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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 2003
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BearingPoint, Inc.
(Exact name of registrant as specified in its charter)
Delaware 001-31451 22-3680505
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1676 International Drive
McLean, VA 22102
(Address of principal executive offices)
(703) 747-3000
(Registrant's telephone number, including area code)
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Item 5. Other Events
On April 30, 2003, BearingPoint, Inc. (the "Company" or "BearingPoint")
announced its financial results for the third quarter of fiscal 2003.
The Company reported gross revenue of $821.3 million for the third
quarter of fiscal year 2003, up 41.0% over the third quarter of the prior year.
Similarly, net revenue increased 43.1% from a year ago to $628.3 million. The
growth in revenue occurred in both the core (pre-acquisition) business and as a
result of acquisitions and other transactions. The North American portion of the
Company's core (pre-acquisition) business grew 6.0% year over year and 4.7% over
the previous quarter.
Net income for the Company's third quarter of fiscal year 2003 was $12.4
million or $0.06 per share. The results include the impact of an $11.9 million
charge (net of tax) that pertained to a previously announced workforce reduction
program. Excluding the impact of this charge, operating earnings were $24.3
million or $0.13 per share. The Company reported net income of $23.7 million or
$0.15 per share in the third quarter of fiscal year 2002.
Also during the Company's third quarter, BearingPoint strengthened its
management by adding two executives to its leadership team: Robert Falcone as
executive vice president and chief financial officer, and Christopher Formant as
executive vice president for Financial Services, North America.
Highlights from the current quarter results include the following key
performance items:
. Net income of $12.4 million, or $0.06 per share in the third quarter of
fiscal year 2003, was consistent with guidance set forth at the beginning
of the quarter. These results compare to net income and earnings per
share of $16.4 million and $0.09 for the three months ended December 31,
2002, and $23.7 million and $0.15 for the three months ended March 31,
2002. The Company's operating earnings and operating earnings per share
in the third quarter were $24.3 million and $0.13, respectively, which
excludes the impact of the previously announced reduction in workforce
charge of $11.9 million (net of tax).
. Gross revenue in the third quarter of fiscal year 2003 was $821.3
million, an increase of $239.0 million, or 41.0%, from $582.3 million in
the third quarter of fiscal year 2002. This increase was predominantly
due to the impact of the international acquisitions and other
transactions and growth in the North American portion of the Company's
core (pre-acquisition) business, which was up 6.0% year over year. Gross
revenue also increased $13.4 million from $807.9 million in the previous
quarter. Gross revenue increased 4.7% in North America over the previous
quarter. Our core (pre-acquisition) business includes our operations in
North America (including the personnel hired from Andersen Business
Consulting in the United States) and our operations in the Asia Pacific
and Latin America regions, Israel, and Ireland before the acquisitions
and other transactions involving international Andersen Business
Consulting units, and the German, Austrian and Swiss consulting practices
formerly known as KPMG Consulting AG (KCA).
. Gross revenue, based on management's estimates, in the third quarter of
fiscal year 2003 for our core (pre-acquisition) business increased when
compared to the previous quarter and the quarter ended March 31, 2002.
The quarterly increase was primarily the result of increases in four of
our five North America business units (Public Services, Consumer and
Industrial Markets, Financial Services and High Technology) and our core
Asia Pacific practice. Year over year growth was primarily attributable
to three of our five North America business units (Public Services,
Consumer and Industrial Markets and Financial Services) plus our Asia
Pacific and Latin America core practices.
. Our acquisitions and other transactions in the first half of fiscal year
2003 significantly expanded our international presence and diversified
our revenue base. For the quarter ended March 31,
2003, North America generated 68.6% of consolidated gross revenue, while
EMEA, Asia Pacific and Latin America contributed 19.2%, 10.2% and 2.0%,
respectively. By comparison, for the third quarter of the prior fiscal
year, North America contributed 91.4% of gross revenue, with EMEA, Asia
Pacific and Latin America providing 1.0%, 5.9% and 1.7%, respectively.
The Company also continues to effectively manage its cost structure and
focus on the following key performance indicators:
. Other direct contract expenses, as a percentage of gross revenue,
decreased to 23.5% compared to 24.6% in the third quarter of the prior
year. The improvement as a percentage of gross revenue was primarily due
to the Company's effort to limit the use of subcontractors and travel
expenses.
