EPS of $0.56 for quarter and $1.59 for year exceed company’s expectations
Company resolves NHS matter; reported results reflect impact of agreement announced today
Company declares cash dividend of $0.35 per share
NEW YORK; Sept. 28, 2006 — Accenture (NYSE: ACN) reported record financial results and the successful resolution of previously reported issues with its contracts with the National Health Service (NHS) in England.
“I’m delighted that we have resolved the NHS contracts, arriving at an agreement that benefits all parties, is clearly in the best interest of our shareholders, and puts this matter successfully behind us,” said William D. Green, Accenture’s chairman and CEO. “Our results for the quarter and the year clearly demonstrate the strength and momentum of our business. We had record revenues for the fifth consecutive year. We exceeded our outlook for EPS for both the quarter and the full year. We achieved solid bookings in both consulting and outsourcing, demonstrating strong demand for our services. Our cash flows are exceptionally strong. And we continue to return cash to shareholders, repurchasing more than $2 billion of our shares during the year and declaring our second annual cash dividend.”
Accenture’s results include the financial impact of the agreement announced earlier today resolving the NHS matter (the Agreement), which resulted in a reduction of Accenture’s net revenues in the fourth quarter of $339 million. This reduction in net revenues was offset by a corresponding decrease in cost of services. As a result, there was no impact on operating income or EPS for the quarter.
Financial Review
Fourth Quarter 2006
Net Revenues
Revenues before reimbursements (“net revenues”) for the fourth quarter of fiscal 2006 were $3.97 billion, including the impact of the Agreement, which resulted in a reduction of consulting net revenues in the fourth quarter of $339 million. Net revenues of $3.97 billion for the fourth quarter of fiscal 2006 compare with $3.92 billion for the fourth quarter of fiscal 2005, flat in local currency and an increase of 1 percent in U.S. dollars. Absent the impact of the Agreement, net revenues for the fourth quarter were $4.31 billion, an increase of 8 percent in local currency and 10 percent in U.S. dollars.
As previously reported, Accenture began expensing stock options and employee stock purchase plans on Sept. 1, 2005, in accordance with SFAS 123R. Therefore, in addition to providing year-over-year GAAP comparisons, the company is presenting results for the fourth quarter and full fiscal year 2005 on an options-adjusted basis to provide meaningful comparisons on relevant metrics.
EPS
The table below shows diluted EPS for the fourth quarter of fiscal 2006 on a GAAP basis and adjusted for reorganization benefits and the previously announced tax benefit recorded in June, along with diluted EPS for the fourth quarter of fiscal 2005 on a GAAP basis and adjusted for reorganization benefits and options expense. On an adjusted basis, diluted EPS for the fourth quarter of fiscal 2006 increased 22 percent over the same period of fiscal 2005.
Diluted Earnings Per Share
For the Three Months Ended
2006
2005
Earnings per share — as reported (GAAP)
Pro forma stock option and employee share purchase plan compensation expense, net of tax
Subtotal
Tax impact of prior-period reorganization benefits
Tax benefit recorded in June
Earnings per share — as adjusted
Operating Income
The table below shows operating income for the fourth quarter of fiscal 2006 on a GAAP basis and as adjusted for the Agreement, as well as for the same period of fiscal 2005 on a GAAP basis and as adjusted for options expense. On an adjusted basis, operating income for the fourth quarter of fiscal 2006 increased 14 percent, to $501 million, and operating margin expanded 40 basis points, to 11.6 percent of net revenues, over the fourth quarter last year.
Operating Income (US$ millions)
For the Three Months Ended
2006
2005
Operating income — as reported (GAAP)
% of net revenues
Pro forma stock option and employee share purchase plan compensation expense
Impact of the Agreement
Operating income — as adjusted
% of net revenues (adjusted for the Agreement)
Gross Margin
The table below shows gross margin (gross profit as percentage of net revenues) for the fourth quarter of fiscal 2006 on a GAAP basis and as adjusted for the Agreement, as well as for the same period of fiscal 2005 on a GAAP basis and as adjusted for options expense. On an adjusted basis, gross margin for the fourth quarter of fiscal 2006 increased to 31.4 percent from 31.3 percent in the fourth quarter last year.
