Accenture Reports Second-Quarter Earnings

Company Achieves Record Revenues, New Bookings and Cash Flow

NEW YORK; March 30, 2004 – Accenture (NYSE: ACN) today reported results for the second quarter of fiscal 2004, ended Feb. 29, 2004, which include its highest-ever quarterly net revenues, new bookings and cash flow from operations.

Revenues before reimbursements (“net revenues”) for the second quarter were $3.30 billion, compared with $2.83 billion for the second quarter of fiscal 2003, an increase of 17 percent in U.S. dollars and 8 percent in local currency.

Diluted earnings per share for the quarter were $0.22. This includes a pre-tax restructuring charge of $107 million as the result of a global consolidation of office space, which reduced earnings per share by $0.07. The real estate consolidation will further reduce fixed costs and produce ongoing savings. Diluted earnings per share for the second quarter of fiscal year 2003 were $0.25.

Operating income for the second quarter of 2004 was $307 million, representing 9.3 percent of net revenues, compared with $368 million, or 13.0 percent of net revenues, for the second quarter last fiscal year. Operating income excluding the restructuring charge related to real estate consolidation was $415 million, or 12.6 percent of net revenues, for the second quarter of fiscal 2004.

In the second quarter of fiscal 2004, Accenture accrued variable compensation expense of $64 million. During the second quarter of fiscal 2003, Accenture did not accrue variable compensation expense and reversed $6 million of previously accrued variable compensation expense.

Gross margin (gross profit as a percentage of net revenues) in the second quarter of fiscal 2004 was 33.0 percent, versus 35.7 percent in the same quarter last year and 34.1 percent in the first quarter of fiscal 2004. The decline reflects the continuing shift in the company’s business mix toward outsourcing as well as ongoing pricing pressures. Gross margin in the second quarter of this fiscal year included variable compensation expense of $52 million, or 1.6 percent of net revenues. The three Communications & High Tech contracts with lower-than-expected margins identified in the first quarter of this fiscal year did not have a material effect on margins in the second quarter and should not affect the company’s ability to meet earnings and cash flow targets for the fiscal year.

Selling, general and administrative costs for the second quarter of fiscal 2004 were $675 million, or 20.4 percent of net revenues, compared with $656 million, or 23.2 percent of net revenues, for the second quarter of fiscal 2003.

The company’s effective tax rate for the second quarter of fiscal 2004 was 34.8 percent, compared with 38.0 percent for the second quarter last fiscal year. As previously stated, Accenture’s effective tax rate for the full fiscal year 2004 is expected to be 34.8 percent.

Income before minority interest for the second quarter of fiscal 2004 was $220 million. This includes the restructuring charge related to real estate consolidation, which, after taxes, reduced income before minority interest by $70 million. Income before minority interest for the second quarter of fiscal 2003 was $250 million.

Accenture’s total cash balance at Feb. 29, 2004, was $2.85 billion, compared with $2.33 billion at Nov. 30, 2003. Cash combined with $305 million of liquid fixed-income securities classified as investments on the company’s balance sheet totaled $3.16 billion at Feb. 29, 2004. For the six months ended Feb. 29, 2004, operating cash flow was $986 million, compared with $612 million for the same period last fiscal year. Free cash flow, defined as operating cash flow net of property and equipment additions of $101 million, was $885 million for the six months ended Feb. 29, 2004, compared with $533 million for the same period last year. Reflecting improvements in billing and collections, Accenture had 40 days services outstanding at Feb. 29, 2004, compared with 48 days services outstanding at the end of the second quarter last year and 49 days services outstanding at the end of the first quarter this year. Total debt at Feb. 29, 2004, was $52 million, up slightly from $50 million at Nov. 30, 2003.

“We are pleased with our results for the second quarter, which reflect a pickup in our consulting business and the continued growth of our outsourcing business. Our balance sheet remains strong, with a significant increase in cash during the quarter,” said Joe W. Forehand, Accenture chairman and CEO. “In addition, at $7.65 billion, new bookings in our second quarter were our highest quarterly bookings ever, with $2.89 billion in consulting bookings and $4.76 billion in outsourcing bookings, positioning us for further growth.”

Consulting and Outsourcing Net Revenues

Net Revenues by Operating Group

Net Revenues by Geographic Region

Business Outlook

For the third quarter of fiscal 2004, Accenture expects net revenues to be in the range of $3.40 billion to $3.55 billion and is comfortable with consensus earnings of $0.30 per share on a GAAP basis.