. Professional compensation costs increased as a percentage of gross
revenue from 38.5% a year ago to 45.9% in this quarter. This increase was
primarily because the additional operations that were added during that
period of time through acquisitions and other transactions had a higher
percentage of professional compensation cost to gross revenue than the
existing operations had in the same quarter of the prior year.
. Other costs of service, as a percentage of gross revenue, decreased to
8.1% compared to 8.8% in the third quarter of the prior year. This
improvement was created by a decline in bad debt expense and decreased
discretionary spending as a result of cost control initiatives.
. Selling, general and administrative expenses, as a percentage of gross
revenue, decreased to 18.8% compared to 19.6% in the third quarter of the
prior year. This decrease is principally due to reduced infrastructure
costs and the decline in spending on rebranding. Rebranding costs
incurred in the quarter were $4.7 million, down from $15.0 million in the
previous quarter.
. For the nine months ended March 31, 2003, the Company reported gross
revenue of $2.4 billion, which represents an increase of $592.4 million,
or 33.2%, over the nine months ended March 31, 2002. Net revenue
increased 37.3% for the same period in the prior year. The growth in
revenue is predominantly the result of growth in our core
(pre-acquisition) business and acquisitions and other transactions
completed in the first half of fiscal year 2003.
. Net income for the nine months ended March 31, 2003 was $44.0 million or
$0.24 per share compared to a net loss of $27.3 million or $0.17 per
share, for the same period in the prior year. Included in the prior
year's results was an $80.0 million or $0.50 per share, transitional
impairment charge related to the cumulative effect of a change in
accounting principle. Net income before cumulative effect of change in
accounting principle for the nine months ended March 31, 2002 was $52.7
million or $0.33 per share.
SELECTED FINANCIAL DATA
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Three Months Ended Nine Months Ended
March 31, March 31,
US dollars in thousands, 2003 2002 2003 2002
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except per share data
Revenue $ 821,325 $ 582,305 $ 2,376,796 $ 1,784,414
Expenses 797,035 532,831 2,288,728 1,672,620
Net Income - GAAP Basis 12,388 23,748 43,958 (27,302)
Operating Earnings (a) 24,253 23,748 55,823 65,441
Net Income Applicable to
Common Shares 12,388 23,748 43,958 (27,188)
Common Shares Outstanding:
Average - Diluted 190,855,015 159,620,010 184,217,158 158,799,651
Period End 191,701,143 158,009,240 191,701,143 158,009,240
Earnings per Share:
GAAP Basis - Basic and Diluted $ 0.06 $ 0.15 $ 0.24 $ (0.17)
Operating Basis - Basic and Diluted (a) $ 0.13 $ 0.15 $ 0.30 $ 0.41
Utilization Rate (Total NA) 69% 70% 65% 66%
Gross Billing Rate (Total NA) $ 222 $ 229 $ 219 $ 228
Average Billable Headcount (Global) 13,915 7,875 13,656 8,195
Total Headcount (Period End) 15,847 9,176 15,847 9,176
Reconciliation of Net Income to Operating Earnings (a)
Net Income - GAAP Basis $ 12,388 $ 23,748 $ 43,958 $ (27,302)
Add Back (net of tax):
Workforce Reduction Program 11,865 - 11,865 11,283
Software License Impairment Charge - - - 1,500
Change in Accounting Principle - - - 79,960
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Operating Earnings (a) $ 24,253 $ 23,748 $ 55,823 $ 65,441
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(a) Operating earnings and operating earnings per share are non-GAAP financial
measures. The company believes that adjusting net income to reflect either
non-recurring items (e.g., software license impairment charge) or items that do
not contribute to the operating earnings of the company (i.e., workforce
reduction program) provides useful information to investors regarding the
company's results of operations.
