in the industries and markets that they serve. In addition, our business tends to lag behind economic cycles in an industry. A decline in the level of business activity of our clients could have a material adverse
effect on our revenues and profit margin. We are now seeing some evidence of an economic slowdown in some markets, including a reduction in capital expenditures and technology and associated discretionary spending by our clients, particularly in the
United States. This has caused a reduction in our growth rate in the Americas and in our Communications & High Tech, Financial Services and Products global market units in the third quarter of this fiscal year as compared with the first half of
this fiscal year. Revenues before reimbursements for the third quarter of 2001 for our Communications & High Tech, Financial Services and Products global market units increased by 8%, 15% and 16%, respectively, over the third quarter of 2000,
while revenues before reimbursements for the first half of 2001 for these market units increased by 27%, 19% and 25%, respectively, over the first half of 2000. Revenues before reimbursements for the third quarter of 2001 for our Americas geographic
area increased by 10% over the third quarter of 2000, while revenues before reimbursements for the first half of 2001 for this geographic area increased by 27% over the first half of 2000. We expect continued growth in revenues in the fourth quarter
of this fiscal year, though at a slower rate of growth than in the third quarter. We will implement cost-savings initiatives to manage our expenses as a percentage of revenues. However, we may not be able to reduce the rate of growth in our costs on
a timely basis or control our costs to maintain our margins.
Our business will be negatively affected if we are not able to anticipate and keep pace with rapid changes in technology or if growth in the use of technology in
business is not as rapid as in the past.
Our success will depend, in part, on our ability to develop and implement management and technology solutions that
anticipate and keep pace with rapid and continuing changes in technology, industry standards and client preferences. We may not be successful in anticipating or responding to these developments on a timely basis, and our ideas may not be successful
in the marketplace. Also, products and technologies developed by our competitors may make our service or product offerings uncompetitive or obsolete. Any one of these circumstances could have a material adverse effect on our ability to obtain and
successfully complete important client engagements.
Our business is also dependent, in part, upon continued growth in the use of technology in business by our clients and
prospective clients and their customers and suppliers. If the growth in the use of technology does not continue, demand for our services may decrease. Use of new technology for commerce generally requires the understanding and acceptance of a new
way of conducting business and exchanging information. Companies that have already invested substantial resources in traditional means of conducting commerce and exchanging information may be particularly reluctant or slow to adopt a new approach
that may make some of their existing personnel and infrastructure obsolete.
We may face damage to our professional reputation or legal liability if our clients are not satisfied with our services.
As a professional services firm, we depend to a large extent on our relationships with our clients and our reputation
for high-caliber professional services and integrity to attract and retain clients. As a result, if a client is not satisfied with our services or products, including those of subcontractors we employ, it may be more damaging in our business than in
other businesses. Moreover, if we fail to meet our contractual obligations or fail to disclose our financial or other arrangements with our alliance partners, we could be subject to legal liability or loss of client relationships. Our contracts
typically include provisions to limit our exposure to legal claims relating to our services and the applications we develop, but these provisions may not protect us or may not be enforceable in all cases.
|
Our services or products may infringe upon the intellectual property rights of others.
|
We cannot be sure that our services and products, or the products of others that we offer to our clients, do not
infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or against our clients. These claims may harm our reputation, cost us money and prevent us from offering some services or
products. Historically in our contracts, we have generally agreed to indemnify our clients for any expenses or liabilities resulting from claimed infringements of the intellectual property rights of third parties. In some instances, the amount of
these indemnities may be greater than the revenues we receive from the client. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming and costly, injure our reputation or require us to enter into royalty or
licensing arrangements. We may not be able to enter into these royalty or licensing arrangements on acceptable terms. Depending on the circumstances, we may be required to grant a specific client greater rights in intellectual property developed in
connection with an engagement than we otherwise do, in which case we seek to cross license the use of the intellectual property. However, in very limited situations, we forego rights to the use of intellectual property we help create and in these
cases, this limits our ability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or product could cause us to lose revenue-generating opportunities and require us to incur additional expenses
to develop new or modified solutions for future projects.
|
Our engagements with clients may not be profitable.
|
Unexpected costs or delays could make our contracts unprofitable. When making proposals
for engagements, we estimate the costs and timing for completing the projects. These estimates reflect our best judgment regarding the efficiencies of our methodologies and professionals as we plan to deploy them on projects. Any increased or
unexpected costs or unanticipated delays in connection with the performance of these engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which would have an adverse effect
on our profit margin. While we have many types of contracts, including time-and-materials contracts, fixed-price contracts and contracts with features of both of these contract types, the risks associated with all of these types of contracts are
often similar. We estimate that a majority of our contracts have some fixed-price, incentive-based or other pricing terms that condition our fee on our ability to deliver defined goals. Our failure to meet a clients expectations in any type of
contract may result in an unprofitable engagement.
Our contracts can be terminated by our clients with short notice. Our clients typically
retain us on a non-exclusive, engagement-by-engagement basis, rather than under exclusive long-term contracts. Approximately 75% of our consulting engagements are less than twelve months in duration. While our accounting systems identify the
duration of our engagements, these systems do not track whether contracts can be terminated upon short notice and without penalty. However, we estimate that the majority of our contracts can be terminated by our clients with short notice and without
significant penalty. The advance notice of termination required for contracts of shorter duration and lower revenue is typically 30 days. Longer-term, larger and more complex contracts generally require a longer notice period for termination and may
include an early termination charge to be paid to us. Additionally, large
client projects involve multiple engagements or stages, and there is a risk that a client may choose not to retain us for additional stages of a project or that a client will cancel or delay additional planned engagements. These terminations,
cancellations or delays could result from factors unrelated to our work product or the progress of the project, but could be related to business or financial conditions of the client or the economy generally. When contracts are terminated, we lose
the associated revenues and we may not be able to eliminate associated costs in a timely manner.
We may fail to collect amounts extended to clients. In limited circumstances we extend
financing to our clients. A client must meet established criteria to receive financing. In the rare event that these criteria are waived, approval by senior levels of our management is required. We have extended $168 million of financing as of May
31, 2001. We do not expect financing levels to exceed $250 million, which is in line with historical levels, over the next 12 months.
|
If our affiliates, alliances or venture capital portfolio companies do not succeed, we may not be successful in
implementing our growth strategy.
|
We have invested a substantial amount of time and resources in our affiliates, alliances and venture capital portfolio
companies, and we plan to make substantial additional investments in the future. We made investments of $287 million in the 12 months ended May 31, 2001. The value of affiliate and venture capital financial commitments at May 31, 2001 was $19
million and $48 million, respectively. We anticipate making additional investments of $300 million to $400 million in the 12 months ended May 31, 2002. In addition, we expect to spend over $125 million over the same period in payroll and other
expenses in support of alliance agreements. The benefits we anticipate from these relationships are an important component of our growth strategy. If these relationships do not succeed, we may lose our investments or fail to obtain the benefits we
hope to derive from them. Similarly, we may be adversely affected by the failure of one or more of our affiliates or alliances, which could lead to reduced marketing exposure, diminished sales and a decreased ability to develop and gain access to
solutions. Moreover, because most of our alliance relationships are nonexclusive, our alliance partners are able to form closer or preferred arrangements with our competitors. In addition, our venture capital activities may suffer from the poor
performance of the portfolio companies in which we invest or from our inability to obtain attractive returns on our investments or investments or to monetize these investments at all. These losses or failures could have a material and adverse impact
on our growth strategy, which, in turn, could adversely affect our financial condition and results of operations.
|
Our global operations pose complex management, foreign currency, legal, tax and economic risks, which we may not
adequately address.
|
We have offices in 46 countries around the world. In fiscal 2000, approximately 54% of our revenues were attributable to
activities in the Americas, 38% of our revenues were attributable to our activities in Europe, the Middle East, Africa and India, and 8% of our revenues were attributable to our activities in the Asia/Pacific region. As a result, we are subject to a
number of risks, including:
|
|
the absence in some jurisdictions of effective laws to protect our intellectual property rights;
|
|
|
multiple and possibly overlapping and conflicting tax laws;
|
|
|
restrictions on the movement of cash;
|
|
|
the burdens of complying with a wide variety of national and local laws;
|
|
|
restrictions on the import and export of certain technologies;
|
|
|
price controls or restrictions on exchange of foreign currencies; and
|
|
The consulting, information technology and outsourcing markets are highly competitive, and we may not be able to
compete effectively.
|
The consulting, information technology and outsourcing markets in which we operate include a large number of
participants and are highly competitive. Our primary competitors include:
|
|
large accounting, consulting and other professional service firms, including some of the Big 5 accounting
firms;
|
|
|
information technology service providers;
|
|
|
application service providers;
|
|
|
packaged software vendors and resellers; and
|
|
|
service groups of computer equipment companies.
|
In addition, a client may choose to use its own resources, rather than engage an outside firm for the types of services we provide.
Our marketplace is experiencing rapid changes in its competitive landscape. Some of our competitors have sought access
to public and private capital and others have merged or consolidated with better-capitalized partners. These changes may create larger and better-capitalized competitors with enhanced abilities to compete for market share generally and our clients
specifically, in some cases, through significant economic incentives to clients to secure contracts. These competitors may also be better able to compete for skilled professionals by offering them large compensation incentives. In addition, one or
more of our competitors may develop and implement methodologies which result in superior productivity and price reductions without adversely affecting the competitors profit margins. Any of these circumstances may impose additional pricing
pressure on us, which would have an adverse effect on our revenues and profit margin.
|
If we are unable to attract and retain employees in appropriate numbers, we will not be able to compete effectively and
will not be able to grow our business.
|
Our success and ability to grow are dependent, in part, on our ability to hire and retain large numbers of talented
people. We hired approximately 17,000 new employees in each of fiscal years 2000 and 2001. The cumulative rate of turnover among our employees was 19% for fiscal year 1999, 22% for fiscal year 2000 and, on an annualized basis, approximately 14% for
the nine months ended May 31, 2001, excluding involuntary terminations. The inability to attract qualified employees in sufficient numbers to meet demand or the loss of a significant number of our employees could have a serious negative effect on
us, including our ability to obtain and successfully complete important client engagements and thus maintain or increase our revenues. On June 7, 2001, we announced an initiative to reduce our staff in certain parts of the world, in certain skill
groups and in some support positions. This initiative may adversely affect employee recruiting and retention.
We regularly benchmark our employee compensation to the marketplace in all countries in which we operate. We make annual
adjustments to remain competitive based on the individual markets and the demand for top talent. We also adjust compensation levels within some of our larger countries, such as the United States and the United Kingdom, to reflect different labor
pools. In some cases these increases are greater than the general rate of inflation due to other market forces, including the demand for technical talent. To attract and retain the number of employees we need to grow our business, we may have to
increase our compensation levels in the future. This would adversely affect our operating margins.
|
Our transition to a corporate structure may adversely affect our ability to recruit, retain and motivate our partners
and other key employees, which in turn could adversely affect our ability to compete effectively and to grow our business.
|
We face additional retention risk because of our transition to a corporate structure. Our partners received our equity
in lieu of the interests in the partnerships and corporations that they previously held.
Our partners, on average, received approximately 329,000 Accenture Ltd Class A common shares, Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares (with a value at the time of the offering of approximately $4,606,000,
at an assumed price per share of $14.00), and the median number of Accenture Ltd Class A common shares, Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares received by our partners was approximately 355,000 (with a
value at the time of the offering of approximately $4,970,000, at an assumed price per share of $14.00). Their ownership of this equity is not dependent upon their continued employment. While these equity interests are subject to transfer
restrictions, the transfer restrictions lapse over time, may not be enforceable in all cases and can be waived. See Certain Relationships and Related TransactionsVoting Agreement and Accenture SCA Transfer Rights
Agreement. In addition, in connection with our transition to a corporate structure, our partners have accepted significant reductions in their cash compensation. The substitution of equity, equity-based incentives and other employee benefits
in lieu of higher cash compensation may not be sufficient to retain these individuals in the near or long term. There is no guarantee that the non-competition agreements we have entered into with our partners are sufficiently broad to prevent them
from leaving us for our competitors or other opportunities or that these agreements will be enforceable in all cases.
In connection with the offering and our transition to a corporate structure, our non-partner employees will also receive
equity incentives. These incentives to attract, retain and motivate employees may not be as effective as the opportunity, which existed prior to our transition to a corporate structure, to hold a partnership interest in Accenture. If these
incentives are not effective, our ability to hire, retain and motivate skilled professionals will suffer.
|
We have only a limited ability to protect our intellectual property rights, which are important to our
success.
|
Our success depends, in part, upon our ability to protect our proprietary methodologies and other intellectual property.
Existing laws of some countries in which we provide services or products may offer only limited protection of our intellectual property rights. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure and other
contractual arrangements, and patent, copyright and trademark laws to protect our intellectual property rights. The steps we take in this regard may not be adequate to prevent or deter infringement or other misappropriation of our intellectual
property, and we may not be able to detect unauthorized use or take appropriate and timely steps to enforce our intellectual property rights.
Risks That Relate to Our Financial Results and Our Lack of Experience in Managing a Public Company
|
Our profitability will suffer if we are not able to maintain our prices and utilization rates and control our
costs.
|
Our profit margin, and therefore our profitability, is largely a function of the rates we are able to charge for our
services and the utilization rate, or chargeability, of our professionals. Accordingly, if we are not able to maintain the rates we charge for our services or an appropriate utilization rate for our professionals, we will not be able to sustain our
profit margin and our profitability will suffer. The rates we are able to charge for our services are affected by a number of factors, including:
|
|
our clients perception of our ability to add value through our services;
|
|
|
introduction of new services or products by us or our competitors;
|
|
|
pricing policies of our competitors; and
|
|
|
general economic conditions.
|
Our utilization rates are also affected by a number of factors, including:
|
|
seasonal trends, primarily as a result of our hiring cycle and holiday and summer vacations;
|
|
|
our ability to transition employees from completed projects to new engagements;
|
|
|
our ability to forecast demand for our services and thereby maintain an appropriate headcount; and
|
|
|
our ability to manage attrition.
|
Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the
number of our professionals and execute our strategy for growth, we may not be able to manage a significantly larger and more diverse workforce, control our costs or improve our efficiency.
|
Our quarterly revenues, operating results and profitability will vary from quarter to quarter, which may result in
increased volatility of our share price.
|
Our quarterly revenues, operating results and profitability have varied in the past and are likely to vary significantly
from quarter to quarter, making them difficult to predict. This may lead to volatility in our share price. The factors that are likely to cause these variations are:
|
|
the business decisions of our clients regarding the use of our services;
|
|
|
the timing of projects and their termination;
|
|
|
the timing and extent of gains and losses on our portfolio of investments;
|
|
|
the timing of income or loss from affiliates;
|
|
|
our ability to transition employees quickly from completed projects to new engagements;
|
|
|
the introduction of new products or services by us or our competitors;
|
|
|
changes in our pricing policies or those of our competitors;
|
|
|
our ability to manage costs, including personnel costs and support services costs;
|
|
|
costs related to possible acquisitions of other businesses; and
|
|
|
global economic conditions.
|
|
The historical and pro forma financial information in this prospectus may not permit you to predict our costs of
operations.
|
The historical financial information in this prospectus does not reflect the added costs we expect to incur as a public
company or the resulting changes that have occurred in our capital structure and operations. Because we historically operated through partnerships in many countries prior to our transition to a corporate structure, we paid little or no taxes on
profits and no salaries to our partners who are now our employees. In preparing our pro forma financial information we deducted and charged to earnings estimated income taxes based on an estimated tax rate, which may be different from our actual tax
rate in the future, and estimated salaries, payroll taxes and benefits for our partners who became our employees after our transition to a corporate structure. The estimates we used in our pro forma financial information may not be similar to our
actual experience as a public corporation. For more information on our historical financial statements and pro forma financial information, see Pro Forma Financial Information and our historical financial statements and related notes
included elsewhere in this prospectus.
|
Our management has no experience in managing a public company.
|
Our management team has historically operated our business as a privately-owned series of partnerships and corporations.
The individuals who now constitute our management have never had responsibility for managing a publicly-traded company.
|
We expect to record substantial net losses in the fiscal quarter ended August 31, 2001 due to the one-time grant of
restricted share units in connection with the offering.
|
We expect to record a substantial loss in the quarter ended August 31, 2001 primarily as the result of net nonrecurring
compensation cost of approximately $967 million resulting from the grant of restricted share units in connection with the offering.
Risks That Relate to Your Ownership of Our Class A Common Shares
|
We will continue to be controlled by our partners, whose interests may differ from those of our other
shareholders.
|
Upon completion of the offering our partners will own or control shares representing, in the aggregate, an 82% voting
interest in Accenture Ltd, or 80% if the underwriters exercise their overallotment option in full. These shares are subject to a voting agreement, which requires our partners to vote as a group with respect to all matters submitted to shareholders.
Our partners voting interest in Accenture Ltd may increase to the extent additional employees we name as partners are required to become parties to the voting agreement. See Certain Relationships and Related TransactionsVoting
Agreement for a discussion of these voting arrangements.
As long as our partners continue to own or control a significant block of voting rights, they will control us. This will
enable them, without the consent of the public shareholders, to:
|
|
elect the board of directors and remove directors;
|
|
|
control our management and policies;
|
|
|
determine the outcome of most corporate transactions or other matters submitted to the shareholders for approval, including
mergers, amalgamations and the sale of all or substantially all of our assets; and
|
|
|
act in their own interest as partners, which may conflict with or not be the same as the interests of shareholders who are
not partners.
|
Furthermore, as a result of a partner matters agreement, our partners will continue to have influence with respect to a
wide variety of matters over which neither shareholders nor employees of a public company typically have input. The partner matters agreement will provide mechanisms for our partners to:
|
|
select, for three to five years after the offering, five partner nominees for election to membership on the board of
directors of Accenture Ltd;
|
|
|
make a non-binding recommendation to the board of directors of Accenture Ltd through a committee of partners regarding the
selection of a chief executive officer of Accenture Ltd in the event a new chief executive officer is appointed within the first four years after the offering;
|
|
|
vote on new partner admissions;
|
|
|
approve the partners income plan as described below; and
|
|
|
hold a non-binding vote with respect to any decision to eliminate or materially change the current practice of allocating
partner compensation on a relative, or unit, basis.
|
Under the terms of the partner matters agreement, a partners income committee, consisting of the chief executive
officer and partners he or she appoints, reviews evaluations and recommendations concerning the performance of partners and determines relative levels of income participation, or unit allocation. Based on its review, the committee will prepare a
partners income plan, which then must be submitted to the partners in a partner matters vote. If the plan is approved by a 66 2
/3% partner matters vote, it is (1)
subject to the impact on overall unit allocation of determinations by the board of directors or the compensation committee of the board of directors of the unit allocation for the executive officers, binding with respect to the income participation
or unit allocation of all partners other than the principal executive officers of Accenture Ltd (including the chief executive officer), unless otherwise determined by the board of directors and (2) submitted to the compensation committee of the
board of directors as a recommendation with respect to the income participation or unit allocation of the chief executive officer and the other principal executive officers of Accenture Ltd. See Certain Relationships and Related
TransactionsPartner Matters Agreement.