For the full fiscal year 2004, Accenture expects net revenue growth, including any future impact of EITF 00-21, to be in the range of 11 percent to 14 percent and GAAP earnings per share for the full fiscal year to be between $1.13 and $1.15 per share. The Company anticipates that this earnings-per-share range will allow it to accrue between $100 million and $200 million of variable compensation for the full fiscal year.

Also for the full fiscal year 2004, Accenture continues to expect operating cash flow to be in the range of $1.6 billion to $1.8 billion; property and equipment additions to be in the range of $300 million to $350 million; and free cash flow to be in the range of $1.3 billion to $1.5 billion. The Company continues to target new bookings for fiscal year 2004 in the range of $18 billion to $20 billion.

Standard & Poor’s Core Earnings*

In order to provide investors with an additional perspective, Accenture presents core earnings using Standard & Poor’s Core Earnings* methodology in addition to reporting earnings on a GAAP basis. Accenture’s S&P Core Earnings* calculation principally reflects adjustments to add back minority interest, includes stock option and related compensation expense, excludes non-operational items such as net gains or losses on investments, and excludes reversals of restructuring charges into income.

For the second quarter of fiscal 2004, Accenture’s core earnings were $203 million, or $0.20 per fully diluted share, compared with $199 million, or $0.20 per fully diluted share, for the comparable period of fiscal 2003. Accenture’s core earnings per share of $0.20 for the second quarter of fiscal 2004 compare with reported GAAP fully diluted earnings per share of $0.22.

Accenture’s core earnings were calculated in consultation with Standard & Poor’s Corporate Value Consulting division to ensure consistency with the S&P Core Earnings* methodology. (A full reconciliation to GAAP earnings with notes is attached.)

Conference Call and Webcast Details

Accenture will host a conference call at 8:00 a.m. ET today to discuss its second-quarter fiscal 2004 financial results. To participate, please dial +1 (888) 428-4480 [+1 (651) 291-0561 outside the United States, Puerto Rico and Canada] approximately 15 minutes before the scheduled start of the call. The conference call will also be accessible live on the Investor Relations section of the Accenture Web site at www.accenture.com.

A replay of the conference call will be available online at www.accenture.com and via telephone by dialing +1 (800) 475-6701 [+1 (320) 365-3844 outside the United States, Puerto Rico and Canada] and entering access code 724766 from 1:00 p.m. ET Tuesday, March 30, through 11:59 p.m. ET Tuesday, April 13.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and technologies to help clients improve their performance. With approximately 90,000 people in 48 countries, the company generated net revenues of US$11.8 billion for the fiscal year ended Aug. 31, 2003. Its home page is www.accenture.com.

Forward-Looking Statements

This news release contains forward-looking statements relating to our operations and results of operations, the accuracy of which is necessarily subject to risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and the factors discussed under the “Risk Factors” heading in the Business section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Accenture undertakes no duty to update any forward-looking statements made in this news release or to conform such statements to actual results or changes in Accenture’s expectations.