STATEMENTS OF INCOME - QUARTERLY
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Three Months Ended % of Three Months Ended % of
US dollars in thousands, March 31, Gross March 31, Gross
except per share data 2003 Revenue 2002 Revenue
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Revenue $ 821,325 100.0% $ 582,305 100.0%
Other Direct Contract Expenses (193,053) (23.5) (143,254) (24.6)
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Net Revenue 628,272 76.5 439,051 75.4
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Costs of Service
Professional Compensation 376,979 45.9 224,206 38.5
Other Costs of Service 66,870 8.1 51,322 8.8
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Total Costs of Service 443,849 54.0 275,528 47.3
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Gross Margin 184,423 22.5 163,523 28.1
Selling, General & Administrative 154,188 18.8 113,995 19.6
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Operating Income 30,235 3.7 49,528 8.5
Interest Income / (Expense), Net (4,513) (0.5) 277 0.0
Other (1,432) (0.2) (331) (0.1)
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Income before Taxes 24,290 3.0 49,474 8.5
Income Tax Expense 11,902 1.4 25,726 4.4
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Net Income - GAAP Basis 12,388 1.5 23,748 4.1
Workforce Reduction Program (net of tax) 11,865 1.4 - -
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Operating Earnings (a) $ 24,253 3.0% $ 23,748 4.1%
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Performance Metrics
Net Income Applicable to Common $ 12,388 $ 23,748
Basic and Diluted Net Income
per Share - GAAP Basis $ 0.06 $ 0.15
Basic and Diluted Operating
Earnings per Share (a) $ 0.13 $ 0.15
Utilization Rate (Total NA) 69% 70%
Efficiency Rate (Total NA) 75% 75%
Days Sales Outstanding (DSO) 69 58
(a) Operating earnings and operating earnings per share are non-GAAP financial
measures. The company believes that adjusting net income to reflect either
non-recurring items (e.g., software license impairment charge) or items that do
not contribute to the operating earnings of the company (i.e., workforce
reduction program) provides useful information to investors regarding the
company's results of operations.
STATEMENTS OF INCOME - YTD
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Nine Months Ended % of Nine Months Ended % of
US dollars in thousands, March 31, Gross March 31, Gross
except per share data 2003 Revenue 2002 Revenue
----------------- ------- ----------------- -------
Revenue $2,376,796 100.0% $1,784,414 100.0%
Other Direct Contract Expenses (535,486) (22.5) (442,990) (24.8)
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Net Revenue 1,841,310 77.5 1,341,424 75.2
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Costs of Service
Professional Compensation 1,078,555 45.4 717,038 40.2
Other Costs of Service 205,657 8.7 163,970 9.2
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Total Costs of Service 1,284,212 54.0 881,008 49.4
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Gross Margin 557,098 23.4 460,416 25.8
Selling, General & Administrative 459,213 19.3 348,170 19.5
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Operating Income 97,885 4.1 112,246 6.3
Interest Income/(Expense), Net (8,364) (0.4) 451 0.0
Other (1,453) (0.1) (903) (0.1)
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Income before Taxes 88,068 3.7 111,794 6.3
Income Tax Expense 44,110 1.9 59,136 3.3
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Income Before Cumulative Effect of Change
in Accounting Principle 43,958 1.8 52,658 3.0
Cumulative Effect of Change in Accounting
Principle - - 79,960 4.5
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Net Income - GAAP Basis 43,958 1.8 (27,302) (1.5)
Add Back:
Workforce Reduction Program (net of tax) 11,865 0.5 11,283 0.6
Software License Impairment Charge (net of tax) - - 1,500 0.1
Cumulative Effect of Accounting Change (net of tax) - - 79,960 4.5
---------- ----- ---------- -----
Operating Earnings (a) $ 55,823 2.3% $ 65,441 3.7%
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Performance Metrics
Net Income Applicable to Common $ 43,958 $ (27,188)
Basic and Diluted Net Income
per Share - GAAP Basis $ 0.24 $ (0.17)
Basic and Diluted Income Before
Cumulative Effect of Change
in Accounting Principle $ 0.24 $ 0.33
Basic and Diluted Operating
Earnings per Share (a) $ 0.30 $ 0.41
Utilization Rate (Total NA) 65% 66%
Efficiency Rate (Total NA) 74% 75%
Days Sales Outstanding (DSO) 69 58
(a) Operating earnings and operating earnings per share are non-GAAP financial
measures. The company believes that adjusting net income to reflect either
non-recurring items (e.g., software license impairment charge) or items that do
not contribute to the operating earnings of the company (i.e., workforce
reduction program) provides useful information to investors regarding the
company's results of operations.