In addition, immediately following the offering, Accenture Ltd will own shares representing a 58% voting interest in
Accenture SCA and certain of our partners will own shares representing a 42% voting interest in Accenture SCA. Accenture SCA is organized under Luxembourg law, and a 66
2
/3% shareholder vote is required to
amend the articles of association of Accenture SCA, liquidate Accenture SCA, sell all or substantially all of the assets of Accenture SCA and to authorize the general partner to increase the issued share capital of Accenture SCA. Luxembourg law
requires a unanimous shareholder vote for a migration of Accenture SCA to a different jurisdiction and for the levying of an assessment on the Accenture SCA shares. Accordingly, there is the possibility that our partners holding an equity interest
in Accenture SCA could block Accenture Ltd from causing Accenture SCA to take any of these actions. See Accenture Organizational Structure for a discussion of our organizational structure.
|
Our share price may decline due to the large number of Class A common shares eligible for future
sale.
|
Sales of substantial amounts of Accenture Ltd Class A common shares, or the perception of these sales, may adversely
affect the price of the Class A common shares and impede our ability to raise capital through the issuance of equity securities in the future. The number of Class A common shares available for sale in the public market at any time is limited by
United States federal securities laws and by contractual restrictions on transfer. Our partners have agreed with us to comply with the 180-day lock-up between us and the underwriters. We have agreed not to waive this lock-up with our partners prior
to the expiration of the 180 days without the consent of Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated. In addition, our partners equity interests are subject to contractual transfer restrictions that generally restrict
sales for one year and then permit sales in increasing amounts over the subsequent seven years. Although these transfer restrictions may be waived generally by us and our partners (for example, if Accenture Ltd would permit its partners to
participate as selling shareholders in an underwritten public offering) and in particular cases by committees of our partners, we have not agreed to any waiver of these restrictions and do not expect to these restrictions will be waived except in
limited circumstances. For a discussion of the terms of the transfer restrictions, see Certain Relationships and Related TransactionsVoting Agreement and Accenture SCA Transfer Rights Agreement.
Upon consummation of the offering, there will be 394,981,896 Class A common shares outstanding, or 412,231,896 Class A
common shares if the underwriters exercise their overallotment option in full. Of these Class A common shares, 115,000,000 Class A common shares sold in the offering, or 132,250,000 Class A common shares if the underwriters exercise their
overallotment option in full, will be freely transferable without restriction or further registration under the Securities Act of 1933. The remaining 279,981,896 Class A common shares generally will be available for future sale upon the expiration
or waiver of transfer restrictions or, in the case of restricted share units, following delivery of the underlying
Class A common shares. Our partners will also hold 595,462,804 Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares that may be redeemed or exchanged on a one-for-one basis for Accenture Ltd Class A common shares. We
expect that these Class A common shares, subject to the expiration or waiver of transfer restrictions, generally will be available for future sale. In addition, options to purchase 99,295,000 Class A common shares will generally become exercisable
over the four or five years following consummation of the offering. We expect that these underlying Class A common shares will be freely transferable without further restriction.
As reflected in the table below, on each of the first eight anniversaries of the consummation of the offering, Class A
common shares held by our partners will become available for sale in significant numbers and Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares held by our partners will become redeemable or exchangeable for freely
transferable Class A common shares in significant numbers. Our partners may be more likely to sell all or a portion of their Class A common shares to provide liquidity in response to the reduction in partner compensation in connection with our
transition to a corporate structure or to diversify their portfolios.
Anniversary
of
offering
|
|
Number of Class A
common shares
that become
available for sale
by our
partners(1)
|
|
Percentage of Class A
common shares
outstanding immediately
following the offering that
become available for sale
by our partners(1)
|
1 |
|
80,772,004 |
|
8% |
2 |
|
121,158,007 |
|
12% |
3 |
|
80,772,004 |
|
8% |
4 |
|
80,772,004 |
|
8% |
5 |
|
80,772,004 |
|
8% |
6 |
|
80,772,004 |
|
8% |
7 |
|
80,772,004 |
|
8% |
8 or later |
|
201,930,012 |
|
20% |
(1)
|
Assumes our partners holdings of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares
are redeemed or exchanged on a one-for-one basis. Also assumes that all partners remain our employees until the eighth anniversary of the offering.
|
See Shares Eligible for Future Sale for a discussion of the Class A common shares that may be sold in the
public market in the future.
|
There has been no prior market for the Class A common shares, and they may trade at prices below the initial public
offering price.
|
The price of the Class A common shares after the offering may fluctuate widely, depending upon many factors, including
our perceived prospects and those of the consulting and technology industries in general, differences between our actual financial and operating results and those expected by investors and analysts, changes in analysts recommendations or
projections, changes in general economic or market conditions and broad market fluctuations.
|
You will experience immediate and substantial dilution in the book value of your Class A common
shares.
|
The initial public offering price of the Class A common shares will be substantially higher than the pro forma net
tangible book value per share of our Class A common shares. Pro forma net tangible book value represents the amount of our tangible assets on a pro forma basis, less our pro forma total liabilities. As a result, we currently expect that you will
incur immediate dilution of $13.75 per share based upon an assumed initial public offering price of $14.00 per share. For more information, see Dilution.
|
We may need additional capital in the future, which may not be available to us. The raising of additional capital may
dilute your ownership in us.
|
We may need to raise additional funds through public or private debt or equity financings in order to:
|
|
take advantage of opportunities, including more rapid expansion;
|
|
|
acquire complementary businesses or technologies;
|
|
|
develop new services and products; or
|
|
|
respond to competitive pressures.
|
Any additional capital raised through the sale of equity may dilute your ownership percentage in us. Furthermore, any
additional financing we may need may not be available on terms favorable to us, or at all.
|
We are registered in Bermuda, and a significant portion of our assets are located outside the United States. As a
result, it may not be possible for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States.
|
We are organized under the laws of Bermuda, and a significant portion of our assets are located outside the United
States. It may not be possible to enforce court judgments obtained in the United States against us in Bermuda or in countries, other than the United States, where we have assets based on the civil liability provisions of the federal or state
securities laws of the United States. In addition, there is some doubt as to whether the courts of Bermuda and other countries would recognize or enforce judgments of United States courts obtained against us or our directors or officers based on the
civil liabilities provisions of the federal or state securities laws of the United States or would hear actions against us or those persons based on those laws. We have been advised by our legal advisors in Bermuda that the United States and Bermuda
do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States
based on civil liability, whether or not based solely on United States federal or state securities laws, would not automatically be enforceable in Bermuda. Similarly, those judgments may not be enforceable in countries, other than the United States,
where we have assets.
|
Bermuda law differs from the laws in effect in the United States and may afford less protection to
shareholders.
|
Our shareholders may have more difficulty protecting their interests than would shareholders of a corporation
incorporated in a jurisdiction of the United States. As a Bermuda company, we are governed by the Companies Act 1981 of Bermuda. The Companies Act differs in some material respects from laws generally applicable to United States corporations and
shareholders, including the provisions relating to interested directors, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. See Description of Share Capital.
Under Bermuda law, the duties of directors and officers of a company are generally owed to the company only.
Shareholders of Bermuda companies do not generally have rights to take action against directors or officers of the company, and may only do so in limited circumstances. Officers of a Bermuda company must, in exercising their powers and performing
their duties, act honestly and in good faith with a view to the best interests of the company and must exercise the care and skill that a reasonably prudent person would exercise in comparable circumstances. Directors have a duty not to put
themselves in a position in which their duties to the company and their personal interests may conflict and also are under a duty to disclose any personal interest in any contract or arrangement with the company or any of its subsidiaries. If a
director or officer of a Bermuda company is found to have breached his duties to that company, he may be held personally liable to the company in respect of that breach of duty. A director may be liable jointly and severally with other directors if
it is shown that the director knowingly engaged in fraud or dishonesty. In cases not involving fraud or dishonesty, the liability of the director will be determined by the Bermuda courts on the basis of their estimation of the percentage of
responsibility of the director for the matter in question, in light of the nature of the conduct of the director and the extent of the causal relationship between his conduct and the loss suffered.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements relating to our operations that are based on our current
expectations, estimates and projections. Words such as expects, intends, plans, projects, believes, estimates and similar expressions are used to identify these forward-looking
statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be
accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. The reasons for this include changes in general economic and political conditions, including fluctuations in exchange
rates, and the factors discussed under the section entitled Risk Factors.
ACCENTURE ORGANIZATIONAL STRUCTURE
Accenture Ltd is a Bermuda holding company with no material assets other than Class I and Class II common shares in our
subsidiary, Accenture SCA, a Luxembourg partnership limited by shares. Accenture Ltds only business is to hold these shares and to act as the sole general partner of Accenture SCA. As the general partner of Accenture SCA and as a result of
Accenture Ltds majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCAs management and operations and will consolidate Accenture SCAs results in its financial statements. We operate our business through
subsidiaries of Accenture SCA. Accenture SCA will reimburse Accenture Ltd for its expenses but will not pay Accenture Ltd any fees.
Prior to our transition to a corporate structure, we operated as a series of related partnerships and corporations under
the control of our partners. In connection with our transition to a corporate structure, our partners have generally exchanged all of their interests in these partnerships and corporations for Accenture Ltd Class A common shares or, in the case of
partners resident in specified countries, Accenture SCA Class I common shares or exchangeable shares issued by Accenture Canada Holdings Inc., an indirect subsidiary of Accenture SCA. Generally, partners who received Accenture SCA Class I common
shares or Accenture Canada Holdings exchangeable shares also received a corresponding number of Accenture Ltd Class X common shares which entitle their holders to vote at Accenture Ltd shareholders meetings but do not carry any economic
rights.
Our transition to a corporate structure has been accounted for as a reorganization at carryover basis as there are no
changes in the rights, obligations or economic interests of our partners upon the exchange of their interests for shares in Accenture Ltd, Accenture SCA or Accenture Canada Holdings except for those applied consistently among our partners or those
resulting from our transition from a series of related partnerships and corporations to a corporate structure. The Accenture SCA Class I common shares and the Accenture Canada Holdings exchangeable shares held by our partners will be treated as a
minority interest in the consolidated financial statements of Accenture Ltd. However, the future exchange and/or redemption of Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares will be accounted for at carryover
basis.
None of our partners will be selling shares in the offering, and, immediately following the offering, our partners will
own approximately 82% of the equity in our business, or 80% if the underwriters exercise their overallotment option in full. We will continue to be controlled by our partners following the offering. Upon completion of the offering, our partners will
own or control shares representing, in the aggregate, approximately 82% of the voting interest in Accenture Ltd, or approximately 80% if the underwriters exercise their overallotment option in full. Immediately following the offering, our public
shareholders (including our non-partner employees) will own approximately 18% of the equity in our business, or approximately 20% if the underwriters exercise their overallotment option in full, and will own shares representing approximately 18% of
the voting interest in Accenture Ltd, or approximately 20% if the underwriters exercise their overallotment option in full.
Evercore Partners Inc. has acted as our financial advisor in our review of capitalization strategies and
options.
Our organizational structure immediately following the offering will be as shown in the diagram below. The diagram does
not display the subsidiaries of Accenture SCA and does not reflect exercise of the underwriters overallotment option.
(1)
|
Includes non-partner employees.
|
(2)
|
Generally consists of our partners in countries other than Australia, Canada, Denmark, France, Italy, New Zealand, Norway,
Spain, Sweden and the United States.
|
(3)
|
Generally consists of our partners in Australia, Canada, Denmark, France, Italy, New Zealand, Norway, Spain, Sweden and the
United States. Our partners in Canada and New Zealand do not hold Accenture Ltd Class A common shares or Accenture SCA Class I common shares but instead hold Accenture Canada Holdings exchangeable shares. Each of these exchangeable shares is
exchangeable at the option of the holder for an Accenture Ltd Class A common share on a one-for-one basis and entitles its holder to receive distributions equal to any distributions to which an Accenture Ltd Class A common share entitles its
holder.
|
We intend to make all distributions to all of our equity holders pro rata based on economic ownership. Based on the
shares outstanding immediately after the offering and assuming no exercise of the underwriters overallotment option, our public shareholders would receive approximately 18% of any distribution.
Each Class A common share and each Class X common share of Accenture Ltd entitles its holder to one vote on all matters
submitted to a vote of shareholders of Accenture Ltd. The holder of a Class X common share is not, however, entitled to receive dividends or to receive payments upon a liquidation of Accenture Ltd.
Each Class I common share and each Class II common share of Accenture SCA entitles its holder to one vote on all matters
submitted to a vote of shareholders of Accenture SCA. Each Accenture SCA Class II common share entitles Accenture Ltd to receive a dividend or liquidation payment equal to 10% of any dividend or liquidation payment to which an Accenture SCA Class I
common share entitles its holder. Accenture Ltd holds all of the Class II common shares of Accenture SCA.
In the opinion of our counsel, under Accenture SCAs articles of association, shares in Accenture SCA held by
Accenture Ltd are actions de commandité, or general partnership interests, and shares in Accenture SCA held by our partners are actions de commanditaires, or limited partnership interests. Accenture Ltd, as general partner of
Accenture SCA, has unlimited liability for the liabilities of Accenture SCA.
Subject to contractual transfer restrictions, Accenture SCA is obligated, at the option of the holder, to redeem any
outstanding Accenture SCA Class I common share at any time at a redemption price per share generally equal to the market price of an Accenture Ltd Class A common share at the time of the redemption. Accenture SCA may, at its option, pay this
redemption price with cash or by delivering Accenture Ltd Class A common shares on a one-for-one basis. In addition, each of our partners in the United States, Australia and Norway has agreed that we may cause that partner to exchange that
partners Accenture SCA Class I common shares for Accenture Ltd Class A common shares on a one-for-one basis if Accenture Ltd holds more than 40% of the issued share capital of Accenture SCA and we receive a satisfactory opinion from counsel or
a professional tax advisor that such exchange should be without tax cost to that partner. This one-for-one redemption price and exchange ratio will be adjusted if Accenture Ltd holds more than a de minimis amount of assets (other than its
interest in Accenture SCA and assets it holds only transiently prior to contributing them to Accenture SCA) or incurs more than a de minimis amount of liabilities (other than liabilities for which Accenture SCA has a corresponding liability
to Accenture Ltd). Accenture Ltd does not intend to hold any material assets other than its interest in Accenture SCA or to incur any material liabilities such that this one-for-one redemption price and exchange ratio would require adjustment. In
order to maintain Accenture Ltds economic interest in Accenture SCA, Accenture SCA will issue common shares to Accenture Ltd each time additional Accenture Ltd Class A common shares are issued.
Holders of Accenture Canada Holdings exchangeable shares may exchange their shares for Accenture Ltd Class A common
shares at any time on a one-for-one basis. Accenture Canada Holdings may, at its option, satisfy this exchange with cash at a price per share generally equal to the market price of an Accenture Ltd Class A common share at the time of the exchange.
Each exchangeable share of Accenture Canada Holdings entitles its holder to receive distributions equal to any distributions to which an Accenture Ltd Class A common share entitles its holder.
Accenture Ltd may, at its option, redeem any Class X common share for a redemption price equal to the par value of the
Class X common share, or $0.0000225 per share. Accenture Ltd may not, however, redeem any Class X common share of a holder if such redemption would reduce the number of Class X common shares held by that holder to a number that is less than the
number of Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares held by that holder, as the case may be. Accenture Ltd will redeem Accenture Ltd Class X common shares upon redemption or exchange of Accenture SCA Class
I common shares and Accenture Canada Holdings exchangeable shares so that the aggregate number of Class X common shares outstanding at any time does not exceed the aggregate number of Accenture SCA Class I common shares and Accenture Canada Holdings
exchangeable shares outstanding.
You should read Risk FactorsRisks That Relate to Your Ownership of Our Class A Common SharesWe will
continue to be controlled by our partners, whose interests may differ from those of our other shareholders, Certain Relationships and Related Transactions and Description of Share Capital for additional information
about our corporate structure and the risks posed by the structure.
We estimate that the net proceeds to Accenture Ltd from the offering, at an assumed public offering price of $14.00 per
Class A common share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $1,516 million, or $1,746 million if the underwriters exercise their overallotment option
in full.
Accenture Ltd intends to use the net proceeds from the offering to subscribe for Accenture SCA Class I common
shares.
Accenture SCA intends to use the proceeds it receives from the issuance of its Class I common shares as
follows:
|
|
approximately $839 million for costs and expenses incurred in connection with our transition to a corporate
structure;
|
|
|
approximately $338 million to repay amounts outstanding under our revolving credit facilities; and
|
|
|
the balance for working capital, which previously was funded by our partners, and for general corporate purposes.
|
The costs we anticipate incurring in connection with our transition to a corporate structure include indirect taxes,
such as capital and stamp duty imposed on transfers of assets among our subsidiaries; income taxes imposed on transfers of assets and liabilities among our subsidiaries; and income taxes relating to mandatory changes in tax accounting
methods.
We expect that loans under our revolving credit facilities will be provided at the prime rate, or at the London
interbank offered rate plus a spread which will vary according to a pricing grid, and that these facilities will be subject to annual commitment fees. Please see Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources for a description of the terms of these facilities.
Pending specific application of the net proceeds, we intend to invest them in short-term marketable
securities.
We currently do not anticipate that Accenture Ltd or Accenture SCA will pay dividends.
We may from time to time enter into financing agreements that contain financial covenants and restrictions, some of
which may limit the ability of Accenture Ltd and Accenture SCA to pay dividends. See Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources.
Future dividends on the Class A common shares of Accenture Ltd, if any, will be at the discretion of its board of
directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
The following table sets forth our consolidated capitalization as of May 31, 2001:
|
|
on a historical consolidated basis; and
|
|
|
on a pro forma consolidated basis adjusted to reflect our sale in the offering of 115,000,000 Class A common shares at an
assumed public offering price of $14.00 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
This table should be read in conjunction with our historical financial statements and related notes, Pro Forma
Financial Information and Managements Discussion and Analysis of Financial Condition and Results of Operations, appearing elsewhere in this prospectus.
|
|
As of May 31, 2001
|
|
|
(Unaudited) |
|
|
Historical
|
|
Pro forma
as adjusted
|
|
|
(in millions) |
Cash and cash equivalents |
|
$ 724 |
|
|
$ 1,816 |
|
|
|
|
|
|
|
|
Short-term bank borrowings |
|
$ 528 |
|
|
$ 190 |
|
Current portion of long-term debt |
|
3 |
|
|
3 |
|
Long-term debt |
|
31 |
|
|
31 |
|
Minority interests |
|
|
|
|
175 |
|
Shareholders equity (deficit): |
|
|
|
|
|
|
Preferred shares: 2,000,000,000 shares authorized, 0 shares issued and
outstanding, 0 shares issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
Class A common shares, par value $0.0000225 per share, 20,000,000,000
shares authorized, 212,335,319 shares issued and outstanding,
327,257,239 shares issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
Class X common shares, par value $0.0000225 per share, 1,000,000,000
shares authorized, 591,161,472 shares issued and outstanding,
591,161,472 shares issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
Restricted share units (related to Class A common shares), 0 units
issued and outstanding, 74,419,748 units issued and outstanding
pro forma as adjusted |
|
|
|
|
1,042 |
|
Additional paid-in capital |
|
|
|
|
1,341 |
|
Retained earnings (deficit) |
|
(1,178 |
) |
|
(2,095 |
) |
Deferred compensation |
|
|
|
|
(94 |
) |
Accumulated other comprehensive income (loss) |
|
(77 |
) |
|
(77 |
) |
|
|
|
|
|
|
|
Total shareholders equity (deficit) |
|
(1,255 |
) |
|
117 |
|
|
|
|
|
|
|
|
Total
capitalization |
|
$ (693 |
) |
|
$ 516 |
|
|
|
|
|
|
|
|
As of May 31, 2001, our net tangible book value was $(1,275 million), or approximately $(4.55) per Accenture Ltd Class A
common share. Net tangible book value per Accenture Ltd Class A common share represents total consolidated tangible assets less total consolidated liabilities, divided by the aggregate number of Class A common shares outstanding, assuming the
redemption or exchange of all our partners holdings of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares for newly issued Class A common shares on a one-for-one basis. Class A common shares outstanding does
not include 6,695,091 shares underlying restricted share units that are not fully vested or scheduled to fully vest prior to the end of the current fiscal year or 99,295,000 shares issuable pursuant to options. After giving effect to our sale of
115,000,000 Class A common shares in the offering, at an assumed initial public offering price of $14.00 per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our net tangible book value as of May 31, 2001 would have been approximately $97 million, or $0.25 per share. This represents an immediate increase in net tangible book value to existing
shareholders of $4.80 per share and an immediate dilution to new investors of $13.75 per share.