ACCENTURE LTD
CONSOLIDATED INCOME STATEMENT
For the Three Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
2004
2003
% of Net
Revenues
% of Net
Revenues
REVENUES:
Revenues before reimbursements (Net revenues) $ 3,302,209 100% $ 2,826,196 100%
Reimbursements 380,095 12 362,827 13
Revenues 3,682,304 112 3,189,023 113
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses 2,212,547 67 1,816,706 64
Reimbursable expenses 380,095 12 362,827 13
Cost of services 2,592,642 79 2,179,533 77
Sales and marketing 358,662 11 369,631 13
General and administrative costs 316,133 10 286,033 10
Reorganization benefit 107,438 3 (13,995) 0
Total operating expenses 3,374,875 102 2,821,202 100
OPERATING INCOME 307,429 9.3 367,821 13.0
Gain (loss) on investments, net 3,332 0 1,465 0
Interest income 15,187 0 10,824 0
Interest expense (5,816) 0 (4,501) 0
Other income (expense) 17,765 1 27,385 1
Equity in losses of affiliates (516) 0 (9) 0
INCOME BEFORE TAXES 337,831 10 402,985 14
Provision for taxes 117,408 4 153,134 5
INCOME BEFORE MINORITY INTEREST 219,973 7 249,851 9
Minority interest (96,884) (3) (131,130) (5)
NET INCOME $ 123,089 4 $ 118,721 4
EARNINGS PER SHARE:
Basic $ 0.23 $ 0.25
Diluted $ 0.22 $ 0.25
WEIGHTED AVERAGE SHARES:
Basic 544,052,062 467,077,408
Diluted 998,003,396 997,771,990
ACCENTURE LTD
CONSOLIDATED INCOME STATEMENT
For the Six Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
2004
2003
% of Net
Revenues
% of Net
Revenues
REVENUES:
Revenues before reimbursements (Net revenues) $ 6,563,794 100% $ 5,756,154 100%
Reimbursements 692,998 11 760,316 13
Revenues 7,256,792 111 6,516,470 113
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses 4,363,437 66 3,590,903 62
Reimbursable expenses 692,998 11 760,316 13
Cost of services 5,056,435 77 4,351,219 76
Sales and marketing 709,259 11 725,464 13
General and administrative costs 655,489 10 656,764 11
Reorganization benefit 21,040 0 (13,995) 0
Total operating expenses 6,442,223 98 5,719,452 99
OPERATING INCOME 814,569 12.4 797,018 13.8
Gain (loss) on investments, net 3,830 0 5,270 0
Interest income 25,610 0 19,917 0
Interest expense (11,567) 0 (11,037) 0
Other income (expense) 19,291 0 25,610 0
Equity in losses of affiliates (1,202) 0 (539) 0
INCOME BEFORE TAXES 850,531 13 836,239 15
Provision for taxes 295,984 5 317,771 6
INCOME BEFORE MINORITY INTEREST 554,547 8 518,468 9
Minority interest (257,118) (4) (272,876) (5)
NET INCOME $ 297,429 5 $ 245,592 4
EARNINGS PER SHARE:
Basic $ 0.56 $ 0.53
Diluted $ 0.55 $ 0.52
WEIGHTED AVERAGE SHARES:
Basic 531,738,351 467,598,703
Diluted 1,009,403,593 1,000,088,568
ACCENTURE LTD
SUMMARY OF REVENUES
For the Three and Six Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
% increase/ (decrease) US$
% increase/ (decrease) Local currency
% of Total 2003 Net Revenues
Feb 29, 2004
Feb 28, 2003
OPERATING GROUPS
Communication & High Tech $ 930,812 $ 786,444 18% 12% 28%
Financial Services 647,531 570,249 14% 4% 20%
Government 467,926 361,560 29% 23% 14%
Products 715,386 642,190 11% 3% 22%
Resources 538,268 463,717 16% 8% 16%
Other 2,286 2,036 12% n/m 0%
TOTAL Net Revenues 3,302,209 2,826,196 17% 8% 100%
Reimbursements 380,095 362,827 5%
TOTAL REVENUES $ 3,682,304 $ 3,189,023 15%
GEOGRAPHY
Americas $ 1,501,120 $ 1,345,433 12% 9% 45%
EMEA 1,575,653 1,289,872 22% 7% 48%
Asia Pacific 225,436 190,892 18% 6% 7%
TOTAL Net Revenues 3,302,209 2,826,196 17% 8% 100%
Reimbursements 380,095 362,827 5%
TOTAL REVENUES $ 3,682,304 $ 3,189,023 15%
Six Months Ended
% increase/ (decrease) US$
% increase/ (decrease) Local currency
% of Total 2003 Net Revenues
Feb 29, 2004
Feb 28, 2003
OPERATING GROUPS
Communication & High Tech $ 1,809,822 $ 1,616,451 12% 6% 27%
Financial Services 1,293,580 1,172,171 10 1 20
Government 946,145 720,498 31 25 14
Products 1,416,527 1,291,808 10 2 22
Resources 1,092,895 950,985 15 7 17
Other 4,825 4,241 14 n/m 0