BALANCE SHEET
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March 31, June 30,
US dollars in thousands 2003 2002
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ASSETS
Current Assets:
Cash and Cash Equivalents $ 44,360 $ 203,597
Accounts Receivable, Net 349,383 246,792
Unbilled Revenues, Net 270,307 128,883
Other Current Assets 110,597 67,941
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Total Current Assets 774,647 647,213
Property and Equipment, Net 106,039 60,487
Goodwill and Other Intangible Assets, Net 1,104,481 163,315
Other Assets 22,398 24,116
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Total Assets $ 2,007,565 $ 895,131
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LIABILITIES AND EQUITY
Current Liabilities:
Current Portion of Notes Payable $ 26,059 $ 1,846
Acquisition Obligation 22,497 16,653
Accounts Payable and Other Current Liabilities 463,968 264,796
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Total Current Liabilities 512,524 283,295
Long Term Portion of Notes Payable 297,685 -
Other Long Term Liabilities 62,968 9,966
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Total Liabilities 873,177 293,261
Total Equity 1,134,388 601,870
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Total Liabilities and Equity $ 2,007,565 $ 895,131
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Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 Press Release of BearingPoint, Inc., dated April 30, 2003.
Exhibit 99.2 Performance Report of BearingPoint, Inc., dated March 31, 2003.
Item 9. Regulation FD Disclosure
The following information is being furnished under Item 12 of Form 8-K.
On April 30, 2003, the Company issued a press release announcing its
financial results for the third quarter of fiscal year 2003 (see Exhibit 99.1)
and a Performance Report for the same fiscal period (see Exhibit 99.2).
Forward-Looking Statements
This Current Report on Form 8-K contains "forward-looking statements"
within the meaning of the United States Private Securities Litigation Reform Act
of 1995. These statements relate to the Company's operations that are based on
the Company's current expectations, estimates and projections. Words such as
"may," "will," "could," "would," "should," "anticipate," "predict," "potential,"
"continue," "expects," "intends," "plans," "projects," "believes," "estimates,"
and similar expressions are used to identify these forward-looking statements.
These statements are only predictions and as such are not guarantees of future
performance because they involve risks, uncertainties, and assumptions that are
difficult to predict. Forward-looking statements are based upon assumptions as
to future events or the Company's future financial performance 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. As a result,
these statements speak only as of the date they were made, and the Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The Company's actual results may differ from the forward-looking
statements for many reasons, including:
-- the business decisions of the Company's clients regarding the use of the
Company's services;
-- the timing of projects and their termination;
-- the availability of talented professionals to provide the Company's
services;
-- the pace of technological change;
-- the strength of the Company's joint marketing relationships;
-- the actions of the Company's competitors; and
-- unexpected difficulties associated with the Company's recent
acquisitions, group hires and other transactions involving BearingPoint
GmbH and the former Andersen Business Consulting Practices.
In addition, the Company's results and forward-looking statements could
be affected by general domestic and international economic and political
conditions, including the current slowdown in the economy, uncertainty as to the
future direction of the economy and vulnerability of the economy to domestic or
international incidents, as well as market conditions in the Company's industry.
For a more detailed discussion of certain of these factors, see "Factors
Affecting Future Financial Results" that is
attached as Exhibit 99.1 to the Company's Form 10-Q for the quarter ended
December 31, 2002, "Factors Affecting Future Financial Results" in the Company's
most recent Form 10-K and similar sections in the Company's filings with the
Securities and Exchange Commission, which describe risks and factors that could
cause results to differ materially from those projected in such forward-looking
statements. The Company cautions the reader that these risk factors may not be
exhaustive. The Company operates in a continually changing business environment,
and new risk factors emerge from time to time. Management cannot predict such
new risk factors, nor can it assess the impact, if any, of such new risk factors
on the Company's business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those implied by any
forward-looking statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 29, 2003 BearingPoint, Inc.
By:
/s/ Robert S. Falcone
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Robert S. Falcone
Executive Vice President and Chief
Financial Officer
Exhibit Index
Exhibit 99.1 Press Release of BearingPoint, Inc., dated April 30, 2003.
Exhibit 99.2 Performance Report of BearingPoint, Inc., dated March 31, 2003.