The following table illustrates this per share dilution:
Assumed initial public offering price per Class A common share |
|
|
|
|
$14.00 |
Net tangible book value per share as of May 31, 2001 |
|
$(4.55 |
) |
Increase in net tangible book value per share attributable to new investors |
|
4.80 |
|
|
|
|
|
|
|
|
|
Net tangible book value per share after giving effect to the offering (1) |
|
|
|
|
0.25 |
|
|
|
|
|
|
Dilution in net tangible book value per share to new investors (2) |
|
|
|
|
$13.75 |
|
|
|
|
|
|
(1)
|
Intangible assets as of May 31, 2001 were $20 million, relating to intangible assets acquired in connection with the
separation from Andersen Worldwide and Arthur Andersen, or $0.05 per share after giving effect to the adjustments for the offering described under Pro Forma Financial Information.
|
(2)
|
Dilution is determined by subtracting net tangible book value per share after giving effect to the offering from the initial
public offering price per share paid by a new investor.
|
If the underwriters overallotment option is exercised in full, the net tangible book value per share after giving
effect to the offering would be $0.79 per share and the dilution in net tangible book value per share to new investors would be $13.21 per share.
PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated balance sheet as of May 31, 2001 and pro forma combined income statements for the
nine months ended May 31, 2001 and for the year ended August 31, 2000 are based on our historical financial statements included elsewhere in this prospectus.
The pro forma income statements and balance sheet give effect to the following as if they occurred on September 1, 1999
in the case of the pro forma income statements and on May 31, 2001 in the case of the pro forma balance sheet:
|
|
the transactions related to our transition to a corporate structure described under Certain Relationships and Related
TransactionsReorganization and Related Transactions;
|
|
|
compensation payments to employees who were partners prior to our transition to a corporate structure; and
|
|
|
provision for corporate income taxes.
|
The pro forma as adjusted income statements and balance sheet also give effect to the offering as if it occurred on
September 1, 1999 in the case of the pro forma income statements and on May 31, 2001 in the case of the pro forma balance sheet.
The pro forma and pro forma as adjusted combined income statements for the year ended August 31, 2000 and the nine
months ended May 31, 2001 do not give effect to one-time events directly attributable to the offering, because of their nonrecurring nature. These one-time events include:
|
|
net compensation cost of approximately $967 million resulting from the grant of restricted share units in connection with the
offering; and
|
|
|
recognition of a charitable contribution of $16 million.
|
In addition, the pro forma and pro forma as adjusted combined income statement for the year ended August 31, 2000 does
not give effect to one-time events directly attributable to our transition to a corporate structure and related transactions, because of their nonrecurring nature. These one-time events, which are included in the historical combined income statement
for the nine months ended May 31, 2001 and excluded from the pro forma and pro forma as adjusted combined income statement for such period, include:
|
|
approximately $839 million, including current taxes payable of $61 million and deferred tax liabilities of $333 million, for
costs associated with our transition to a corporate structure; and
|
|
|
recognition of deferred tax assets, net of approximately $172 million.
|
The pro forma and pro forma as adjusted combined income statement for the nine months ended May 31, 2001 excludes the
effect of a cumulative change in accounting principle to implement Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.
The pro forma adjustments and the adjustments for the offering are based upon available information and assumptions that
management believes are reasonable.
This information and the accompanying notes should be read in conjunction with our historical financial statements
and the related notes included elsewhere in this prospectus. The information presented is not necessarily indicative of the results of operations or financial position that might have occurred had the events described above actually taken place as
of the dates specified or that may be expected to occur in the future.
PRO FORMA COMBINED INCOME STATEMENT
(unaudited)
|
|
For the nine months ended May 31, 2001
|
|
|
Historical
|
|
Pro forma
adjustments
|
|
Pro forma
|
|
Adjustments
for the
offering
|
|
Pro forma as
adjusted
|
|
|
(in millions, except share and per share data) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues before reimbursements |
|
$ 8,666 |
|
|
$ |
|
|
$ 8,666 |
|
|
$ |
|
|
$ 8,666 |
|
Reimbursements |
|
1,475 |
|
|
|
|
|
1,475 |
|
|
|
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
10,141 |
|
|
|
|
|
10,141 |
|
|
|
|
|
10,141 |
|
Operating expenses:* |
Cost of services:* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services before reimbursable expenses* |
|
4,509 |
|
|
725 |
(a) |
|
5,234 |
|
|
9 |
(g) |
|
5,243 |
|
Reimbursable expenses |
|
1,475 |
|
|
|
|
|
1,475 |
|
|
|
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services* |
|
5,984 |
|
|
725 |
|
|
6,709 |
|
|
9 |
|
|
6,718 |
|
Sales and marketing* |
|
771 |
|
|
290 |
(a) |
|
1,061 |
|
|
4 |
(g) |
|
1,065 |
|
General and administrative costs* |
|
1,131 |
|
|
44 |
(a) |
|
1,175 |
|
|
1 |
(g) |
|
1,176 |
|
Reorganization and rebranding costs* |
|
777 |
|
|
(445 |
)(b) |
|
332 |
|
|
|
|
|
332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses* |
|
8,663 |
|
|
614 |
|
|
9,277 |
|
|
14 |
|
|
9,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income* |
|
1,478 |
|
|
(614 |
) |
|
864 |
|
|
(14 |
) |
|
850 |
|
Gain on investments, net |
|
180 |
|
|
|
|
|
180 |
|
|
|
|
|
180 |
|
Interest income |
|
59 |
|
|
|
|
|
59 |
|
|
|
|
|
59 |
|
Interest expense |
|
(26 |
) |
|
(15 |
)(c) |
|
(59 |
) |
|
18 |
(h) |
|
(41 |
) |
|
|
|
|
|
(18 |
)(d) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
21 |
|
|
|
|
|
21 |
|
|
|
|
|
21 |
|
Equity in losses of affiliates |
|
(53 |
) |
|
|
|
|
(53 |
) |
|
|
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes* |
|
1,659 |
|
|
(647 |
) |
|
1,012 |
|
|
4 |
|
|
1,016 |
|
Provision for taxes (1) |
|
420 |
|
|
207 |
(e) |
|
405 |
|
|
1 |
(e) |
|
406 |
|
|
|
|
|
|
(222 |
)(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and cumulative change in
accounting* |
|
1,239 |
|
|
(632 |
) |
|
607 |
|
|
3 |
|
|
610 |
|
Minority interest |
|
|
|
|
449 |
(f) |
|
449 |
|
|
(83 |
)(f) |
|
366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income before partner distributions and cumulative
change in accounting* (2) |
|
$ 1,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative change in accounting |
|
|
|
|
$(1,081 |
) |
|
$ 158 |
|
|
$ 86 |
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
Income before cumulative change in accounting applicable
to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
396,320,914 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
992,285,850 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Historical information excludes payments for partner distributions.
|
(1)
|
Provision for taxes is not the same as income taxes of a corporation. For the historical periods, we operated through
partnerships in many countries. Therefore, we generally were not subject to income taxes in those countries. Taxes related to income earned by our partnerships were the responsibility of the individual partners. In other countries, we operated
through corporations, and in these circumstances we were subject to income taxes.
|
(2)
|
Partnership income before partner distributions is not comparable to net income of a corporation similarly determined.
Partnership income in historical periods is not executive compensation in the customary sense because partnership income is comprised of distributions of current earnings. Accordingly, compensation and benefits for services rendered by partners have
not been reflected as an expense in our historical financial statements.
|
PRO FORMA COMBINED INCOME STATEMENT
(unaudited)
|
|
For the year ended August 31, 2000
|
|
|
Historical
|
|
Pro forma
adjustments
|
|
Pro forma
|
|
Adjustments
for the
offering
|
|
Pro forma
as adjusted
|
|
|
(in millions, except share and per share data) |
Revenues: |
|
|
Revenues before reimbursements |
|
$ 9,752 |
|
|
$ |
|
|
$ 9,752 |
|
|
$ |
|
|
$ 9,752 |
|
Reimbursements |
|
1,788 |
|
|
|
|
|
1,788 |
|
|
|
|
|
1,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
11,540 |
|
|
|
|
|
11,540 |
|
|
|
|
|
11,540 |
|
Operating expenses:* |
Cost of services:* |
|
|
|
Cost of services before reimbursable expenses* |
|
5,486 |
|
|
641 |
(a) |
|
6,127 |
|
|
11 |
(g) |
|
6,138 |
|
Reimbursable expenses |
|
1,788 |
|
|
|
|
|
1,788 |
|
|
|
|
|
1,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services* |
|
7,274 |
|
|
641 |
|
|
7,915 |
|
|
11 |
|
|
7,926 |
|
Sales and marketing* |
|
883 |
|
|
304 |
(a) |
|
1,187 |
|
|
5 |
(g) |
|
1,192 |
|
General and administrative costs* |
|
1,297 |
|
|
141 |
(a) |
|
1,438 |
|
|
3 |
(g) |
|
1,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses* |
|
9,454 |
|
|
1,086 |
|
|
10,540 |
|
|
19 |
|
|
10,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income* |
|
2,086 |
|
|
(1,086 |
) |
|
1,000 |
|
|
(19 |
) |
|
981 |
|
Gain on investments, net |
|
573 |
|
|
|
|
|
573 |
|
|
|
|
|
573 |
|
Interest income |
|
67 |
|
|
|
|
|
67 |
|
|
|
|
|
67 |
|
Interest expense |
|
(24 |
) |
|
(11 |
)(c) |
|
(60 |
) |
|
25 |
(h) |
|
(35 |
) |
|
|
|
|
|
(25 |
)(d) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
51 |
|
|
|
|
|
51 |
|
|
|
|
|
51 |
|
Equity in losses of affiliates |
|
(46 |
) |
|
|
|
|
(46 |
) |
|
|
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
2,707 |
|
|
(1,122 |
) |
|
1,585 |
|
|
6 |
|
|
1,591 |
|
Provision for taxes (1) |
|
243 |
|
|
391 |
(e) |
|
634 |
|
|
2 |
(e) |
|
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest* |
|
2,464 |
|
|
(1,513 |
) |
|
951 |
|
|
4 |
|
|
955 |
|
Minority interest |
|
|
|
|
704 |
(f) |
|
704 |
|
|
(131 |
)(f) |
|
573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income before partner distributions* (2) |
|
$ 2,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
$(2,217 |
) |
|
$ 247 |
|
|
$ 135 |
|
|
$ 382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
394,981,896 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
991,114,209 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Historical information excludes payments for partner distributions.
|
(1)
|
Provision for taxes is not the same as income taxes of a corporation. For the historical periods, we operated through
partnerships in many countries. Therefore, we generally were not subject to income taxes in those countries. Taxes related to income earned by our partnerships were the responsibility of the individual partners. In other countries, we operated
through corporations, and in these circumstances we were subject to income taxes.
|
(2)
|
Partnership income before partner distributions is not comparable to net income of a corporation similarly determined.
Partnership income in historical periods is not executive compensation in the customary sense because partnership income is comprised of distributions of current earnings. Accordingly, compensation and benefits for services rendered by partners have
not been reflected as an expense in our historical financial statements.
|
PRO FORMA CONSOLIDATED BALANCE SHEET
May 31, 2001
(unaudited)
|
|
Historical
|
|
Pro forma
adjustments
|
|
Pro forma
|
|
Adjustments
for the offering
|
|
Pro forma as
adjusted
|
|
|
(in millions) |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ 724 |
|
|
$ |
|
$ 724 |
|
|
$1,516 |
(j) |
|
$1,816 |
|
|
|
|
|
|
|
|
|
|
|
(16 |
)(k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(70 |
)(l) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(338 |
)(m) |
|
|
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from clients |
|
1,588 |
|
|
|
|
1,588 |
|
|
|
|
|
1,588 |
|
Unbilled services |
|
808 |
|
|
|
|
808 |
|
|
|
|
|
808 |
|
Due from related parties |
|
3 |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
Deferred tax assets |
|
126 |
|
|
|
|
126 |
|
|
(14 |
)(l) |
|
112 |
|
Other current assets |
|
227 |
|
|
|
|
227 |
|
|
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
3,476 |
|
|
|
|
3,476 |
|
|
1,078 |
|
|
4,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets: |
Due from related parties |
|
31 |
|
|
|
|
31 |
|
|
|
|
|
31 |
|
Investments |
|
382 |
|
|
|
|
382 |
|
|
|
|
|
382 |
|
Property and equipment, net |
|
793 |
|
|
|
|
793 |
|
|
|
|
|
793 |
|
Deferred tax assets |
|
145 |
|
|
|
|
145 |
|
|
76 |
(g) |
|
200 |
|
|
|
|
|
|
|
|
|
|
|
(21 |
)(l) |
|
|
|
Other non-current assets |
|
102 |
|
|
|
|
102 |
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
1,453 |
|
|
|
|
1,453 |
|
|
55 |
|
|
1,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$4,929 |
|
|
$ |
|
$4,929 |
|
|
$1,133 |
|
|
$6,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term bank borrowings |
|
$ 528 |
|
|
$ |
|
$ 528 |
|
|
$ (338 |
)(m) |
|
$ 190 |
|
Current portion of long-term debt |
|
3 |
|
|
|
|
3 |
|
|
|
|
|
3 |
|
Accounts payable |
|
158 |
|
|
|
|
158 |
|
|
|
|
|
158 |
|
Due to related parties |
|
1,364 |
|
|
|
|
1,364 |
|
|
|
|
|
1,364 |
|
Deferred revenues |
|
928 |
|
|
|
|
928 |
|
|
|
|
|
928 |
|
Accrued payroll and related benefits |
|
1,014 |
|
|
|
|
1,014 |
|
|
(35 |
)(l) |
|
998 |
|
|
|
|
|
|
|
|
|
|
|
19 |
(g) |
|
|
|
Taxes payable |
|
233 |
|
|
|
|
233 |
|
|
(6 |
)(k) |
|
227 |
|
Deferred tax liabilities |
|
310 |
|
|
|
|
310 |
|
|
|
|
|
310 |
|
Other accrued liabilities |
|
332 |
|
|
|
|
332 |
|
|
|
|
|
332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
4,870 |
|
|
|
|
4,870 |
|
|
(360 |
) |
|
4,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
31 |
|
|
|
|
31 |
|
|
|
|
|
31 |
|
Retirement benefits |
|
345 |
|
|
|
|
345 |
|
|
|
|
|
345 |
|
Deferred tax liabilities |
|
98 |
|
|
|
|
98 |
|
|
|
|
|
98 |
|
Other non-current liabilities |
|
840 |
|
|
|
|
840 |
|
|
(54 |
)(l) |
|
786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities |
|
1,314 |
|
|
|
|
1,314 |
|
|
(54 |
) |
|
1,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
|
|
|
|
|
|
|
175 |
(f) |
|
175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares: 2,000,000,000 shares authorized, 0 shares issued and
outstanding, 0 shares issued and outstanding pro forma, 0 shares issued
and outstanding pro forma as adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common shares, par value $0.0000225 per share, 20,000,000,000
shares authorized, 212,335,319 shares issued and outstanding,
212,257,239 shares issued and outstanding pro forma, 327,257,239
shares issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class X common shares, par value $0.0000225 per share, 1,000,000,000
shares authorized, 591,161,472 shares issued and outstanding,
591,161,472 shares issued and outstanding pro forma, 591,161,472
shares issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share units (related to Class A common shares), 0 units issued
and outstanding, 0 units issued and outstanding pro forma, 73,896,473
units issued and outstanding pro forma as adjusted |
|
|
|
|
|
|
|
|
|
948 |
(g) |
|
1,042 |
|
|
|
|
|
|
|
|
|
|
|
94 |
(g) |
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
1,516 |
(j) |
|
1,341 |
|
|
|
|
|
|
|
|
|
|
|
(175 |
)(f) |
|
|
|
Retained earnings (deficit) |
|
(1,178 |
) |
|
|
|
(1,178 |
) |
|
(10 |
)(k) |
|
(2,095 |
) |
|
|
|
|
|
|
|
|
|
|
(16 |
)(l) |
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
(g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(967 |
)(g) |
|
|
|
Deferred compensation |
|
|
|
|
|
|
|
|
|
(94 |
)(g) |
|
(94 |
) |
Accumulated other comprehensive income (loss) |
|
(77 |
) |
|
|
|
(77 |
) |
|
|
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (deficit) |
|
(1,255 |
) |
|
|
|
(1,255 |
) |
|
1,372 |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity (deficit) |
|
$4,929 |
|
|
$ |
|
$4,929 |
|
|
$1,133 |
|
|
$6,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO PRO FORMA FINANCIAL INFORMATION
(unaudited)
(in millions, except share and per share data)
Accenture Ltds only business will be to hold shares in and act as the sole general partner of Accenture SCA. As
the sole general partner of Accenture SCA and as a result of Accenture Ltds majority voting interest in Accenture SCA, Accenture Ltd will control Accenture SCAs management and operations and will, accordingly, consolidate Accenture
SCAs results in Accenture Ltds financial statements. Further, our transition to a corporate structure has been accounted for on a carryover basis.
(a)
|
Adjustments reflect compensation and benefit costs totaling $1,059 and $1,086 for the nine months ended May 31, 2001 and for
the year ended August 31, 2000, respectively, that we would have paid to our partners had we been in a corporate structure during the historical periods. Since we have operated in historical periods as a series of related partnerships and
corporations under the control of our partners, payments to our partners have generally been accounted for as distributions of partners income, rather than compensation expense. As a result, our net income and compensation and benefits expense
have not reflected any payments for services rendered by partners. As a corporation, we will include payments for services rendered by our partners in compensation and benefits expense. The new compensation plan adopted by us is comprised of a fixed
salary amount, benefits and performance-based bonuses. All elements of the new compensation plan, including bonus, have been reflected in these adjustments because our partners would have earned the bonus based on our results of operations for the
historical periods. Compensation cost in the pro forma income statement does not include the fair value of restricted share units to be granted at the time of the offering to some former U.S. employees, some former partners and substantially all
employees that vest upon grant or on August 31, 2001, discussed under note (g), because they are a one-time grant in connection with the offering.
|
|
Benefit costs are medical, dental and payroll taxes, all of which are based on estimated costs that would have been incurred
had these benefits been in place during the historical periods.
|
|
Compensation and benefit costs of partners have been allocated 69% and 59% to cost of services, 27% and 28% to sales and
marketing, and 4% and 13% to general and administrative costs for the nine months ended May 31, 2001 and for the year ended August 31, 2000, respectively, based upon an estimate of the time spent on each activity at the appropriate cost rates. The
percentage allocation in the nine months ended May 31, 2001 varies from the allocation in the year ended August 31, 2000 due to the admission of a significant number of new partners on September 1, 2000.
|
(b)
|
Reflects an adjustment to eliminate the effect of the transaction costs incurred in connection with our transition to a
corporate structure. $445 relates to indirect taxes, such as capital and stamp duty imposed on transfers of assets among group members. $222 relates to the revaluation of deferred tax liabilities upon change in tax status, including income taxes
relating to mandatory changes in tax accounting methods, from a partnership to a corporate structure. These amounts are excluded from the Pro Forma Combined Income Statement due to their nonrecurring nature.
|
(c)
|
Reflects an adjustment of $15 and $11 for the nine months ended May 31, 2001 and for the year ended August 31, 2000,
respectively, for the estimated interest expense on early-retirement benefits payable to partners.
|
(d)
|
Reflects an adjustment of $18 and $25 for the nine months ended May 31, 2001 and the year ended August 31, 2000,
respectively, for the estimated interest expense on borrowings of $338 at an incremental borrowing rate of 7.5% incurred to repay partners paid-in capital in connection with our transition to a corporate structure.
|
NOTES TO PRO FORMA FINANCIAL INFORMATION(Continued)
(unaudited)
(in millions, except share and per share data)
(e)
|
Reflects an adjustment for an estimated income tax provision as if we had operated in a corporate structure at a pro forma
tax rate of 40%. Pro forma as adjusted income taxes total $406 and $636 for the nine months ended May 31, 2001 and for the year ended August 31, 2000, respectively. As a series of related partnerships and corporations under the control of our
partners, we generally were not subject to income taxes. However, some of the corporations were subject to income taxes in their local jurisdictions.
|
(f)
|
Reflects an adjustment to record the 60% minority interest ownership of partners in Accenture SCA and Accenture Canada
Holdings. The minority interest percentage declined from 74% at May 31, 2001 to 60% due to shares issued and restricted share units granted on the date of the offering. However, the recorded minority interest in the historical consolidated balance
sheet at May 31, 2001 was $0 because of our shareholders deficit position. Also reflects the assumed issuance to Accenture Ltd of the 67,724,657 Accenture SCA Class I common shares that will be issued in connection with the delivery of the
67,724,657 Accenture Ltd Class A common shares underlying 67,724,657 restricted share units which generally are considered fully vested and will be issued for no consideration solely upon the passage of time for the purpose of the pro forma earnings
per share and minority interest calculation.
|
|
Accenture Ltd owns a 26% economic interest and a 52% voting interest in Accenture SCA prior to the offering. The remaining
economic interest and voting interest are owned by some of our partners. We operate our business through subsidiaries of Accenture SCA.
|
|
The transition of Accenture to a corporate structure was accounted for as a reorganization at carryover basis. Partners in
Accenture received shares of Accenture Ltd, Accenture SCA or Accenture Canada Holdings depending on their member firm. The shares of Accenture SCA and Accenture Canada Holdings held by partners will be treated as a minority interest in the
consolidated financial statements of Accenture Ltd. However, the future exchange and/or acquisition of Accenture SCA or Accenture Canada Holdings shares will be accounted for at carryover basis.
|
|
Upon receipt of the proceeds of the offering, Accenture Ltd will subscribe for shares in Accenture SCA, thereby increasing
its percentage of economic interest in Accenture SCA from 26% to 40%.
|
|
Since Accenture Ltd is the sole general partner of Accenture SCA and owns the majority of the voting shares, Accenture Ltd
consolidates Accenture SCA and its subsidiaries. Although the other shareholders of Accenture SCA hold more than 50% of the economic interest in Accenture SCA, they do not have voting control and therefore are considered to be a minority
interest.
|
(g)
|
Adjustment reflects the anticipated one-time grants of restricted share units to partners, former partners and employees.