TOTAL Net Revenues 6,563,794 5,756,154 14 6 100
Reimbursements 692,998 760,316 (9) - -
TOTAL REVENUES $ 7,256,792 $ 6,516,470 11 - -
GEOGRAPHY
Americas $ 2,992,689 $ 2,737,727 9 7 45
EMEA 3,125,783 2,620,499 19 5 48
Asia Pacific 445,322 397,928 12 1 7
TOTAL Net Revenues 6,563,794 5,756,154 14 6 100
Reimbursements 692,998 760,316 (9) - -
TOTAL REVENUES $ 7,256,792 $ 6,516,470 11 - -
n/m = not meaningful
Table (operatingincomebyoperatinggroup)
ACCENTURE LTD
OPERATING INCOME BY OPERATING GROUP
For the Three Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars)
(Unaudited)
Operating Income as Reported
February 29, 2004
February 28, 2003
Operating Income
% of OG Net Revenues
Operating Income
% of OG Net Revenues
Increase (Decrease)
US$
Percent
OPERATING GROUPS (OG)
Communications & High Tech $ 59,488 6.4 % $ 91,653 11.7 % $ (32,165) 35%
Financial Services 62,139 9.6% 75,718 13.3 % (13,579) (18) %
Government 43,271 9.2% 53,583 14.8 % (10,312) (19%)
Products 96,015 13.4% 106,512 16.6% (10,497) (10%)
Resources 46,783 8.7% 40,355 8.7% 6,428 (16%)
Other (267) n/m - - (267) n/m
TOTAL Operating Income 307,429 9.3% 367,821 13.0% (60,392) (16%)
Operating Income Excluding Restructuring Costs and Reorganization Benefit (1)
February 29, 2004
February 28, 2003
Operating Income
% of OG Net Revenues
Operating Income
% of OG Net Revenues
Increase (Decrease)
US$
Percent
OPERATING GROUPS
Communications & High Tech $ 86,486 9.3 $ 88,169 11.2 $ (1,683) (2)
Financial Services 85,758 13.2 72,839 12.8 12,919 18
Government 59,072 12.6 51,513 14.2 7,559 15
Products 119,546 16.7 103,418 16.1 16,128 16
Resources 64,272 11.9 37,887 8.2 26,385 70
Other (267) n/m - - (267) n/m
Total Operating Income 414,867 12.6 353,826 12.5 61,041 17
n/m = not meaningful
[1] For the three months ended February 29, 2004, Accenture recorded restructuring costs of $107,256 relating to the Company’s global consolidation of office space and reorganization costs of $182. For the three months ended February 28, 2003, Accenture recorded a benefit of $13,995 relating to a decrease in reorganization liabilities established in connection with Accenture’s transition to a corporate structure in 2001. These amounts are excluded from the table.
ACCENTURE LTD
OPERATING INCOME BY OPERATING GROUP
For the Six Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars)
(Unaudited)
Operating Income as Reported
February 29, 2004
February 28, 2003
Operating Income
% of OG Net Revenues
Operating Income
% of OG Net Revenues
Increase (Decrease)
US$
Percent
OPERATING GROUPS (OG)
Communications & High Tech $ 134,520 7.4 % $ 183,793 11.4% $ (49,273) (27) %
Financial Services 165,819 12.8% 173,834 14.8% (8,015) (5)%
Government 137,174 14.5% 120,360 16.7% 16,814 14%
Products 229,852 16.2% 229,432 17.8% 420 -
Resources 147,204 13.5% 89,599 9.4% 57,605 64%
Other - - - - - -
TOTAL Operating Income 814,569 12.4% 797,018 13.8% 17,551 2%
Operating Income Excluding Restructuring Costs and Reorganization Benefit (1)
February 29, 2004
February 28, 2003
Operating Income
% of OG Net Revenues
Operating Income
% of OG Net Revenues
Increase (Decrease)
US$
Percent
OPERATING GROUPS
Communications & High Tech $ 139,808 7.7 $ 180,309 11.2 $ (40,501) (22)
Financial Services 170,487 13.2 170,955 14.6 (468) -
Government 140,266 14.8 118,290 16.4 21,976 19
Products 234,449 16.6 226,338 17.5 8,111 4
Resources 150,599 13.8 87,131 9.2 63,468 73
Other - - - - - -
Total Operating Income 835,609 12.7 783,023 13.6 52,586 7
n/m = not meaningful
[1] For the six months ended February 29, 2004, Accenture recorded restructuring costs of $107,256 relating to the Company’s global consolidation of office space and a benefit of $86,216 resulting from final determinations of certain reorganization liabilities established in connection with Accenture’s transition to a corporate structure in 2001. For the six months ended February 28, 2003, Accenture recorded a benefit of $13,995 relating to a decrease in reorganization liabilities established in connection with Accenture’s transition to a corporate structure in 2001. These amounts are excluded from the table.