Each restricted share unit awarded will represent an unfunded, unsecured right, which is nontransferable except in the event of death, of a participant to receive a Class A common share on the date specified in the participants award
agreement. We intend to grant restricted share units on a one-time basis on the date of the offering as follows:
|
|
|
35,000,000 to employees who are current holders of eUnits under the eUnit Bonus Plan described on pages F-15 and F-16 in
replacement of outstanding eUnits which are being cancelled as described in note (l) and to all employees in good standing.
|
NOTES TO PRO FORMA FINANCIAL INFORMATION(Continued)
(unaudited)
(in millions, except share and per share data)
|
|
15,042,077 to some of our former partners who retired or resigned prior to May 31, 2001, in respect of past
services.
|
|
|
16,357,175 to some of our employees that will be promoted to partner on September 1, 2001. These restricted share units will
vest on August 31, 2001.
|
|
|
8,020,496 to some of our recently admitted partners in respect of future services. These restricted share units will vest
over five years and will be expensed over the vesting period as services are rendered, except for 1,325,405 restricted share units which will be fully vested.
|
|
We recognize compensation expense for share-based compensation awards in accordance with Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees. Under the measurement principles of APB No. 25 and Financial Interpretation Number 44, Accounting for Certain Transactions Involving Stock Compensationan Interpretation of APB
25, we will recognize compensation expense of $967 (50,565,352 restricted share units that vest upon grant and 17,159,305 restricted share units that vest on August 31, 2001 at an assumed price of $14.00 per share plus $19 of payroll taxes) in
respect of the portion of restricted share units that are fully vested on the date of the grant and a deferred income tax benefit of $76. See ManagementEmployee Awards. This includes $19 of payroll tax incurred on the grant of the
restricted share units which has been recorded in current liabilities. In addition, we have recognized $14 and $19 for the nine months ended May 31, 2001 and for the year ended August 31, 2000, respectively, for the portion of restricted share units
that will vest over a five-year period. The compensation cost of these restricted share units that will vest over a five-year period have been allocated 69% and 59% to cost of services, 27% and 28% to sales and marketing, and 4% and 13% to general
and administrative costs for the nine months ended May 31, 2001 and for the year ended August 31, 2000, respectively. See note (a). The total cost of the restricted share units that vest over five years, $94 (6,695,091 restricted share units at an
assumed price of $14.00 per share), has been recorded in the pro forma as adjusted balance sheet as deferred compensation.
|
(h)
|
Reflects the elimination of the adjustment described in note (d) since the proceeds of the offering eliminate the need for
such borrowing.
|
(i)
|
For the purposes of the pro forma earnings per share calculation, the weighted average shares outstanding, basic and diluted,
were calculated based on:
|
|
|
Year ended
August 31, 2000
Pro forma as adjusted
|
|
Nine months ended
May 31, 2001
Pro forma as adjusted
|
Common share issuances
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
Accenture Ltd Class A common shares |
|
212,257,239 |
|
212,257,239 |
|
212,257,239 |
|
212,257,239 |
Accenture SCA Class I common shares |
|
|
|
587,302,062 |
|
|
|
587,302,062 |
Accenture Canada Holdings exchangeable shares |
|
|
|
8,160,742 |
|
|
|
8,160,742 |
Restricted share unitsvested |
|
67,724,657 |
|
68,394,166 |
|
69,063,675 |
|
69,565,807 |
New shares from offering |
|
115,000,000 |
|
115,000,000 |
|
115,000,000 |
|
115,000,000 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
394,981,896 |
|
991,114,209 |
|
396,320,914 |
|
992,285,850 |
|
|
|
|
|
|
|
|
|
NOTES TO PRO FORMA FINANCIAL INFORMATION(Continued)
(unaudited)
(in millions, except share and per share data)
|
Basic and diluted earnings per share are calculated as follows:
|
|
|
Pro forma as adjusted
|
Basic earnings per share
|
|
Year ended
August 31,
2000
|
|
Nine months
ended
May 31,
2001
|
Net income (loss) available to common shareholders |
|
$ 382 |
|
|
|
|
|
|
|
Income (loss) before cumulative change in accounting |
|
|
|
$ 244 |
|
|
|
|
|
Weighted average shares outstanding |
|
394,981,896 |
|
396,320,914 |
|
|
|
|
|
Basic earnings per share |
|
$ 0.97 |
|
$ 0.61 |
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted
|
Diluted earnings per share
|
|
Year ended
August 31,
2000
|
|
Nine months
ended
May 31,
2001
|
Net income (loss) available to common shareholders |
|
$ 382 |
|
|
Income (loss) before cumulative change in accounting |
|
|
|
$ 244 |
Adjustments: |
|
|
|
|
Minority interest |
|
573 |
|
366 |
|
|
|
|
|
Income before minority interest |
|
$ 955 |
|
|
|
|
|
|
|
Income before minority interest and cumulative change in accounting |
|
|
|
$ 610 |
|
|
|
|
|
Weighted average shares outstanding |
|
991,114,209 |
|
992,285,850 |
|
|
|
|
|
Diluted earnings per share |
|
$ 0.96 |
|
$ 0.61 |
|
|
|
|
|
(j)
|
Adjustment to record net proceeds from the sale of 115,000,000 Class A common shares in the offering, resulting in net
proceeds of $1,516.
|
(k)
|
Reflects the payment of $16 in cash to the Accenture Foundation, Inc., a New York not-for-profit corporation, or to
comparable entities in other jurisdictions.
|
(l)
|
In connection with the grant of restricted share units, discussed in note (g), we are terminating our deferred bonus plan
(the eUnit Bonus Plan) for employees. Adjustment reflects an extinguishment of a liability of $89, of which $70 will be paid out in cash, and elimination of the related current and long-term deferred income tax assets of $14 and $21,
respectively.
|
(m)
|
Adjustment to reflect $338 repayment of borrowings from proceeds of the offering.
|
The following selected financial data have been presented on a historical cost basis for all periods presented. The data
as of August 31, 1999 and 2000 and for the years ended August 31, 1998, 1999 and 2000 are derived from the audited historical financial statements and related notes which are included elsewhere in this prospectus. The data as of August 31, 1996,
1997 and 1998 and as of May 31, 2000 and for the years ended August 31, 1996 and 1997 are derived from unaudited historical financial statements and related notes which are not included in this prospectus. The data as of May 31, 2001 and for the
nine months ended May 31, 2000 and 2001 are derived from the historical unaudited financial statements and related notes which are included elsewhere in this prospectus. The selected financial data should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations, Pro Forma Financial Information and our historical financial statements and related notes included elsewhere in this
prospectus.
|
|
Year ended August 31,
|
|
Nine months
ended
May 31,
|
|
|
1996
|
|
1997
|
|
1998
|
|
1999
|
|
2000
|
|
2000
|
|
2001
|
|
|
(in millions) |
Income Statement Data: |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues before reimbursements |
|
$4,942 |
|
|
$6,275 |
|
|
$8,215 |
|
|
$ 9,550 |
|
|
$ 9,752 |
|
|
$7,245 |
|
|
$ 8,666 |
|
Reimbursements |
|
768 |
|
|
1,172 |
|
|
1,425 |
|
|
1,529 |
|
|
1,788 |
|
|
1,301 |
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
5,710 |
|
|
7,447 |
|
|
9,640 |
|
|
11,079 |
|
|
11,540 |
|
|
8,546 |
|
|
10,141 |
|
Operating expenses:* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services:* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services before reimbursable expenses* |
|
2,678 |
|
|
3,470 |
|
|
4,700 |
|
|
5,457 |
|
|
5,486 |
|
|
4,000 |
|
|
4,509 |
|
Reimbursable expenses |
|
768 |
|
|
1,172 |
|
|
1,425 |
|
|
1,529 |
|
|
1,788 |
|
|
1,301 |
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services* |
|
3,446 |
|
|
4,642 |
|
|
6,125 |
|
|
6,986 |
|
|
7,274 |
|
|
5,301 |
|
|
5,984 |
|
Sales and marketing* |
|
532 |
|
|
611 |
|
|
696 |
|
|
790 |
|
|
883 |
|
|
651 |
|
|
771 |
|
General and administrative costs* |
|
659 |
|
|
819 |
|
|
1,036 |
|
|
1,271 |
|
|
1,297 |
|
|
936 |
|
|
1,131 |
|
Reorganization and rebranding costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses* |
|
4,637 |
|
|
6,072 |
|
|
7,857 |
|
|
9,047 |
|
|
9,454 |
|
|
6,888 |
|
|
8,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income* |
|
1,073 |
|
|
1,375 |
|
|
1,783 |
|
|
2,032 |
|
|
2,086 |
|
|
1,658 |
|
|
1,478 |
|
Gain on investments, net |
|
|
|
|
|
|
|
|
|
|
92 |
|
|
573 |
|
|
534 |
|
|
180 |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
60 |
|
|
67 |
|
|
45 |
|
|
59 |
|
Interest expense |
|
(16 |
) |
|
(19 |
) |
|
(17 |
) |
|
(27 |
) |
|
(24 |
) |
|
(18 |
) |
|
(26 |
) |
Other income (expense) |
|
(4 |
) |
|
4 |
|
|
(6 |
) |
|
(5 |
) |
|
51 |
|
|
32 |
|
|
21 |
|
Equity in losses of affiliates |
|
|
|
|
|
|
|
(1 |
) |
|
(6 |
) |
|
(46 |
) |
|
(9 |
) |
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes* |
|
1,053 |
|
|
1,360 |
|
|
1,759 |
|
|
2,146 |
|
|
2,707 |
|
|
2,242 |
|
|
1,659 |
|
Provision for taxes (1) |
|
116 |
|
|
118 |
|
|
74 |
|
|
123 |
|
|
243 |
|
|
194 |
|
|
420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative change in accounting* |
|
937 |
|
|
1,242 |
|
|
1,685 |
|
|
2,023 |
|
|
2,464 |
|
|
2,048 |
|
|
1,239 |
|
Cumulative effect of change in accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income before partner distributions* (2) |
|
$ 937 |
|
|
$1,242 |
|
|
$1,685 |
|
|
$ 2,023 |
|
|
$ 2,464 |
|
|
$2,048 |
|
|
$ 1,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of August 31,
|
|
As of May 31,
|
|
|
1996
|
|
1997
|
|
1998
|
|
1999
|
|
2000
|
|
2000
|
|
2001
|
|
|
(in millions) |
Balance Sheet Data: |
Cash and cash equivalents |
|
$ 438 |
|
|
$ 325 |
|
|
$ 736 |
|
|
$ 1,111 |
|
|
$ 1,271 |
|
|
$1,297 |
|
|
$ 724 |
|
Working capital |
|
280 |
|
|
175 |
|
|
531 |
|
|
913 |
|
|
1,015 |
|
|
1,023 |
|
|
(1,394 |
) |
Total assets |
|
2,323 |
|
|
2,550 |
|
|
3,704 |
|
|
4,615 |
|
|
5,451 |
|
|
5,491 |
|
|
4,929 |
|
Long-term debt |
|
226 |
|
|
192 |
|
|
157 |
|
|
127 |
|
|
99 |
|
|
127 |
|
|
31 |
|
Total partners capital |
|
696 |
|
|
761 |
|
|
1,507 |
|
|
2,208 |
|
|
2,368 |
|
|
2,579 |
|
|
|
|
Shareholders equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,255 |
) |
*
|
Excludes payments for partner distributions.
|
(1)
|
Provision for taxes is not the same as income taxes of a corporation for historical periods. We operated through partnerships
in many countries. Therefore, we generally were not subject to income taxes in those countries. Taxes related to income earned by our partnerships were the responsibility of the individual partners. In other countries, we operated through
corporations, and in these circumstances we were subject to income taxes.
|
(2)
|
Partnership income before partner distributions is not comparable to net income of a corporation similarly determined.
Partnership income in historical periods is not executive compensation in the customary sense because partnership income is comprised of distributions of current earnings. Accordingly, compensation and benefits for services rendered by partners have
not been reflected as an expense in our historical financial statements.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our historical financial statements and
related notes included elsewhere in this prospectus as well as our pro forma financial information contained in the section entitled Pro Forma Financial Information.
All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a
reference to 2000 or fiscal 2000 means the 12-month period that ended on August 31, 2000. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
Overview
Accenture is the worlds leading provider of management and technology consulting services and solutions. We have
more than 75,000 employees in more than 110 offices in 46 countries delivering to our clients a wide range of consulting, technology and outsourcing services. Our leading position in the management and technology consulting services and solutions
markets results from the fact that we have more consulting professionals than any other consulting firm, with more than 57,000 professionals working within our global market units, complemented by more than 8,000 professionals dedicated full time to
our service lines. In addition, we have deep industry knowledge in 18 distinct industry groups and broad service offering expertise through our eight service lines. In total, we have more than 75,000 employees who provide global scale and reach
through more than 110 offices in 46 countries. Based on our knowledge of our businees and the business of our competitors, we believe that no other consulting firm provides as broad a range of management and technology consulting services and
solutions to as many industry groups in as many geographic markets as we do.
The results of our operations are affected by the level of economic activity and change in the industries we serve. Our
business is also driven, in part, by the pace of technological change and the type and level of technology spending by our clients. The ability to identify and capitalize on these technological and market changes early in their cycles is a key
driver of our performance. We are now seeing some evidence of an economic slowdown in some markets, including a reduction in capital expenditures and technology and associated discretionary spending by our clients, particularly in the United States.
This has caused a reduction in our growth rate in the Americas and in our Communications & High Tech, Financial Services and Products global market units in the third quarter of this fiscal year as compared with the first half of this fiscal
year. Revenues before reimbursements for the third quarter of 2001 for our Communications & High Tech, Financial Services and Products global market units increased by 8%, 15% and 16%, respectively, over the third quarter of 2000, while revenues
before reimbursements for the first half of 2001 for these market units increased by 27%, 19% and 25%, respectively, over the first half of 2000. Revenues before reimbursements for the third quarter of 2001 for our Americas geographic area increased
by 10% over the third quarter of 2000, while revenues before reimbursements for the first half of 2001 for this geographic area increased by 27% over the first half of 2000. We expect continued growth in revenues in the fourth quarter of this fiscal
year, though at a slower rate of growth than in the third quarter. Our strategy is to anticipate changes in demand for our services and to identify cost-management initiatives in order to manage costs as a percentage of revenues. For example, on
June 7, 2001, we announced an initiative to reduce our staff in certain parts of the world, in certain skill groups and in some support positions. We have generally been able to maintain our margins during past periods of volatility, such as the
slowdown in technology spending that occurred in anticipation of the Year 2000 events, through similar proactive cost-management programs.
We have operated as a series of related partnerships and corporations under the control of our partners for all
historical periods. We will operate in a corporate structure in future periods. As a business, whether in partnership form or in a corporate structure, our profitability is driven by the same factors. Revenues are driven by our partners and
senior executives ability to secure contracts for new
engagements and to deliver products and services that add value to our clients. Our ability to add value to clients and therefore drive revenues depends in part on our ability to offer market-leading service offerings and to deploy skilled teams of
professionals quickly and on a global basis.
Cost of services is primarily driven by the cost of client service personnel, which consists primarily of compensation
and training costs. Cost of services as a percentage of revenues is driven by the productivity of our client service workforce. Chargeability, or utilization, represents the percentage of our professionals time spent on billable work. We plan
and manage our headcount to meet the anticipated demand for our services. Selling and marketing expense is driven primarily by development of new service offerings, the level of concentration of clients in a particular industry or market, client
targeting, image development and brand-recognition activities. General and administrative costs generally correlate with changes in headcount and activity levels in our business.
Until August 2000, we were associated with Andersen Worldwide. We and Arthur Andersen were two stand-alone business
units linked through various agreements between us and Andersen Worldwide, a coordinating entity. Following arbitration proceedings between us, on the one hand, and Andersen Worldwide and Arthur Andersen, on the other, that were completed in August
2000, we ceased to be associated with these organizations. During our association with Andersen Worldwide and Arthur Andersen, we were controlled by our partners, and our historical financial statements have been presented on a consistent basis for
all periods. On January 1, 2001, we changed our name to Accenture.
Since we have historically operated as a series of related partnerships and corporations under the control of our
partners, our partners generally participated in profits, rather than receive salaries. Therefore, our historical financial statements do not reflect any compensation or benefit costs for services rendered by them. Upon the consummation of our
transition to a corporate structure, partner compensation will consist of salary, bonuses and benefits. The pro forma financial statements, which appear elsewhere in this prospectus, include adjustments for compensation and benefits that we would
have paid to partners under the compensation program we implemented when we consummated our transition to a corporate structure. Similarly, operating primarily in the form of partnerships has meant that our partners have paid income tax on their
share of the partnerships income on their individual tax returns. Therefore, our historical financial statements do not reflect the income tax liability that we would have paid as a corporation. Following the consummation of our transition to
a corporate structure, we are subject to corporate tax on our income.
Operating segments are defined as components of an enterprise for which separate financial information is regularly
available and evaluated by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is the Chief Executive Officer.
Our five reportable operating segments are our global market units, or market units, which are Communications & High
Tech, Financial Services, Government, Products and Resources. The operating segments are managed separately because each operating segment represents a strategic business unit that serves different markets. Revenues of the individual global market
units vary based on the results of the industry groups that comprise each global market unit. Global market units are managed on the basis of revenues before reimbursements because management believes it is a better indicator of global market unit
performance than revenues. Generally, operating expenses for each global market unit have similar characteristics and are subject to the same drivers, pressures and challenges. While most operating expenses apply to all segments, some sales and
marketing expenses are lower as a percentage of revenues in industry groups whose client base is concentrated, such as those in Financial Services, and higher in
industry groups whose client base is more fragmented, such as those in Products. The discussion and analysis related to each operational expense category applies to all segments, unless otherwise indicated.
We derive substantially all of our revenues from contracts for management and technology service offerings and solutions
that we develop, implement and manage for our clients. Depending on the terms of the contract, revenues are recognized on a time-and-materials basis or on a percentage-of-completion basis, as services are provided by our employees and, to a lesser
extent, subcontractors. Revenues from time-and-materials service contracts are recognized as the services are provided. Revenues from long-term contracts are recognized over the contract term based on the percentage of services provided during the
period compared to the total estimated services to be provided over the duration of the contract. Revenues include the cost and margin earned on computer hardware and software resale contracts, as well as revenues from alliance agreements, neither
of which is material to us. Reimbursements, including those relating to travel and other out-of-pocket expenses, and other similar third-party costs, such as the cost of hardware and software resales, are included in revenues, and an equivalent
amount of reimbursable expenses are included in cost of services.
Each contract has different terms based on the scope, deliverables and complexity of the engagement. While we have many
types of contracts, including time-and-materials contracts, fixed-price contracts and contracts with features of both of these contract types, we have been moving away from contracts that are priced solely on a time-and-materials basis toward
contracts that also include incentives related to costs incurred, benefits produced and our adherence to schedule. We estimate that a majority of our contracts have some fixed-price, incentive-based or other pricing terms that condition our fee on
our ability to deliver defined goals. Generally, our contracts are terminable by the client on short notice and without penalty. Accordingly, we do not believe it is appropriate to characterize these contracts as backlog. Normally, if a client
terminates a project, the client remains obligated to pay for commitments we have made to third parties in connection with the project, services performed and reimbursable expenses incurred by us through the date of termination.
Operating expenses include variable and fixed direct and indirect costs that are incurred in the delivery of our
solutions and services to clients. The primary categories of operating expenses include cost of services, sales and marketing, and general and administrative costs.
Cost of services includes the direct costs to provide services to our clients. Such costs generally consist of
compensation for client service personnel, the cost of subcontractors hired as part of client service teams, costs directly associated with the provision of client service, such as special-purpose facilities for outsourcing contracts, the
recruiting, training, personnel development and scheduling costs of our client service personnel. Reimbursements, including those relating to travel and other out-of-pocket expenses, and other similar third-party costs, such as the cost of hardware
and software resales, are included in revenues, and an equivalent amount of reimbursable expenses are included in cost of services.
Sales and marketing expense consists of expenses related to promotional activities, market development, including costs
to develop new service offerings, and image development, including advertising and market research.
|
General and Administrative Costs
|
General and administrative costs primarily include costs for non-client service personnel, information systems and
office space. Through various cost-management initiatives, we seek to keep general and administrative costs proportionately in line with or below anticipated changes in revenues.
|
Reorganization and Rebranding Costs
|
Reorganization and rebranding costs include one-time costs, beginning in September 2000, to rename our organization
Accenture and other costs to transition to a corporate structure.
Gain on investments represents primarily gains and losses on the sales of marketable securities and write-downs on
investments in private securities. These fluctuate over time, are not predictable and may not recur. Beginning on September 1, 2000, they also include changes in the fair market value of equity holdings considered to be derivatives in accordance
with SFAS 133.
Interest income represents interest earned on cash and cash equivalents. Interest income also includes interest earned
on a limited number of client engagement receivables when we agree in advance to finance those receivables for our clients beyond the normal billing and collection period.
Interest expense primarily reflects interest incurred on borrowings.
Other income (expense) consists of currency exchange gains (losses) and the recognition of income from vesting of
options for services by our representatives on boards of directors of those companies in which we invest. In general, we earn revenues and incur related costs in the same currency. We hedge significant planned movements of funds between countries,
which potentially gives rise to currency exchange gains (losses).
|
Equity in Losses of Affiliates
|
Equity in losses of affiliates represents our share of the operating results of non-consolidated companies over which we
have significant influence.
Prior to our transition to a corporate structure, we were generally not subject to income taxes in most countries
because we operated in partnership form in those countries. Since taxes related to income earned by the partnerships were the responsibility of the individual partners, our partners reported and paid taxes on their share of the partnerships
income on their individual tax returns. In other countries, however, we operated in the form of a corporation or were otherwise subject to entity-level taxes on income and withholding taxes. As a result, prior to our transition to a corporate
structure, we have paid some entity-level taxes, with the amount varying from year to year depending on the mix of earnings among our worldwide entities. Where applicable, we have accounted for these taxes under the asset and liability
method.
|
Partnership Income Before Partner Distributions
|
Our historical financial statements reflect our organization as a related series of partnerships and corporations under
the control of our partners. The income of our partners in historical periods is not executive compensation in the customary sense because partner compensation is comprised of distributions of current earnings, out of which our partners are
responsible for their payroll taxes and benefits.
Following our transition to a corporate structure, as part of our annual budgeting process, we set budgeted income
amounts for our results and cash compensation to our partners. Since June 1, 2001 we have been paying approximately 83% of budgeted cash compensation to our partners as fixed compensation on a monthly basis during the year. Commencing September 1,
2001 we expect to pay an additional 17% as a bonus to the extent that our results meet the budgeted income amount. If our results exceed the budgeted income amount, we currently intend to distribute a portion of the excess to our partners as an
additional bonus.
Historical Results of Operations
The following table sets forth the unaudited percentage of revenues represented by items in our combined income
statements for the periods presented.
|
|
Year ended August 31,
|
|
Nine months
ended
May 31,
|
|
|
1998
|
|
1999
|
|
2000
|
|
2000
|
|
2001
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues before reimbursements |
|
85 |
% |
|
86 |
% |
|
85 |
% |
|
85 |
% |
|
85 |
% |
Reimbursements |
|
15 |
|
|
14 |
|
|
15 |
|
|
15 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
Operating expenses* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services*: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services before
reimbursable expenses* |
|
49 |
|
|
49 |
|
|
48 |
|
|
47 |
|
|
44 |
|
Reimbursable
expenses |
|
15 |
|
|
14 |
|
|
15 |
|
|
15 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services* |
|
64 |
|
|
63 |
|
|
63 |
|
|
62 |
|
|
59 |
|
Sales and marketing* |
|
7 |
|
|
7 |
|
|
8 |
|
|
8 |
|
|
7 |
|
General and administrative costs* |
|
11 |
|
|
12 |
|
|
11 |
|
|
11 |
|
|
11 |
|
Reorganization and rebranding costs* |
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses* |
|
82 |
|
|
82 |
|
|
82 |
|
|
81 |
|
|
85 |
|
Operating income(1)* |
|
18 |
|
|
18 |
|
|
18 |
|
|
19 |
|
|
15 |
|
Gain on investments |
|
|
|
|
1 |
|
|
5 |
|
|
6 |
|
|
2 |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
1 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes* |
|
18 |
|
|
19 |
|
|
23 |
|
|
26 |
|
|
16 |
|
Provision for taxes |
|
1 |
|
|
1 |
|
|
2 |
|
|
2 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before accounting change* |
|
17 |
|
|
18 |
|
|
21 |
|
|
24 |
|
|
12 |
|
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income before partner distributions* |
|
17 |
% |
|
18 |
% |
|
21 |
% |
|
24 |
% |
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Excludes payments for partner distributions.
|
(1)
|
Operating income as a percentage of revenues before reimbursements was 22%, 21%, 21%, 23% and 17% for the years ended August
31, 1998, 1999 and 2000 and for the nine months ended May 31, 2000 and 2001, respectively.
|
We provide services through five global market units. The following table provides unaudited financial information for
each of these market units.
|
|
Year ended August 31,
|
|
Nine months ended
May 31,
|
|
|
1998
|
|
1999
|
|
2000
|
|
2000
|
|
2001
|
|
|
(in millions, except for percentages) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications & High Tech |
|
$1,903 |
|
|
$ 2,499 |
|
|
$ 2,806 |
|
|
$2,061 |
|
|
$ 2,482 |
|
Financial Services |
|
2,405 |
|
|
2,737 |
|
|
2,542 |
|
|
1,898 |
|
|
2,230 |
|
Government |
|
547 |
|
|
777 |
|
|
797 |
|
|
585 |
|
|
728 |
|
Products |
|
1,576 |
|
|
1,664 |
|
|
1,891 |
|
|
1,403 |
|
|
1,707 |
|
Resources |
|
1,702 |
|
|
1,812 |
|
|
1,661 |
|
|
1,251 |
|
|
1,457 |
|
Other |
|
82 |
|
|
61 |
|
|
55 |
|
|
47 |
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues before
reimbursements |
|
8,215 |
|
|
9,550 |
|
|
9,752 |
|
|
7,245 |
|
|
8,666 |
|
Reimbursements |
|
1,425 |
|
|
1,529 |
|
|
1,788 |
|
|
1,301 |
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$9,640 |
|
|
$11,079 |
|
|
$11,540 |
|
|
$8,546 |
|
|
$10,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues as a percentage of total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications & High Tech |
|
19 |
% |
|
22 |
% |
|
25 |
% |
|
24 |
% |
|
24 |
% |
Financial Services |
|
25 |
|
|
25 |
|
|
22 |
|
|
22 |
|
|
22 |
|
Government |
|
6 |
|
|
7 |
|
|
7 |
|
|
7 |
|
|
7 |
|
Products |
|
16 |
|
|
15 |
|
|
16 |
|
|
16 |
|
|
17 |
|
Resources |
|
18 |
|
|
16 |
|
|
14 |
|
|
15 |
|
|
14 |
|
Other |
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues before
reimbursements |
|
85 |
|
|
86 |
|
|
85 |
|
|
85 |
|
|
85 |
|
Reimbursements |
|
15 |
|
|
14 |
|
|
15 |
|
|
15 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications & High Tech |
|
$ 346 |
|
|
$ 532 |
|
|
$ 638 |
|
|
$ 499 |
|
|
$ 388 |
|
Financial Services |
|
681 |
|
|
814 |
|
|
653 |
|
|
513 |
|
|
480 |
|
Government |
|
20 |
|
|
94 |
|
|
71 |
|
|
57 |
|
|
56 |
|
Products |
|
350 |
|
|
250 |
|
|
390 |
|
|
318 |
|
|
281 |
|
Resources |
|
276 |
|
|
267 |
|
|
249 |
|
|
201 |
|
|
192 |
|
Other |
|
110 |
|
|
75 |
|
|
85 |
|
|
70 |
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$1,783 |
|
|
$ 2,032 |
|
|
$ 2,086 |
|
|
$1,658 |
|
|
$ 1,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income as a percentage of total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications & High Tech |
|
19 |
% |
|
26 |
% |
|
31 |
% |
|
30 |
% |
|
26 |
% |
Financial Services |
|
38 |
|
|
40 |
|
|
31 |
|
|
31 |
|
|
32 |
|
Government |
|
1 |
|
|
5 |
|
|
3 |
|
|
4 |
|
|
4 |
|
Products |
|
20 |
|
|
12 |
|
|
19 |
|
|
19 |
|
|
19 |
|
Resources |
|
16 |
|
|
13 |
|
|
12 |
|
|
12 |
|
|
13 |
|
Other |
|
6 |
|
|
4 |
|
|
4 |
|
|
4 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income as a percentage of total
revenues before reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications & High Tech |
|
18 |
% |
|
21 |
% |
|
23 |
% |
|
24 |
% |
|
16 |
% |
Financial Services |
|
28 |
|
|
30 |
|
|
26 |
|
|
27 |
|
|
22 |
|
Government |
|
4 |
|
|
12 |
|
|
9 |
|
|
10 |
|
|
8 |
|
Products |
|
22 |
|
|
15 |
|
|
21 |
|
|
23 |
|
|
16 |
|
Resources |
|
16 |
|
|
15 |
|
|
15 |
|
|
16 |
|
|
13 |
|
Other |
|
n/m |
|
|
n/m |
|
|
n/m |
|
|
n/m |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues before
reimbursements |
|
22 |
% |
|
21 |
% |
|
21 |
% |
|
23 |
% |
|
17 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income as a percentage of revenues |
|
18 |
% |
|
18 |
% |
|
18 |
% |
|
19 |
% |
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/m = not meaningful
|
Nine Months Ended May 31, 2001 Compared to Nine Months Ended May 31, 2000
|
Revenues for the nine months ended May 31, 2001 were $10,142 million, an increase of $1,596 million, or 19%, over the
nine months ended May 31, 2000. Revenues before reimbursements for the nine months ended May 31, 2001 were $8,666 million, an increase of $1,421 million, or 20%, over the nine months ended May 31, 2000. In local currency terms, revenues before
reimbursements grew by 26% in the nine months ended May 31, 2001 over the nine months ended May 31, 2000.
In the nine months ended May 31, 2001, our revenues grew significantly, continuing a trend that began in the second half
of fiscal 2000 as our clients began to focus on new transformation and implementation initiatives after Year 2000 disruptions proved to be minimal. In addition, demand for our services grew as clients began to explore Web-enablement and electronic
commerce strategies and solutions both in the business-to-business and business-to-consumer areas. We believe that this strong revenue growth is the result of our rapid response to changes in the marketplace and our creation and refinement of
relevant service offerings. In addition, by focusing on the re-training of our client service personnel during the Year 2000 slowdown, we positioned ourselves to take advantage of the growth opportunities in these new markets. We achieved this
strong revenue growth in the nine months ended May 31, 2001 despite the difficult economic conditions that many of our clients industries are experiencing. We are now seeing some evidence of an economic slowdown in some markets, including a
reduction in capital expenditures and technology and associated discretionary spending by our clients, particularly in the Americas. This has caused a reduction in our growth rate in the Americas and in our Communications & High Tech, Financial
Services and Products global market units in the third quarter of this fiscal year as compared with the first half of this fiscal year. Revenues before reimbursements for the third quarter of 2001 for our Communications & High Tech, Financial
Services and Products global market units increased by 8%, 15% and 16%, respectively, over the third quarter of 2000, while revenues before reimbursements for the first half of 2001 for these market units increased by 27%, 19% and 25%, respectively,
over the first half of 2000. Revenues before reimbursements for the third quarter of 2001 for our Americas geographic area increased by 10% over the third quarter of 2000, while revenues before reimbursements for the first half of 2001 for this
geographic area increased by 27% over the first half of 2000. We expect continued growth in revenues in the fourth quarter of this fiscal year, though at a slower rate of growth than in the third quarter. We believe we can also slow the growth of
our costs and defer expenditures for discretionary items. For example, on June 7, 2001, we announced an initiative to reduce our staff in certain parts of the world, in certain skill groups and in some support positions.
Our Communications & High Tech market unit achieved revenues before reimbursements of $2,482 million in the nine
months ended May 31, 2001, an increase of 20% over the nine months ended May 31, 2000, primarily due to strong growth in our Communications and Electronics & High Tech industry groups in North America. Operations in Europe and Latin America also
experienced significant growth. Our Financial Services market unit achieved revenues before reimbursements of $2,230 million in the nine months ended May 31, 2001, an increase of 18% over the nine months ended May 31, 2000, primarily due to strong
growth in our Banking industry group in Europe and North America. Our Products market unit achieved revenues before reimbursements of $1,708 million in the nine months ended May 31, 2001, an increase of 22% over the nine months ended May 31, 2000,
as the result of strong growth in our Retail, Consumer Goods & Services and Transportation & Travel Services industry groups in Europe. Our Resources market unit achieved revenues before reimbursements of $1,457 million in the nine months
ended May 31, 2001, an increase of 16% over the nine months ended May 31, 2000, as the result of strong growth in the Chemicals, Forest Products and Metals & Mining industry groups in North America. Our Government market unit achieved revenues
before reimbursements of $728 million in the nine months ended May 31, 2001, an increase of 24% over the nine months ended May 31, 2000, primarily driven by strong growth in Canada, the United States and the United Kingdom.
Operating expenses in the nine months ended May 31, 2001 were $8,664 million, an increase of $1,776 million, or 26%,
over the nine months ended May 31, 2000, and an increase as a percentage of revenues from 81% in the nine months ended May 31, 2000 to 85% in the nine months ended May 31, 2001. Operating expenses, excluding one-time rebranding and reorganization
costs, were $7,887 million for the nine months ended May 31, 2001, or a 15% increase over the nine months ended May 31, 2000 and a decrease as a percentage of revenues from 81% in the nine months ended May 31, 2000 to 78% in the nine months ended
May 31, 2001.
We continue to implement long-term and short-term cost-management initiatives aimed at keeping overall growth in
operating expenses less than the growth in revenues. The long-term initiatives focus on global reductions in infrastructure costs. In addition, the costs of delivering training have been reduced by moving toward Web-enabled and other lower-cost
distribution methods. The short-term initiatives focus on reducing variable costs, such as headcount in select administrative areas, and limiting travel and meeting costs.
Cost of Services
Cost of services was $5,985 million in the nine months ended May 31, 2001, an increase of $684 million, or 13%, over the
nine months ended May 31, 2000, and a decrease as a percentage of revenues from 62% in the nine months ended May 31, 2000 to 59% in the nine months ended May 31, 2001. Cost of services before reimbursable expenses was $4,509 million in the nine
months ended May 31, 2001, an increase of $510 million, or 13%, over the nine months ended May 31, 2000 and a decrease as a percentage of revenues before reimbursements from 55% in the nine months ended May 31, 2000 to 52% in the nine months ended
May 31, 2001. This decrease as a percentage of revenues and revenues before reimbursements resulted from increases in chargeability due to increased demand for our services and lower employee compensation costs resulting from the promotion of 1,286
employees to partner effective September 1, 2000. The increase in partner admissions was designed to incentivize our professionals at an earlier stage in their careers with us.
Sales and Marketing
Sales and marketing expense was $771 million in the nine months ended May 31, 2001, an increase of $120 million, or 18%,
over the nine months ended May 31, 2000, and a decrease as a percentage of revenues from 8% in the nine months ended May 31, 2000 to 7% in the nine months ended May 31, 2001. The 2001 percentage is consistent with 1998 and 1999 levels. The
percentage in 2000 was slightly higher due to higher than normal business development and market-development activities following the Year 2000 slowdown and the reduction in compensation costs related to the promotion of 1,286 employees to partner
effective September 1, 2000.
General and Administrative Costs
General and administrative costs were $1,131 million in the nine months ended May 31, 2001, an increase of $195 million,
or 21%, over the nine months ended May 31, 2000, and remained constant as a percentage of revenues at 11% in the nine months ended May 31, 2000 and in the nine months ended May 31, 2001. Our short-term cost-management initiatives in this period of
significant growth in revenues enabled us to maintain a constant level of general and administrative costs as a percentage of revenues.
Reorganization and Rebranding Costs
Reorganization and rebranding costs were $777 million, or 8% of revenues, in the nine months ended May 31, 2001, and
included amortization of intangible assets, acquired in connection with the Memorandum of Understanding with Andersen Worldwide, of $138 million. The remaining $19 million of intangible assets will be amortized in the fourth quarter of 2001.
Reorganization and rebranding costs, which resulted from changing our name and other costs relating to our transition to a corporate structure, are expected to continue to be incurred at similar levels during the remainder of 2001.
Operating income was $1,478 million in the nine months ended May 31, 2001, a decrease of $181 million, or 11%, over the
nine months ended May 31, 2000, and a decrease as a percentage of revenues from 19% in the nine months ended May 31, 2000 to 15% in the nine months ended May 31, 2001. Operating income decreased as a percentage of revenues before reimbursements from
23% in the nine months ended May 31, 2000 to 17% in the nine months ended May 31, 2001. Operating income, excluding one-time rebranding and reorganization costs, was $2,255 million for the nine months ended May 31, 2001, an increase of $597 million,
or a 36% increase over the nine months ended May 31, 2000 and an increase as a percentage of revenues from 19% in the nine months ended May 31, 2000 to 22% in the nine months ended May 31, 2001. Operating income, excluding one-time rebranding and
reorganization costs, increased as a percentage of revenues before reimbursements from 23% in the nine months ended May 31, 2000 to 26% in the nine months ended May 31, 2001.