ACCENTURE LTD
CONSOLIDATED BALANCE SHEETS
February 29, 2004 and August 31, 2003
(In thousands of U.S. dollars)
February 29, 2003
August 31, 2003
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,853,615 $ 2,332,161
Restricted cash 83,280
Short-term investments 125,898
Receivables from clients, net 1,457,191 1,416,153
Unbilled services 1,048,276 828,515
Other current assets 397,640 377,102
Total current assets 5,882,620 5,037,211
NON-CURRENT ASSETS:
Investments 212,105 33,330
Property and equipment, net 606,612 650,455
Other non-current assets 817,660 738,244
Total non-current assets 1,636,377 1,422,029
TOTAL ASSETS $ 7,518,997 $ 6,459,240
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt $ 38,021 $ 46,162
Accounts payable 513,669 573,201
Deferred revenues 935,433 676,841
Accrued payroll and related benefits 1,194,593 974,319
Other accrued liabilities 1,363,754 1,080,573
Total current liabilities 4,045,470 3,351,096
NON-CURRENT LIABILITIES:
Long-term debt 13,578 13,955
Other non-current liabilities 1,354,702 1,416,395
Total non-current liabilities 1,368,280 1,430,350
MINORITY INTEREST 940,350 883,586
EQUITY:
Shareholders’ equity 1,164,897 794,208
Total equity 1,164,897 794,208
TOTAL LIABILITIES AND EQUITY $ 7,518,997 $ 6,459,240
ACCENTURE LTD
CORE EARNINGS CALCULATION USING STANDARD & POOR’S CORE EARNINGS* METHODOLOGY
For the Three Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars)
(Unaudited)
2004
2003
Notes
Net Income $ 123,089 $ 118,721
S&P Core Earnings* Adjustments
Minority interest relating to Accenture SCA and Accenture Canada Holdings, Inc. (net of tax) 96,987 131,798 [A]
220,076 250,519
Include:
Employee stock option and share purchase plan expense (34,895) (45,547) [B]
Pension adjustments 11,733 (4,644) [C]
Exclude:
(Gain) loss on investments, net, excluding SFAS 133 (3,354) (1,450) [D]
(Gain) loss on disposal of property and equipment 2,641 (10,829) [E]
Charges/reversals relating to prior-period reorganization costs 182 (13,995) [F]
S&P Core Earnings* Adjustments before taxes (23,693) (76,465)
Tax effect 6,548 24,485 [G]
S&P Core Earnings* Adjustments, net (17,145) (51,980)
S&P Core Earnings* $ 202,931 $ 198,539
EPS, S&P Core Earnings* (Diluted) $ 0.20 $ 0.20
EPS, GAAP (Diluted) $ 0.22 $ 0.25
Weighted Average Diluted Shares Outstanding 998,003,396 997,771,990 [H]
S&P Core Earnings* and EPS, S&P Core Earnings* (Diluted) are non-GAAP financial measures
ACCENTURE LTD
CORE EARNINGS CALCULATION USING STANDARD & POOR’S CORE EARNINGS* METHODOLOGY
For the Six Months Ended February 29, 2004 and February 28, 2003
(In thousands of U.S. dollars)
(Unaudited)
2004
2003
Notes
Net Income $ 297,429 $ 245,592
S&P Core Earnings* Adjustments
Minority interest relating to Accenture SCA and Accenture Canada Holdings, Inc. (net of tax) 257,145 274,064 [A]
554,574 519,656
Include:
Employee stock option and share purchase plan expense (74,345) (105,331) [B]
Pension adjustments 23,768 (10,085) [C]
Exclude:
(Gain) loss on investments, net, excluding SFAS 133 (3,402) (5,222) [D]
(Gain) loss on disposal of property and equipment 4,446 (6,592) [E]
Charges/reversals relating to prior-period reorganization costs (86,216) (13,995) [F]
S&P Core Earnings* Adjustments before taxes (135,749) (141,225)
Tax effect 43,795 44,162 [G]
S&P Core Earnings* Adjustments, net (91,954) (97,063)
S&P Core Earnings* $ 462,620 $ 422,593
EPS, S&P Core Earnings* (Diluted) $ 0.46 $ 0.42
EPS, GAAP (Diluted) $ 0.55 $ 0.52
Weighted Average Diluted Shares Outstanding 1,009,403,593 1,000,088,568 [H]
S&P Core Earnings* and EPS, S&P Core Earnings* (Diluted) are non-GAAP financial measures