Gain on investments totaled $180 million for the nine months ended May 31, 2001, compared to a gain of $534 million for
the nine months ended May 31, 2000. This gain in 2001 represents the sale of $382 million of a marketable security purchased in 1995 and $10 million from the sale of other marketable securities, net of other than temporary impairment investment
write-downs of $81 million, and unrealized investment losses recognized according to SFAS 133 of $131 million. Other than temporary impairment write-downs consisted of $19 million in publicly-traded equity securities and $62 million in
privately-traded equity securities. The write-downs relate to investments in Internet or e-commerce companies where the market value has been less than our cost for an extended time period, or the issuer has experienced significant financial
declines or difficulties in raising capital to continue operations.
Interest income was $60 million for the nine months ended May 31, 2001, an increase of $14 million, or 31%, over the
nine months ended May 31, 2000. The increase resulted primarily from the investment of cash generated by the sale of a portion of a marketable security purchased in 1995 and an increase in the deferral of partner distributions.
Interest expense was $25 million for the nine months ended May 31, 2001, an increase of $7 million, or 40%, over the
nine months ended May 31, 2000. The increase resulted primarily from the increase in short-term bank borrowings.
Other income was $21 million in the nine months ended May 31, 2001, a decrease of $11 million from the nine months ended
May 31, 2000.
|
Equity in Losses of Affiliates
|
Equity in losses of affiliates was a $53 million loss in the nine months ended May 31, 2001, compared to a $9 million
loss in the nine months ended May 31, 2000. This increase was primarily due to $38 million in losses related to our investment in Avanade, a company we jointly own with Microsoft that focuses on large-scale technology integration surrounding
Microsofts enterprise platform.
Taxes were $420 million in the nine months ended May 31, 2001, an increase of $226 million over the nine months ended
May 31, 2000. This increase was due to tax costs of our transition to a corporate structure, net of an adjustment for deferred taxes, and an increase in taxable income in some of our entities that were subject to entity-level tax.
|
Cumulative Effect of Accounting Change
|
The adoption of SFAS 133 resulted in cumulative income of $188 million on September 1, 2000, which represents the
cumulative unrealized gains resulting from changes in the fair market value of equity holdings considered to be derivatives by that statement.
|
Year Ended August 31, 2000 Compared to Year Ended August 31, 1999
|
Revenues for 2000 were $11,540 million, an increase of $461 million, or 4%, over 1999. Revenues before reimbursements
for 2000 were $9,752 million, an increase of $202 million, or 2%, over 1999. Exchange rate fluctuations, specifically with respect to the euro, negatively affected revenue growth as measured in U.S. dollars. In local currency terms, revenues before
reimbursements grew by 6% over 1999. Our revenue growth was achieved in the face of a challenging economic environment, which began in the second half of 1999 and was primarily related to Year 2000 events. Specifically, we experienced a slowdown in
information technology spending by large companies as they completed large enterprise business systems installations in anticipation of the Year 2000. In addition, there was reluctance by large companies to commit to major new transformation and
implementation projects until the impact of Year 2000 concerns was fully understood. However, at the same time, we experienced an increase in demand in the electronic commerce area. Accordingly, we focused on developing capabilities and new service
offerings to meet the growing opportunities in these new areas. We retrained our workforce to maintain market relevance to meet the demands of our clients in the emerging new economy. During the second half of 2000, following the realization by our
clients that Year 2000 disruptions were minimal, we experienced increased demand for our services, which led to stronger revenue growth beginning in the third quarter. Specifically, revenue growth was (1%), 0%, 7% and 11% in the first through fourth
quarters of the year over the corresponding quarters in the previous year.
Our Communications & High Tech market unit achieved revenues before reimbursements of $2,807 million in 2000, an
increase of 12% over 1999, primarily due to growth in Europe and Asia, which was partially offset by slower growth in our North American operations because of the Year 2000-related slowdown. Our Financial Services market unit achieved revenues
before reimbursements of $2,542 million in 2000, a decrease of 7% from 1999, primarily driven by decreasing levels of business activity in North America as a result of clients focusing on Year 2000 concerns, as well as the effects of an unfavorable
interest rate environment and reduced client merger activity. Our Products market unit achieved revenues before reimbursements of $1,891 million in 2000, an increase of 14% over 1999, primarily driven by growth in North America from the Retail and
Transportation & Travel Services industry groups, as well as additional growth in the Retail industry group in Europe. Our Resources market unit achieved revenues before reimbursements of $1,661 million in 2000, a decrease of 8% from 1999,
primarily as the result of delayed merger activity as several proposed mergers were delayed by regulatory concerns, and the completion of a number of large enterprise resource planning implementation projects before Year 2000. Our Government market
unit achieved revenues before reimbursements of $797 million in 2000, an increase of 3% over 1999. The 2000 increase was lower than in 1999, primarily as a result of government clients postponing large implementation projects until Year 2000
concerns were resolved.
Operating expenses in 2000 were $9,454 million, an increase of $406 million, or 4%, over 1999, and remained constant as
a percentage of revenues at 82% in 1999 and 2000. In anticipation of slower growth, we formed a special task force in the second half of 1999 to identify cost drivers, raise cost consciousness and reduce non-payroll cost structures, the results of
which were reflected in cost savings during 2000. In 2000, we began a training initiative that focused on building electronic commerce skills
and knowledge quickly. The advent of electronic commerce also facilitated a move from traditional classroom training toward Web-enabled distributed training that is designed to deliver the same or better-quality training in fewer hours at lower
cost. We expect this move toward Web-enabled and other distributed training to continue.
Cost of Services
Cost of services was $7,274 million in 2000, an increase of $288 million, or 4%, over 1999, and remained constant as a
percentage of revenues at 63% in 1999 and 2000. Cost of services before reimbursable expenses was $5,486 million in 2000, an increase of $30 million, or 1%, over 1999 and a decrease as a percentage of revenues before reimbursements from 57% in 1999
to 56% in 2000. We were able to maintain overall cost of services as a percentage of revenues and revenues before reimbursements at relatively constant levels through periods of slow growth in the first half of 2000, followed by periods of
accelerated growth in the second half of 2000.
Sales and Marketing
Sales and marketing expense was $883 million in 2000, an increase of $93 million, or 12%, over 1999 and an increase as a
percentage of revenues from 7% in 1999 to 8% in 2000. The increase was primarily related to our employees spending larger portions of their time on business- and market-development activities coupled with an increase in advertising to communicate
our electronic commerce capabilities to existing and potential clients. The increased business- and market-development activities were directed toward increasing demand for our services and products after the Year 2000 slowdown.
General and Administrative Costs
General and administrative costs were $1,296 million in 2000, an increase of $25 million, or 2%, from 1999 and a
decrease as a percentage of revenues from 12% in 1999 to 11% in 2000. As signs of slowing demand became apparent in the first half of 2000, we launched initiatives to better manage our general and administrative costs, including controlling
facilities, services and support costs. This reduction as a percentage of revenues was due in part to the elimination of temporary duplicate costs incurred in 1999 associated with the transition to us of internal support systems and other functions
previously shared with Andersen Worldwide.
Operating income was $2,086 million in 2000, an increase of $54 million, or 3%, over 1999, and remained constant as a
percentage of revenues at 18% in 1999 and 2000. Operating income remained constant as a percentage of revenues before reimbursements at 21% in 1999 and 2000.
Gain on investments totaled $573 million for 2000, compared to a gain of $93 million in 1999. $476 million of gain on
investments were related to the sale of a portion of our investment in a marketable security purchased in 1995.
Interest income was $67 million in 2000, an increase of $7 million, or 12%, over 1999. The increase in interest income
in 2000 resulted primarily from an increase in our cash balance, which was generated by the sale of a portion of our investment in a marketable security purchased in 1995.
Other income was $51 million in 2000, an increase of $56 million over 1999. This increase was primarily attributable to
the recognition of income from vesting of options for services by our representatives on boards of directors of those companies in which we invest, coupled with income resulting from foreign exchange translations.
|
Equity in Losses of Affiliates
|
Equity in losses of affiliates was a loss of $47 million in 2000 compared to a loss of $6 million in 1999, primarily due
to a loss of $32 million related to our investment in Avanade.
Taxes were $243 million in 2000, an increase of $120 million over 1999. This increase was due to increased taxable
income in some of our entities that were subject to entity-level tax.
|
Year Ended August 31, 1999 Compared to Year Ended August 31, 1998
|
Revenues for 1999 were $11,079 million, an increase of $1,440 million, or 15%, over 1998. Revenues before reimbursements
for 1999 were $9,550 million, an increase of $1,335 million, or 16%, over 1998. In local currency terms, revenue before reimbursements grew by 17% over 1998. During the first half of 1999, revenue growth was primarily a result of continued increases
in large-scale enterprise business systems solutions implementations, which had also fueled the strong growth in 1998. During the second half of 1999, a portion of the demand for our services moved from large-scale, complex transformation and
implementation projects to scalable electronic commerce solutions. In addition, our clients were increasingly focusing on Year 2000 issues, which delayed large-scale implementation projects.
Our Communications & High Tech market unit achieved revenues before reimbursements of $2,498 million in 1999, an
increase of 31% over 1998, primarily due to rapid growth in the communications and electronics and high tech industries which presented new challenges for our clients, thus increasing the demand for our services. The most significant increase was
experienced in Europe, which had revenue before reimbursements growth of 60% over 1998, primarily fueled by robust growth in telecommunications outsourcing work. Our Financial Services market unit achieved revenues before reimbursements of $2,736
million in 1999, an increase of 14% over 1998, primarily as a result of strength in Europe offset by information technology spending reductions by several clients in anticipation of Year 2000 concerns. Our Products market unit achieved revenues
before reimbursements of $1,664 million in 1999, an increase of 6% over 1998, primarily due to strong growth from the Pharmaceuticals & Medical Products industry group, which was partially offset by slower growth in North America in the second
half of the year, particularly due to Year 2000 concerns in the Automotive and Industrial Equipment industry groups. Our Resources market unit achieved revenues before reimbursements of $1,812 million in 1999, an increase of 7% over 1998, primarily
as a result of growth in the Utilities industry group, which was partially offset by slowdowns from the Forest Products and Metals & Mining industry groups, as these clients faced challenging economic conditions with depressed oil and base metal
prices. Our Government market unit achieved revenues before reimbursements of $777 million in 1999, an increase of 42% over 1999, primarily as the result of strong growth in the global postal marketplace as well as a significant expansion of work
undertaken for the United States federal government.
Operating expenses in 1999 were $9,048 million, an increase of $1,191 million, or 15%, over 1998, and remained constant
as a percentage of revenues at 82% in 1998 and 1999. In March 1999, as a result of changes occurring in the marketplace and the slowdown in demand for large-scale systems implementation, we implemented cost-saving initiatives that resulted in a cost
level consistent with the anticipated lower growth in demand. In addition, due to the increased demand for electronic commerce services and products, we began to retrain client service personnel to be better equipped to meet the change in the nature
of services being demanded as the market moved from requirements for enterprise business systems skills to electronic commerce skills.
Cost of Services
Cost of services was $6,986 million in 1999, an increase of $861 million, or 14%, over 1998, and a decrease as a
percentage of revenues from 64% in 1998 to 63% in 1999. Cost of services before reimbursable expenses was $5,457 million in 1999, an increase of $756 million, or 16%, over 1998 and remained constant as a percentage of revenues before reimbursements
at 57% in 1998 and 1999.
Sales and Marketing
Sales and marketing expense was $790 million in 1999, an increase of $94 million, or 14%, over 1998, and remained
constant as a percentage of revenues at 7% in 1998 and 1999. Included in sales and marketing expense was a comprehensive marketing and identity initiative that we undertook at the beginning of 1999. We launched a new signature trademark and visual
identity based on our former name and increased related media efforts. This required the worldwide reissuing of all our communications, marketing and media materials. We also made significant investments in new electronic commerce-related service
offerings to establish a leadership position in this emerging market space.
General and Administrative Costs
General and administrative costs were $1,271 million in 1999, an increase of $236 million, or 23%, over 1998, and an
increase as a percentage of revenues from 11% in 1998 to 12% in 1999. The major driver of this increase was the transition of the provision of internal support services from Andersen Worldwide to us. As a result, we established separate financial
systems and support, data and voice networks, and treasury management, credit and partnership accounting functions that were previously handled by Andersen Worldwide. During the transition period, we temporarily incurred duplicate costs for these
services from Andersen Worldwide.
Operating income was $2,032 million in 1999, an increase of $249 million, or 14%, over 1998, and remained constant as a
percentage of revenues at 18% in 1998 and 1999. Operating income decreased as a percentage of revenues before reimbursements from 22% in 1998 to 21% in 1999.
Gain on investments totaled $93 million for 1999, primarily related to the sale of a portion of our investment in a
marketable security purchased in 1995.
Interest income was $60 million in 1999. In 1998, Andersen Worldwide managed all interest income and expense activities
on behalf of Accenture and Arthur Andersen and the interest cost was allocated on a net basis by a formula based on net assets employed and resulted in no interest income being allocated to Accenture.
Other expense was an expense of $5 million in 1999 and an expense of $6 million in 1998.
|
Equity in Losses of Affiliates
|
Equity in losses of affiliates was a loss of $6 million in 1999 compared to a loss of $1 million in 1998.
Taxes were $123 million in 1999, an increase of $49 million over 1998. This increase was due to increased taxable income
in some of our entities that were subject to entity-level tax.
The following tables present unaudited quarterly financial information for each of our last seven fiscal quarters on a
historical basis. We believe the quarterly information contains all adjustments, consisting only of normal recurring adjustments, necessary to fairly present this information. As a professional services organization, we anticipate and respond to
demand from our clients. Accordingly, we have limited control over the timing and circumstances under which our services are provided. Typically, we show slight increases in our first-quarter revenues as a result of billing rate increases and the
addition of new hires. We typically experience minor declines in revenues for the second and fourth quarters because of an increase in vacation and holiday hours in those quarters. For these and other reasons, we can experience variability in our
operating results from quarter to quarter. The operating results for any quarter are not necessarily indicative of the results for any future period.
|
|
Three months ended
|
|
|
November 30,
1999
|
|
February 29,
2000
|
|
May 31,
2000
|
|
August 31,
2000
|
|
November 30,
2000
|
|
February 28,
2001
|
|
May 31,
2001
|
|
|
(in millions) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues before
reimbursements |
|
$2,412 |
|
|
$2,272 |
|
|
$2561 |
|
|
$2,507 |
|
|
$2,831 |
|
|
$2,882 |
|
|
$2,953 |
|
Reimbursements |
|
364 |
|
|
436 |
|
|
501 |
|
|
487 |
|
|
407 |
|
|
502 |
|
|
566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
2,776 |
|
|
2,708 |
|
|
3,062 |
|
|
2,994 |
|
|
3,238 |
|
|
3,384 |
|
|
3,519 |
|
Operating expenses* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services:* |
|
|
|
Cost of services before
reimbursable
expenses* |
|
1,356 |
|
|
1,304 |
|
|
1,340 |
|
|
1,487 |
|
|
1,384 |
|
|
1,560 |
|
|
1,566 |
|
Reimbursable
expenses |
|
364 |
|
|
436 |
|
|
501 |
|
|
487 |
|
|
407 |
|
|
502 |
|
|
566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services* |
|
1,720 |
|
|
1,740 |
|
|
1,841 |
|
|
1,974 |
|
|
1,791 |
|
|
2,062 |
|
|
2,132 |
|
Sales and marketing* |
|
199 |
|
|
222 |
|
|
230 |
|
|
232 |
|
|
202 |
|
|
251 |
|
|
318 |
|
General and
administrative costs* |
|
318 |
|
|
322 |
|
|
296 |
|
|
360 |
|
|
376 |
|
|
389 |
|
|
365 |
|
Reorganization and
rebranding costs* |
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
159 |
|
|
588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses* |
|
2,237 |
|
|
2,284 |
|
|
2,367 |
|
|
2,566 |
|
|
2,399 |
|
|
2,861 |
|
|
3,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income* |
|
539 |
|
|
424 |
|
|
695 |
|
|
428 |
|
|
839 |
|
|
523 |
|
|
116 |
|
Gain (loss) on investments,
net |
|
68 |
|
|
200 |
|
|
266 |
|
|
39 |
|
|
218 |
|
|
(30 |
) |
|
(9 |
) |
Interest income |
|
14 |
|
|
13 |
|
|
18 |
|
|
22 |
|
|
23 |
|
|
20 |
|
|
17 |
|
Interest expense |
|
(7 |
) |
|
(5 |
) |
|
(6 |
) |
|
(6 |
) |
|
(4 |
) |
|
(6 |
) |
|
(16 |
) |
Other income (expense) |
|
6 |
|
|
14 |
|
|
12 |
|
|
19 |
|
|
7 |
|
|
17 |
|
|
(3 |
) |
Equity in losses of
affiliates |
|
(4 |
) |
|
(3 |
) |
|
(2 |
) |
|
(37 |
) |
|
(20 |
) |
|
(21 |
) |
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
taxes* |
|
616 |
|
|
643 |
|
|
983 |
|
|
465 |
|
|
1,063 |
|
|
503 |
|
|
94 |
|
Provision for taxes |
|
42 |
|
|
71 |
|
|
81 |
|
|
49 |
|
|
53 |
|
|
83 |
|
|
285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative
change in accounting* |
|
574 |
|
|
572 |
|
|
902 |
|
|
416 |
|
|
1,010 |
|
|
420 |
|
|
(191 |
) |
Cumulative effect of
accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership income (loss)
before partner
distributions* |
|
$ 574 |
|
|
$ 572 |
|
|
$ 902 |
|
|
$ 416 |
|
|
$1,198 |
|
|
$ 420 |
|
|
$ (191 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Excludes payments for partner distributions.
|
Revenues in the second quarter of 2000 were seasonably down from the first quarter, as were fourth-quarter revenues
compared to third-quarter revenues. However, the decrease in revenues during the fourth quarter of 2000 was not as pronounced as would normally be the case because of the increase in demand that occurred after Year 2000 concerns proved to be
minimal. Similarly, while revenues in the first quarter of 2001 were seasonally up, revenues in the second quarter of 2001 were slightly above the first quarter as strong growth overcame the typical seasonal decline. The increase in revenues in the
third quarter of 2001 was seasonably up over the second quarter but less than would be typical due to the strong growth experienced in the second quarter and the beginning of a slowdown in demand experienced in the third quarter.
Cost of services as a percentage of revenues in the first through fourth quarters of 2000 and the first three quarters
of 2001 was 62%, 64%, 60%, 66%, 55%, 61% and 61%, respectively. The decrease in cost of services as a percentage of revenues in the third quarter of 2000 resulted from significantly higher chargeability and a higher number of workdays in the
quarter.
The increase in cost of services as a percentage of revenues in the fourth quarter of 2000 as compared to the prior
three quarters resulted from increased vacation time and fewer available workdays in the quarter. In addition, subcontractor, training, legal and other costs were higher than in prior quarters.
The decrease in cost of services as a percentage of revenues in the first and second quarters of 2001 from the first and
second quarters of 2000 resulted from increased chargeability and lower compensation costs resulting from the promotion of 1,286 employees to partner effective September 1, 2000. This lower compensation cost also resulted in lower sales and
marketing expense in the first and second quarters of 2001, although in the second quarter of 2001 additional spending on new strategy-development initiatives, particularly in the Communications & High Tech market unit, partially offset these
reductions. The increase in cost of services from 55% of revenues in the first quarter of 2001 to 61% in the second quarter of 2001 resulted primarily from lower chargeability levels as we increased headcount to meet increased client service demand.
The increase in cost of services as a percentage of revenues in the third quarter of 2001 over the third quarter of 2000 is primarily the result of lower chargeability, partially offset by lower employee compensation costs resulting from the
promotion of 1,286 employees to partner effective September 1, 2000.
In the first quarter of 2001, we also began incurring one-time costs to rebrand our organization as required by the
arbitration and other costs related to our transition to a corporate structure. These non-recurring costs totalled $30 million, $159 million and $588 million in the first, second and third quarters of 2001, respectively.
Our strategy is to limit the growth in general and administrative costs below the growth in revenues through
cost-management initiatives.
Operating income in the second quarter of 2001 was $523 million, a 23% increase over the second quarter of 2000.
Excluding one-time rebranding and reorganization costs, operating income would have been $682 million, or a 61% increase over the second quarter of 2000. Partnership income before partner distributions was $420 million in the second quarter of 2001,
or a 27% decrease from the second quarter of 2000. Excluding these one-time rebranding and reorganization costs and gains (losses) on investments, partnership income before partner distributions would have been $609 million, or a 64% increase over
the second quarter of 2000.
Operating income in the third quarter of 2001 was $116 million, an 83% decrease from the third quarter of 2000.
Excluding one-time rebranding and reorganization costs, operating income would have
been $703 million, a 1% increase over the third quarter of 2000. Partnership income before partner distributions was a loss of $191 million in the third quarter of 2001 compared to income of $902 million in the third quarter of 2000. Excluding
one-time rebranding and reorganization costs, gains (losses) on investments and a one-time restructuring income tax charge of $222 million in 2001, partnership income before partner distributions would have been $628 million, or a 1% decrease from
the third quarter of 2000.
The adoption of SFAS 133 resulted in cumulative income of $188 million on September 1, 2000, which represents the
cumulative unrealized gains resulting from changes in the fair market value of equity holdings considered to be derivatives under SFAS 133.
We expect to record a substantial net loss in the fiscal quarter ended August 31, 2001, primarily as a result of the net
nonrecurring compensation cost of approximately $967 million resulting from the grant of restricted share units in connection with the offering.
Liquidity and Capital Resources
We have historically relied on cash flow from operations, partner capital contributions and bank credit facilities to
satisfy our liquidity and capital requirements. However, each year a portion of the partner distributions have been made on a deferred basis, which significantly strengthened our working capital and limited our external borrowings. In the future, we
may need to raise additional funds through public or private debt or equity financings in order to:
|
|
take advantage of opportunities, including more rapid expansion;
|
|
|
acquire complementary businesses or technologies;
|
|
|
develop new services and products; or
|
|
|
respond to competitive pressures.
|
Our balance of cash and cash equivalents was $724 million at May 31, 2001. The balance of cash and cash equivalents was
$1,111 million at August 31, 1999 and $1,271 million at August 31, 2000, an increase of $160 million, or 14%, due to increased year-over-year earnings, including earnings from the sale of marketable securities, which was partially offset by
increases in distributions to partners, purchases of equity investments and escrow of amounts due pending the final resolution of the arbitration with Andersen Worldwide and Arthur Andersen. In addition, our market units continued to effectively
manage the timing of billings to and collections from clients, resulting in a relatively low net investment in the working capital components most directly affected by our client service operations: receivables from clients, unbilled services and
deferred revenue.
Net cash provided by operating activities was $1,994 million for the nine months ended May 31, 2001, an increase of $402
million from the nine months ended May 31, 2000. Net cash used by investing activities was $233 million for the nine months ended May 31, 2001, an increase of $496 million from the nine months ended May 31, 2000, as proceeds from the sale of
investments of $422 million were offset by purchases of new investments and by capital expenditures. Net cash used in financing activities was $2,301 million for the nine months ended May 31, 2001, an increase of $673 million from the nine months
ended May 31, 2000. This included normal distributions to partners of $1,950 million, repayment of partners capital totaling $524 million, and a payment of $314 million to Andersen Worldwide and Arthur Andersen as partial payment of amounts
due related to the final resolution of the arbitration, offset in part by a net increase in proceeds from short-term bank borrowings of $360 million. See Certain Relationships and Related TransactionsRelationship with Andersen Worldwide
and Arthur Andersen.
Net cash provided by operating activities was $2,131 million for 2000, a decrease of $63 million from 1999. Net cash
provided by investing activities was $107 million for 2000, an increase of
$337 million over 1999 as proceeds from the sales of investments of $576 million were partially offset by purchases of new investments and by capital expenditures. Net cash used in financing activities was $2,034 million for 2000, an increase of
$464 million over 1999 due primarily to an increase in partner distributions and cash transfers into an escrow account pending final resolution of the arbitration. Until August 7, 2000, the date the arbitration award became effective, Andersen
Worldwide, as agent for the Accenture and Arthur Andersen member firms, facilitated the cost-sharing provisions of various member firm agreements between the individual Accenture and Arthur Andersen member firms. Amounts due to Andersen Worldwide
under these member firm agreements were $233 million, $280 million and $314 million in 1998, 1999 and 2000, respectively.
The balance of paid-in capital was $352 million at August 31, 1999, $403 million at August 31, 2000, and $0 at May 31,
2001. All paid-in capital was returned to partners as of May 31, 2001.
Since we have historically deferred the distribution of a portion of our partners current-year earnings into the
subsequent fiscal year, these earnings have been available for a period of time to meet liquidity and working capital requirements. These distributable earnings, temporarily retained and distributed in the subsequent fiscal year, totaled $896
million, $1,130 million and $1,306 million at August 31, 1999, 2000 and May 31, 2001, respectively. At May 31, 2001, we reclassified the final distributable earnings from the capital accounts to current liabilities. We expect to distribute to our
partners any pre-incorporation earnings undistributed as of the date of the consummation of our transition to a corporate structure in one or more installments by December 31, 2001.
On August 31, 1998, we entered into a $450 million unsecured multi-currency revolving credit facility with a syndicate
of banks led by Morgan Guaranty Trust Company of New York for general working capital purposes. The syndicated facility, available through August 31, 2003, provides committed financing and/or letters of credit in the Group of Seven currencies and
bid option financing in a number of other currencies. Committed financing is provided at the prime rate or at the London interbank offered rate plus a spread, which varies according to a pricing grid, and is subject to annual commitment fees. At May
31, 2001, we had $338 million in borrowings and $19 million in letters of credit outstanding under the syndicated facility.
Our syndicated facility requires us to (1) limit liens placed on our assets to (a) liens incurred in the ordinary course
of business (subject to certain limitations) and (b) other liens securing aggregate amounts not in excess of 30% of our total assets and (2) maintain a maximum debt to cash flow ratio of one to one. We are in compliance with the terms of this
facility. We have amended the syndicated facility and our other credit facilities in connection with our transition to a corporate structure to maintain our existing credit capacity. As a corporation, we expect to have greater access to debt capital
markets and may replace or supplement current credit capacity with other sources of debt financing.
Additionally, on June 22, 2001 we entered into a $420 million unsecured 364-day revolving credit facility with a
syndicate of banks led by Bank of America, N.A. for general working capital, capital expenditures and other business purposes. The terms of the Bank of America facility are substantially similar to the terms of the Morgan Guaranty
facility.
We maintain four separate bilateral, uncommitted, unsecured multi-currency revolving credit facilities. As of May 31,
2001, these facilities provided for up to $369 million of local currency financing in countries that cannot readily access our facilities. We also maintain local guaranteed and non-guaranteed lines of credit. As of May 31, 2001, amounts available
under these facilities totaled $299 million. At May 31, 2001, we had $190 million outstanding under these various facilities. Interest rate terms on the bilateral revolving facilities and local lines of credit are at market rates prevailing in the
relevant local markets.
Accenture LLP, our United States subsidiary, was also the obligor under a collateral trust note in the principal amount
of $18 million, which financed our Northbrook, Illinois, technology campus. The principal amount was payable in varying annual installments through 2007 and was secured by a guarantee from Andersen Worldwide. We prepaid this obligation on May 31,
2001.
In addition, we have been co-obligors with Arthur Andersen on term debt obligations of approximately $109 million
consisting of $75 million of unsecured debt due before the end of May 2002 and a $34 million collateral trust note, secured by Arthur Andersens training center in St. Charles, Illinois, due in installments through 2011. Arthur Andersen has
made principal and interest payments with respect to these obligations in the past, and we expect them to continue making these payments. Arthur Andersen has agreed with us to prepay the $34 million collateral trust note on or before August 1, 2001,
and they have eliminated us as a co-obligor on the $75 million of unsecured debt as of May 31, 2001.
During 1998, 1999 and 2000, and for the nine months ended May 31, 2001 we incurred $271 million, $305 million, $315
million and $301 million in capital expenditures, respectively, primarily for technology assets, furniture and equipment and leasehold improvements to support our operations. We expect fiscal 2001 capital expenditures for technology assets,
furniture and equipment and leasehold improvements for existing and new office space to be in the range of $350 million to $450 million. During November 1999, we formed Accenture Technology Ventures to select, structure and manage a portfolio of
equity investments. Accenture has made equity investments of $18 million, $153 million and $215 million during 1999, 2000 and the nine months ended May 31, 2001, respectively. As of May 31, 2001, we had commitments for investments of $67 million. We
expect to invest up to $340 million in fiscal 2001. We also received $111 million and $110 million in fiscal 2000 and the nine months ended May 31, 2001, respectively, in equity from our clients as compensation for current and future services.
Amounts ultimately realized from these equity securities may be higher or lower than amounts recorded on the measurement dates.
In limited circumstances, we agree to extend financing to clients. The terms vary by engagement, but generally we
contractually link payment for services to the achievement of specified performance milestones. We finance these client obligations primarily with existing working capital and bank financing in the country of origin. As of August 31, 1998, 1999,
2000 and May 31, 2001, $232 million, $232 million, $223 million and $168 million were outstanding for 18, 16, 14 and 14 clients, respectively. These outstanding amounts are included in unbilled services and other non-current assets on our historical
balance sheets.
We do not expect that our transition to a corporate structure will materially change our working capital requirements.
Prior to the consummation of our transition to a corporate structure, we deferred the distribution of a substantial portion of our earnings to our partners into the subsequent fiscal year. This deferral enabled us to fund the capital requirements of
our business without significant external financing. We expect to replace this deferral through retained earnings which will result from the substantial reduction in partner compensation in our corporate structure. We expect our liquidity needs on a
short- and long-term basis to be satisfied by cash flows from operations, increased debt capacity under existing and/or new credit facilities, the net proceeds of the offering and increased financial flexibility that will result from our transition
to a corporate structure. We expect to repay approximately $338 million of amounts outstanding under our revolving credit facilities with the net proceeds from the offering. This increase in debt capacity will replace working capital historically
funded through the deferral of the distribution of partnership earnings and the contribution of capital by our partners. We are not dependent on the proceeds of the offering to meet normal operating liquidity requirements over the next 12 months. We
believe our change to a corporate structure will provide financing flexibility to meet ongoing and future capital resource needs, which include implementing our strategy, driving business initiatives and providing equity for investment and
acquisitions.
Market Risk
We are exposed to foreign currency risk in the ordinary course of business. We hedge cash flow exposures for our major
countries using a combination of forward and option contracts. Principal currencies hedged are the Australian dollar, Canadian dollar, euro currencies, Japanese yen, Norwegian krone, Swedish krona, Swiss franc and British pound. These instruments
are generally short-term in nature, with typical maturities of less than one year. From time to time, we enter into forward or option contracts of a longer-term nature.
For purposes of specific risk analysis, we use sensitivity analysis to determine the effects that market risk exposures
may have on the fair value of our hedge portfolio. The foreign currency exchange risk is computed based on the market value of future cash flows as affected by the changes in the rates attributable to the market risk being measured. The sensitivity
analysis represents the hypothetical changes in value of the hedge position and does not reflect the opposite gain or loss on the underlying transaction. As of August 31, 1999, a 10% decrease in the levels of foreign currency exchange rates against
the U.S. dollar with all other variables held constant would result in a decrease in the fair value of our financial instruments of $10 million, while a 10% increase in the levels of foreign currency exchange rates against the U.S. dollar would
result in an increase in the fair value of our financial instruments of $24 million. As of August 31, 2000, a 10% decrease in the levels of foreign currency exchange rates against the U.S. dollar with all other variables held constant would result
in an increase in the fair value of our financial instruments of $6 million, while a 10% increase in the levels of foreign currency exchange rates against the U.S. dollar would have almost no effect on the fair value of our financial instruments due
to the fact that our long and short forward positions almost completely offset each other. As of May 31, 2001, a 10% decrease in the levels of foreign currency exchange rates against the U.S. dollar with all other variables held constant would
result in a decrease in the fair value of our financial instruments of $15 million, while a 10% increase in the levels of foreign currency exchange rates against the U.S. dollar would result in an increase in the fair value of our financial
instruments of $15 million.
During the last three years, the majority of our debt obligations have been short-term in nature and the associated
interest obligations have floated relative to major interest rate benchmarks, such as the London interbank offered rate. While we have not entered into any derivative contracts to hedge interest rate risks during this period, we may do so in the
future.
The interest rate risk associated with our borrowing and investing activities at August 31, 2000 and at May 31, 2001 is
not material in relation to our combined and consolidated financial position, results of operations or cash flows. We have not used derivative financial instruments to alter the interest rate characteristics of our investment holdings or debt
instruments.
We have marketable equity securities that are subject to market price volatility. The investments are classified as
available-for-sale securities and are recorded in the balance sheet at fair value with unrealized gains or losses reported in the accumulated other comprehensive income within partners capital. We have not entered into any derivative contracts
to hedge the risks associated with the portfolio of equity investments.
Our investment portfolio also includes warrants in both publicly-traded and privately-held companies. The privately-held
investments are inherently risky because the markets for the technologies or products
they develop are less established than those of most publicly-traded companies and because we may be unable to liquidate our investments if desired. Beginning September 1, 2000, warrants in publicly-traded companies and certain warrants in
privately-held companies are deemed derivatives by SFAS 133. As such, they are recorded in the balance sheet at fair value with unrealized gains or losses recorded in the income statement. The following analysis presents the hypothetical change in
the fair value of our marketable equity securities classified as available-for-sale at August 31, 1999 and August 31, 2000, assuming the same hypothetical price fluctuations of plus or minus 10%, 20% and 30%.
|
|
Valuation of investments assuming
indicated decrease
|
|
August 31,
1999 fair
value
|
|
Valuation of investments assuming
indicated increase
|
|
|
-30%
|
|
-20%
|
|
-10%
|
|
|
+10%
|
|
+20%
|
|
+30%
|
|
|
(in thousands) |
Marketable Equity
Securities |
|
$211,713 |
|
$241,958 |
|
$272,202 |
|
$302,447 |
|
$332,692 |
|
$362,936 |
|
$393,181 |
|
|
Valuation of investments assuming
indicated decrease
|
|
August 31,
2000 fair
value
|
|
Valuation of investments assuming
indicated increase
|
|
|
-30%
|
|
-20%
|
|
-10%
|
|
|
+10%
|
|
+20%
|
|
+30%
|
|
|
(in thousands) |
Marketable Equity
Securities |
|
$528,016 |
|
$603,446 |
|
$678,877 |
|
$754,308 |
|
$829,739 |
|
$905,170 |
|
$980,600 |
The following analysis presents the hypothetical change in the fair value of our marketable equity securities classified
as available-for-sale and warrants in privately-held companies deemed to be derivatives by SFAS 133 at May 31, 2001, assuming the same hypothetical price fluctuations of plus or minus 10%, 20% and 30%.
|
|
Valuation of investments assuming
indicated decrease
|
|
May 31,
2001
fair value
|
|
Valuation of investments assuming
indicated increase
|
|
|
-30%
|
|
-20%
|
|
-10%
|
|
|
+10%
|
|
+20%
|
|
+30%
|
|
|
(in thousands) |
Marketable Equity Securities
and Warrants Deemed
Derivatives by SFAS 133 |
|
$109,770 |
|
$125,451 |
|
$141,133 |
|
$156,814 |
|
$172,495 |
|
$188,177 |
|
$203,858 |
Recently Issued Accounting Pronouncements
Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use, was adopted as of September 1, 1999. This statement addresses how to distinguish internal-use software from software to be sold, which costs are to be capitalized, when capitalization begins and ends, and guidelines for amortization and
evaluating impairments. Under SOP 98-1, general and administrative costs are not capitalized. Adoption of this statement did not have a material effect on our results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued SFAS 133 which, as amended, establishes accounting and
reporting standards for derivative instruments and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. We adopted SFAS 133 in the
first quarter of 2001, which ended on November 30, 2000. The adoption of SFAS 133 resulted in cumulative income of $188 million on September 1, 2000, and investment losses of $131 million during the nine months ended May 31, 2001.
In December 1999, the Staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, which
summarizes the Staffs views in applying generally accepted accounting principles to revenue recognition in financial statements. Our revenue recognition principles are consistent with the guidance set forth in SAB 101.
Overview
Accenture is the worlds leading provider of management and technology consulting services and solutions. We had
approximately $13.1 billion of revenues for the 12 months ended May 31, 2001. We have more than 75,000 employees based in more than 110 offices in 46 countries delivering to our clients a wide range of consulting, technology and outsourcing
services. We operate globally with one common brand and business model designed to enable us to serve our clients on a consistent basis around the world. We work with clients of all sizes and have extensive relationships with the worlds
leading companies and governments. We serve 84 of the Fortune Global 100 and more than half of the Fortune Global 500. In total, we have served more than 4,000 clients on nearly 18,000 engagements over the past five fiscal
years.
Industry Background
The global business environment is changing at an accelerating pace, presenting opportunities and challenges for
companies around the world. A heightened focus on productivity, increased competition and the commercialization of the Internet and other emerging technologies are among the forces driving this change. To succeed, businesses must identify and
respond rapidly to market trends; develop new products, services, skills and capabilities; use technology effectively; and, in some cases, restructure or reinvent themselves. In this dynamic, competitive environment, decisions with respect to
technology have become increasingly important and complex. This has created a growing need for professionals with experience in using technology to help drive business strategy.
In the 1980s and early 1990s, businesses worldwide focused on improving their internal operational efficiency through
the use of technology, automating functions such as accounting, human resources management and manufacturing planning. Today, enterprises seek to deploy a more far-reaching set of technological initiatives across business functions, organizations,
customers, business partners and suppliers. For example, businesses are increasingly using relationship-management tools and
technologies such as data mining, which search large databases to extract relevant information and synthesize data, to gain insight into and improve interactions with
customers and alliance partners; virtual research and development to accelerate new product development efforts; business exchanges to manage demand; outsourcing of business functions to transform and efficiently manage business processes; and
collaborative software tools to facilitate product design and development among geographically dispersed teams. In addition, technologies such as wireless and broadband promise to fundamentally change the customer experience for businesses and
individual customers alike.
In this environment, information technology services projects are becoming more complex in scale and scope. At the same
time, successful implementation of major new enabling technologies has become critical to organizations to achieve growth or improvements in efficiency and productivity. As a result, management and information technology consulting services
providers have an increasingly important role in helping business leaders create value. Businesses and governments are increasingly turning to these service providers for access to specialized expertise and services that are either not readily
available from internal resources or not in their core competency. The worldwide business consulting and information technology services market, excluding hardware support and processing services, is expected to grow from $284 billion in 2000 to
$411 billion in 2003, a compound annual growth rate of 13.2%, according to IDC (International Data Corporation). Key drivers of this market growth are expected to include demand for supply chain management, customer relationship management
and Internet services, which IDC has estimated will grow at compound annual rates of 36%, 30% and 38%, respectively, over the next four years.
Clients increasingly demand that comprehensive solutions to their business challenges be delivered on an accelerated
basis because of increasingly complex and competitive market conditions. The management consulting and information technology services providers who will succeed in this environment will be those who undertake the research and development necessary
to identify key trends, invest significant human and financial capital in the development of market-ready solutions at the beginning of major industry and technological cycles, and create innovative, cost-effective means to deliver services in a
predictable manner. To deliver value to clients, these service providers must continuously develop and expand their expertise in new technologies, maintain a global presence and offer a full range of expertise and services. They must also have
access to capital to fund technology research and development and to create market-ready solutions.