NOTES TO STANDARD & POOR'S CORE EARNINGS* ADJUSTMENTS

(Unaudited)
[A] Some of our partners and former partners and their permitted transferees own shares in our subsidiary Accenture SCA and in our subsidiary Accenture Canada Holdings, Inc., which are non transferable except by exchange for shares in Accenture Ltd (or for cash at the Company’s option). The shareholders of Accenture SCA and Accenture Canada Holdings, Inc. have substantially the same rights and economic interests as Accenture Ltd shareholders and are subject to the same restrictions. In addition, we view and operate the business as a single enterprise. We similarly focus on the results of Accenture as a whole as we believe that this better reflects the substance of the overall Accenture corporate structure. Therefore, the minority interest related to these shareholders is added back to Net Income. Net income before Minority interest is also consistent with diluted shares, which assume the conversion of all minority Accenture SCA and Accenture Canada Holdings Inc. shares on a one for one basis.
[B] As we elect to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for employee stock options and share purchase rights rather than the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation," in which stock options and share purchase rights are expensed, we have deducted the amount as computed under SFAS 123 in accordance with the S&P Core Earnings* methodology. The impact of income taxes and minority interests is shown in the following table:
Three Months Ended
Six Months Ended
February 29,
2004
February 28,
2003
February 29,
2004
February 28,
2003
Employee stock options and share purchase rights expense, before tax and minority interest $ 34,895 $ 45,547 $ 74,345 $ 105,331
Income tax benefit (10,468) (13,664) (22,303) (31,599)
Minority interest (10,717) (16,774) (23,939) (38,879)
Employee stock option and purchase plan expense, net of tax and minority interest $ 13,710 $ 15,109 $ 28,103 $ 34,853
[C] Under the S&P Core Earnings* methodology, pension service costs and interest costs (to the extent that interest cost exceeds actual returns on assets) are included in the Company's core earnings. Other items, such as expected returns on plan assets and amortization of gains and losses and prior service costs, are not included in the S&P Core Earnings* methodology. Pension expense computed under generally accepted accounting principles has been adjusted to reflect service costs, interest costs, and actual returns on pension plan assets.
[D] Under the S&P Core Earnings* methodology, investment gains and losses are not considered a part of the Company's normal, or core, business. As such, these items are excluded from S&P Core Earnings*. No adjustment is required for SFAS 133 items for purposes of calculating S&P Core Earnings*. The adjustment represents Gain (loss) on investments, net, as reported under generally accepted accounting principles adjusted for a SFAS No. 133 (loss) and gain of $(21) million and $15 million for the three months ended February 29, 2004 and February 28, 2003, respectively, and gains of $428 million and $49 million for the six months ended February 29, 2004 and February 28, 2003, respectively.
[E] Under the S&P Core Earnings* methodology, gains and losses on disposal of property, plant and equipment are excluded from core earnings.
[F] In connection with our transition to a corporate structure in 2001, Accenture recorded tax related re-organization costs of $455 million. For the three and six months ended February 29, 2004, Accenture recorded a benefit of $0 and $86 million, respectively, related to this charge. For both the three and six months ended February 28, 2003, Accenture recorded a benefit of $14 million related to this charge. Under the S&P Core Earnings* methodology, amounts relating to restructuring charges recorded in prior periods do not relate to the on-going operations and are excluded from the calculation of core earnings. Previously reported core earnings for the second quarter of fiscal 2003 have been restated to conform to the current-year presentation.
[G] Under the S&P Core Earnings* methodology, we have applied the statutory federal tax rate of 35% to the S&P Core Earnings* adjustments with the exception of stock options and share purchase rights. Stock options and share purchase rights are tax affected using a 30% tax rate, which is consistent with the rate used in our financial statement disclosures and represents our best estimate of the tax benefit related to stock options and share purchase rights.
[H] Diluted shares outstanding represent average shares outstanding for purposes of computing Diluted Earnings Per Share under generally accepted accounting standards, as well as Diluted Earnings Per Share under S&P Core Earnings* methodology.
* Standard & Poor's Corporate Value Consulting ("S&P CVC") has reviewed Accenture's calculation of Core Earnings for consistency with Standard & Poor's Core Earnings methodology. This review was based solely on financial information generated by Accenture; Standard & Poor's has not conducted any review or undertaken to investigate or verify, and is not responsible for, the basis, adequacy, accuracy or completeness of the information used in Accenture's calculation of Core Earnings. Standard & Poor's review has been limited solely to the application of the Standard & Poor's Core Earnings methodology to the specific financial information generated, prepared and provided by Accenture; Standard & Poor's makes no representation as to the adequacy or accuracy of Accenture’s financial information used in the calculation. Standard & Poor's has no duty to update its review of Accenture's calculation of Core Earnings. Standard & Poor's Core Earnings methodology is published on Standard & Poor's web site at www.standardandpoors.com
# # #

Roxanne Taylor

+1 (917) 452 5106

roxanne.taylor@accenture.com