Our Solution and Competitive Strengths
As the worlds leading provider of management and technology consulting services and solutions, we believe that we
are well positioned for continued growth in a marketplace characterized by an increasing pace of technological change and complex business challenges. Our approach is to create value for clients through our network of businesses by leveraging our
industry knowledge, service offering expertise and insight into and access to emerging technologies. With this comprehensive approach, we are able to move clients forward in every part of their business, from strategic planning to day-to-day
operations. This often includes helping clients identify and enter new markets, increase revenues in existing markets and deliver their products and services more effectively and efficiently. We believe that our approach, together with the following
competitive strengths, distinguishes us in this marketplace.
|
|
Seamless Execution on a Global Scale. We operate globally with one common brand and
business model designed to allow us to serve our clients on a consistent basis around the world. We believe that our global network of more than 75,000 employees in 46 countries provides us with a significant advantage in developing and delivering
solutions to the most complex strategic, technological and operational opportunities and challenges that our clients face. Our consulting professionals around the world share skills, insight, knowledge of local markets and service line expertise,
and receive a common base of extensive training to ensure the same high-quality services and solutions for clients globally.
|
|
|
Deep Industry Expertise. We have developed specialized expertise and experience in the
18 industry groups in which our professionals work. Our industry focus enables our professionals to provide services with a thorough understanding of industry evolution, business issues and applicable technologies, and ultimately to deliver
solutions tailored to each clients industry.
|
|
|
Broad and Evolving Service Offerings. We offer our clients what we believe is the
broadest and deepest service offering expertise in the industry. Our eight service lines, which span the global market units, are Strategy & Business Architecture, Finance & Performance Management, Human Performance, Customer Relationship
Management, Supply Chain Management, Solutions Engineering, Technology Research & Innovation, and Solutions Operations. More than 8,000 Accenture professionals are dedicated full time to a specific service line, helping to develop knowledge,
assets and innovative solutions for clients across all of the industries we serve. These subject matter experts complement the more than 57,000 professionals working within our global market units who apply their knowledge of a specific service line
to clients within an industry group.
|
|
|
Enduring Relationships with the Worlds Leading Corporations and Governments. We
work with chief executive officers and other senior management at many of the worlds largest and most successful organizations, including the top companies in virtually every industry sector, and
governments worldwide. We serve 84 of the Fortune Global 100 and more than half of the Fortune Global 500. Our partners and senior executives are responsible for both winning client engagements and delivering service to clients,
ensuring continuity between what we promise to our clients and what we deliver. We believe that our commitment to client satisfaction serves to strengthen and extend our relationships. For example, more than 80% of our top 100 clients in fiscal year
2000, ranked by revenues before reimbursements, have been our clients for each of the last five years, and more than 50% have been clients for at least 10 years. Our clients typically retain us on a non-exclusive basis.
|
|
|
Technology Innovation and Implementation. Technology is part of our heritage and is
fundamental to our service offerings. We are a leader in the development and implementation of technology-based business solutions that create value for our clients. In addition, our innovative tools, methodologies, software and other intellectual
property enhance our ability to deploy technical solutions, particularly across large-scale, global platforms.
|
|
|
Distinctive People and Culture. Our most important asset is our people. We are deeply
committed to the long-term development of our employees, whom we recruit from universities and industry. Each professional receives extensive and focused technical and managerial skills development training throughout his or her career with us,
including 750 hours of training for our entry-level professionals in their first five years. In fiscal year 2000, we spent $580 million, or nearly 5% of our revenues, on training and development. We seek to reinforce our employees commitment
to our clients, culture and values through a comprehensive performance review system and a competitive compensation philosophy that reward individual performance and teamwork. In addition, in connection with the offering, we intend to grant equity
awards to our employees in order to promote employee ownership of our company and improve retention. After the offering, we will preserve the management practices, including the continued use of the partner title, that reinforce our
partnership culture and the collaboration, motivation, alignment of interests and sense of ownership and reward that our partnership culture has sustained.
|
|
|
Proven, Tenured and Highly Motivated Management Team. Our more than 2,400 partners
manage our day-to-day activities and client relationships and have an average of 14 years of experience with us. In addition to establishing and supporting enduring client relationships, our partners focus on mentoring our professionals at all
levels to develop the next generation of firm leadership. None of our partners will be selling shares in the offering and, immediately following the offering, our partners will own approximately 82% of the equity in our business, or 80% if the
underwriters exercise their overallotment option in full.
|
|
|
Highly Diversified Business by Industry, Geography and Technology. Our global business
is highly diverse. We operate across virtually every industry and geography, delivering a wide range of business and technology solutions and services to address the strategic and functional business challenges that organizations face. As a result,
we can deploy our professionals anywhere in the world in response to evolving marketplace opportunities or challenges. Not only does our diversification enable us to take advantage of changing business, technological and economic conditions
worldwide, it also allows us to manage through geographic and industry market cycles.
|
|
|
History of Staying Ahead of Industry Trends. Throughout our history, we have reinvented
ourselves to capitalize on evolving management trends and technologies for the benefit of our clients. We pioneered systems integration and business integration; we led the deployment of
enterprise resource planning, customer relationship management and electronic services; and we have established ourselves as a leader in todays marketplace. We constantly adapt our service offerings in anticipation of future industry
trends.
|
Our Strategy for Growth
We strive to be a global market maker, architect and builder of the new marketplace, developing innovations to
improve the way the world works and lives. We intend to help create new markets, design new business models, and deliver business and technology solutions that provide value to our clients. We believe that our network of businesses approach
provides us with a fundamental advantage in executing our strategic plans. Our global market units and service lines develop offerings and provide expertise to clients. Our affiliates, alliances and venture capital portfolio companies provide us
with insight into and access to emerging business models, products and technologies, enhancing the ability of our global market units and service lines to deliver value to clients.
To serve our clients and grow our business, we aggressively pursue the following strategic imperatives:
|
|
Deliver Value@Speed for Our Clients. Successful client relationships depend
on our ability to help clients quickly deliver more value to their customers and shareholders. We have implemented a global initiative, called Value@Speed, to help clients accelerate development of top- and bottom-line growth. Through this
initiative we develop proprietary offerings aimed at creating value within specific industries. We do this by developing an in-depth understanding of how the industries are structured and operate, key trends within the industries and how companies
are affected by these trends, and how companies can create or destroy value. Our strategy is to work closely with client executives to implement value-generating solutions that contribute to superior financial performance and enhance productivity on
an accelerated basis.
|
|
|
Accelerate and Ride the Waves of Change. Industry today is characterized by
ongoing waves of technological and business change that present our clients with significant value-creation opportunities. We leverage our network of businesses to help organizations apply business and technology solutions that create value by
realizing the opportunities presented by these waves of change. We believe that our significant scale and access to capital will enable us to continue to make the investments in research and development, tools and methodologies and intellectual
property necessary to anticipate these waves and rapidly develop and deliver business and technology solutions based on them.
|
|
|
Create Asset-Based Solutions to Drive Superior Results. To deliver value to our clients
more quickly, we create assets, such as software and business architectures and methodologies for business processes, that enable us to rapidly implement market-ready solutions for our clients. One example is the 24-hour online multi-channel
transaction processing software asset we developed for the banking industry, which has been installed in 89 financial institutions in 16 countries. We recognize the value of intellectual property in the new marketplace and vigorously create, harvest
and protect our intellectual property. We have filed more than 600 patent applications in the United States and other jurisdictions in the last two years and have received more than 40 United States patents.
|
|
|
Leverage Our Expertise in Transformational Outsourcing. We are helping our clients
create value by leveraging information technology to reinvent and transform fundamental business operations. Using our knowledge of consulting, business process infrastructure and applications
outsourcing, we believe we are well positioned to develop and implement new business models and operate critical business functions for clients around the world. We refer to the creation of new and innovative ways to manage and operate business
functions in a manner that helps refocus the cost base around the business strategic goals as transformational outsourcing. We pursue transformational outsourcing opportunities, which require a combination of consulting and outsourcing skills.
Our strategy is to leverage our industry expertise and technology and business process skills to help clients discover and create new business models and, in many cases, transform entire business functions.
|
|
|
Aggressively Grow in Attractive Geographic Markets. Demand for the services we provide
is growing rapidly in both established and emerging economies, such as parts of Asia and Latin America. We have offices in 46 countries around the world and, while we are a leader in the majority of markets in which we operate, we believe there are
significant opportunities for us to grow in multiple geographies, including by way of investment. Given the fragmented nature of the worldwide business consulting and information technology services market, and based on our market knowledge of the
markets in each of the 46 countries in which we operate, we believe there is room for us to increase our market share on a global basis.
|
|
|
Foster a Great Place to Work. We derive our success from the ability of our
professionals to help our clients succeed in todays complex business environment. Our ability to hire, train, develop and retain our professionals is critical to our enterprise. To attract and retain these professionals, we have a great
place to work program, which includes performance metrics to hold our leadership accountable for employee satisfaction and retention. In an early initiative in this program, we promoted 1,286 new partners in September 2000 to further
incentivize our professionals at an earlier stage in their careers with us. Our goal is to create an environment in which we can:
|
|
|
develop inspiring leaders;
|
|
|
cultivate a diverse workforce;
|
|
|
create interesting work;
|
|
|
provide continuous learning;
|
|
|
support flexible workstyles; and
|
|
|
provide competitive rewards.
|
|
The marketplace for high-caliber consulting professionals has become very competitive in many parts of the world, and we are
committed to providing attractive current compensation and significant long-term incentives for our employees.
|
|
|
Enhance Our Operational Efficiency. As experts in operational efficiency, we plan to
provide value to our clients as well as our shareholders by maintaining our organization as a cost-effective, technology-enabled company with strong financial discipline. This includes continuous improvement in our client delivery capabilities and
cost structure. We intend to continue to electronically enable our own business processes in areas such as human resources, training, recruiting, performance management and finance and operations management. Our continued focus on efficiency is
intended to optimize the performance of our organization as we increase our scale and scope.
|
Management and Technology Consulting Services and Solutions
Our management and technology consulting services and solutions business is structured around five global market units,
which together comprise 18 industry groups. Eight service lines support the global market units and provide access to the full spectrum of business and information technology solutions. Client engagement teams typically consist of industry experts,
service line specialists and consultants with local market knowledge. Our client teams are complemented by our solution centers, which allow us to capture replicable components of methodologies and technologies and use these to create tailored
solutions for our clients quickly and cost-effectively.
The following table shows the organization of our five global market units and 18 industry groups.
Communications
& High Tech |
|
Financial
Services |
|
Products |
|
Resources |
|
Government |
|
|
|
Industry Groups
|
|
Industry Groups
|
|
Industry Groups
|
|
Industry Groups
|
|
Industry Groups
|
|
|
|
Communications
Electronics &
High Tech
Media & Entertainment |
|
Banking
Health Services
Insurance |
|
Automotive
Consumer Goods &
Services
Industrial Equipment
Pharmaceuticals &
Medical Products
Retail
Transportation &
Travel Services |
|
Chemicals
Energy
Forest Products
Metals & Mining
Utilities |
|
Government |
|
Communications & High Tech
|
We are a leading provider of management and technology consulting services and solutions to the communications, high
technology and media and entertainment industries. We offer services that help our clients stay ahead of major technology and industry trends, including the proliferation of wireless devices, next-generation networks, digital content services,
Web-enabled platforms and the industry restructuring brought about by the convergence of these technologies. In addition, we have established mobile commerce labs in Europe and the United States. At these research and development facilities we
explore how new mobile technologies, such as wireless, can be integrated with existing legacy and Internet systems and applied in new and innovative ways.
The table below sets forth information about our Communications & High Tech global market unit, including
information about revenues before reimbursements and number of employees, as well as a partial list of some of our largest clients for this global market unit:
|
Communications & High Tech
|
|
|
Year ended
August 31, 2000
|
|
Nine months ended
May 31, 2001
|
Revenues before reimbursements (in millions): |
|
$2,807 |
|
|
$2,482 |
|
Percent of revenues before reimbursements: |
|
29 |
% |
|
29 |
% |
Number of employees as
of May 31, 2001: |
|
16,503 |
|
AT&T Corp.
BellSouth
Corporation
Cable & Wireless
PLC
Compaq Computer
Corporation
Deutsche Telekom
AG
Electronic Arts
France Telecom
Infostrada S.p.A.
LM Ericsson AB
Microsoft
Corporation
|
|
Nokia Corporation
Nortel Networks
Corporation
Sony Corporation
Sprint Corporation
Sun Microsystems,
Inc.
Telecom Argentina
Telecom Italia
S.p.A.
Telenor AS
Texas Instruments,
Incorporated
Verizon
Communications
|
|
Our Communications & High Tech global market unit comprises the following industry groups:
|
|
Communications. Our Communications industry group serves many of the worlds
leading wireline, wireless, cable and satellite communications companies. In fiscal year 2000, we served 19 of the 21 telecommunications companies in the Fortune Global 500. We provide a wide range of services designed to help our
communications clients increase margins and market share, improve customer retention, increase revenues, reduce overall costs and accelerate sales cycles. For instance, communications companies have extremely complex billing systems, and we believe
that our industry knowledge and experience have made us the industry leader in developing, implementing and operating billing systems tailored to our communications clients needs. We have expertise in next-generation networks, as demonstrated
by our numerous patent applications in areas such as high-speed networks, system architectures and bandwidth trading. Over the last decade, we have worked with many of the worlds leading communications companies on a number of strategic,
operational and systems consulting projects. For example, since 1998 we have been managing many of BellSouths applications as part of one of the largest information technology outsourcing arrangements in the telecommunications
industry.
|
|
|
Electronics & High Tech. Our Electronics & High Tech industry group serves the
aerospace, defense, electronics, high technology and network communications industries. In fiscal year 2000, we worked with 37 of the 47 aerospace, computer services and software, computer, office equipment, electronics, electrical equipment,
network communications, scientific, photo and control equipment companies in the Fortune Global 500. This industry group provides services in such areas as electronic commerce and strategy and supply chain management. For instance, we helped
Sharp build a Web-based system that enables the companys large network of office-products dealers and corporate customers to configure and purchase products online, ultimately improving order accuracy and reducing order cycle time. By
providing up-to-the-second order information, the new system enables Sharps customers to track the status of their orders online, greatly reducing costly telephone inquiries. We also helped Dell Computer upgrade its already world-class
manufacturing infrastructure as part of an accelerated supply-chain solution. A key
element was a rigorous process-reengineering program that enables Dell to keep no more than a few hours of inventory of parts and supplies on hand, substantially reducing inventory and carrying costs at its manufacturing facilities.
|
|
|
Media & Entertainment. Our Media & Entertainment industry group serves
entertainment, print and publishing companies, as well as innovative new ventures and Internet companies. In fiscal year 2000, we worked with five of the nine entertainment, printing and publishing companies in the Fortune Global 500. Our
Media & Entertainment industry group provides an array of services ranging from customer relationship management to digital content infrastructure. For instance, we have helped several media and entertainment clients design and build electronic
business solutions. We worked with Electronic Arts to design and develop their advanced gaming portal, EA.com. Additionally, we have helped our media and entertainment clients use digital content services and exploit mobile and broadband commerce.
For example, we played a central role in the launch of Qpass, a start-up backed by Accenture Technology Ventures that provides an end-to-end commerce infrastructure for processing transactions across the Internet, wireless and broadband
platforms.
|
Our Financial Services global market unit focuses on the growth opportunities being created by sophisticated customer
relationship management, increased consolidation, business-to-business exchanges, mobile commerce and the electronic enabling of front and back offices of financial, health care and insurance services companies.
The table below sets forth information about our Financial Services global market unit, including information about
revenues before reimbursements and number of employees, as well as a partial list of some of our largest clients for this global market unit:
|
|
Year ended
August 31, 2000
|
|
Nine months ended
May 31, 2001
|
Revenues before reimbursements (in millions): |
|
$2,542 |
|
|
$2,230 |
|
Percent of revenues before reimbursements: |
|
26 |
% |
|
26 |
% |
Number of employees as
of May 31, 2001: |
|
15,108 |
|
Clients
Allianz
Allstate Insurance
Company
AMP Limited
AXA Group
Banco Bilbao Vizcaya
Argentaria
Barclays Bank plc.
BSCH
Clearstream
International
Credit Suisse
Group
Deutsche Bank AG
|
|
Dresdner Bank Group
E*TRADE
The Goldman Sachs Group,
Inc.
J. P. Morgan Chase &
Co.
Lloyds TSB
London Stock
Exchange
UnitedHealth Group
Visa USA
Washington Mutual,
Inc.
Zurich Financial
Services
|
|
Our Financial Services global market unit comprises the following industry groups:
|
|
Banking. In fiscal year 2000, our Banking industry group worked with 49 of the 75
commercial and savings banks, diversified financials and securities companies in the Fortune Global 500. We also work with a variety of new entrants and innovators, such as on-line banks and brokerages. We help these organizations develop and
execute strategies to target, acquire and retain customers more effectively, expand product and service offerings, and leverage new technologies and distribution channels. For example, we helped E*TRADE define and implement its customer relationship
management strategy, which included developing the technology infrastructure and business processes required to generate customer insights. As a result, E*TRADE is able to develop targeted marketing campaigns and strengthen its customer
relationships. We consulted with Visa USA, one of the worlds largest consumer payment systems, as it modernized its core infrastructure, which supports clearing, settlement and authorization transactions between member banks and merchants.
This solution, called Visa Direct Exchange, allows transactions to be processed over a single, flexible, reliable and secure network and messaging architecture. This capability gives Visa USA the flexibility to grow its business to support more than
40 billion transactions annually, with peak capabilities of 10,000 transactions per second.
|
|
|
Health Services. Our Health Services industry group serves integrated healthcare
providers, health insurers, managed care organizations, biotech and life sciences companies and policy-making authorities. In fiscal year 2000, our Health Services industry group served five of the seven health care companies in the Fortune
Global 500. We are helping our clients in the health plan and health insurance area in North America accelerate their business by connecting consumers, physicians and other stakeholders through electronic commerce. For example, we helped
Highmark Blue Cross Blue Shield develop and execute an electronic consumer health management strategy, including separate portals for consumers, providers, groups and agents. In Europe, we are helping create new connections between governments,
physicians and insurers.
|
|
|
Insurance. Our Insurance industry group helps property and casualty insurers,
life insurers, reinsurance firms and insurance brokers improve business processes, develop Internet insurance businesses and improve the quality and consistency of risk selection decisions. In fiscal year 2000, we served 25 of the 53 insurance
companies in the Fortune Global 500. For example, we have been helping Pacific Life design and implement an innovative service capability for its agent network. Components of the solution include automated document management and workflow and
a knowledge management application. These components, coupled with a new technology infrastructure, are designed to enable Pacific Life to continue its high-end product and services strategy while enhancing the capabilities of its employees to
service Pacific Lifes multiple distribution systems and complex product suite. We also help insurers take advantage of the opportunities provided by convergence within the financial services industry. For instance, we helped AMP, one of
Australias leading insurance and investment institutions, create a direct bank within just eight months of AMPs decision to proceed. In conjunction with AMP staff, we designed and delivered a solution that supports secured and unsecured
lending, deposit-taking and credit cards. In addition, our Insurance industry group has also developed a claims management capability that enables insurers to provide better customer service while optimizing claims costs.
|
Our Products global market unit comprises six industry groups: Automotive, Consumer Goods & Services, Industrial
Equipment, Pharmaceuticals & Medical Products, Retail, and Transportation & Travel Services.
The table below sets forth information about our Products global market unit, including information about revenues
before reimbursements and number of employees, as well as a partial list of some of our largest clients for this global market unit:
|
|
Year ended
August 31, 2000
|
|
Nine months ended
May 31, 2001
|
Revenues before reimbursements (in millions): |
|
$1,891 |
|
|
$1,708 |
|
Percent of revenues before reimbursements: |
|
19 |
% |
|
20 |
% |
Number of employees as
of May 31, 2001: |
|
10,347 |
|
Clients
Adecco SA
AstraZeneca
Auchan
B |