Gross Margin
For the Three Months Ended
2006
2005
Gross margin
Gross margin — adjusted for pro forma stock option and employee share purchase plan compensation expense
Gross margin — adjusted for the Agreement
Selling, general and administrative (SG&A) expenses for the fourth quarter were $844 million, or 21.3 percent of net revenues. Excluding the impact of the Agreement, SG&A expenses were 19.6 percent of net revenues, which compares with fourth-quarter fiscal 2005 SG&A expenses of 19.8 percent of net revenues on a GAAP basis and 19.9 percent of net revenues on an options-adjusted basis.
The company’s effective tax rate for the fourth quarter was 4.5 percent, reflecting the impact of the $143 million tax benefit recorded in June.
GAAP income before minority interest for the fourth quarter was $502 million, compared with $363 million, or $314 million on an options-adjusted basis, for the same period of fiscal 2005.
For the three months ended Aug. 31, 2006, operating cash flow was $812 million, and property and equipment additions were $97 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $715 million.
Fiscal Year 2006
Net Revenues
Net revenues for fiscal 2006, which include the impact of the Agreement, were $16.65 billion, compared with $15.55 billion for fiscal 2005, an increase of 9 percent in local currency and 7 percent in U.S. dollars.
EPS
The table below shows diluted EPS for the full fiscal year 2006 on a GAAP basis and adjusted for reorganization benefits, the June tax benefit, and the net impact of the Agreement and second-quarter NHS adjustments, along with diluted EPS for the full fiscal year 2005 on a GAAP basis and adjusted for reorganization benefits and options expense. As a result of reductions in reorganization liabilities, Accenture recorded a reorganization benefit of $72 million in fiscal 2006. In fiscal 2005, Accenture recorded a net reorganization benefit of $89 million in fiscal 2005, comprising a $115 million reorganization benefit, less a $26 million interest expense on reorganization liabilities. On an adjusted basis, diluted EPS for fiscal 2006 increased 26 percent over diluted EPS for fiscal 2005.
Diluted Earnings Per Share
For the 12 Months Ended
2006
2005
Earnings per share — as reported (GAAP)
Pro forma stock option and employee share purchase plan compensation expense, net of tax
Subtotal
Impact of reorganization benefits
Tax benefit recorded in June
Subtotal
Impact of the Agreement
Q2 NHS adjustments
Earnings per share — as adjusted
Operating Income
The table below shows operating income for the full fiscal year 2006 on a GAAP basis and as adjusted for reorganization benefits, the Agreement and second-quarter NHS adjustments, as well as for the full fiscal year 2005 on a GAAP basis and as adjusted for reorganization benefits and options expense. On an adjusted basis, operating income for fiscal 2006 increased 17 percent, to $2.11 billion, and operating margin expanded 80 basis points, to 12.4 percent of net revenues, over fiscal 2005.
Operating Income (US$ millions)
For the 12 Months Ended
2006
2005
Operating income — as reported (GAAP)
% of net revenues
Impact of reorganization benefits
Pro forma stock option and employee share purchase plan compensation expense
Impact of the Agreement
Q2 NHS adjustments
Operating income — as adjusted
% of net revenues (adjusted for the Agreement)
Gross Margin
The table below shows gross margin (gross profit as a percentage of net revenues) for the full fiscal year 2006 on a GAAP basis and as adjusted for the Agreement and second-quarter NHS adjustments, as well as for the full fiscal year 2005 on a GAAP basis and as adjusted for options expense. On an adjusted basis, gross margin for fiscal 2006 increased to 31.6 percent from 31.4 percent in fiscal 2005.
Gross Margin
For the 12 Months Ended
2006
2005
Gross margin
Gross margin — adjusted for pro forma stock option and employee share purchase plan compensation expense
Gross margin —adjusted for the Agreement and Q2 NHS adjustments
Selling, general and administrative (SG&A) expenses for the full fiscal year were $3.20 billion, or 19.2 percent of net revenues. Excluding the impact of the Agreement and the second-quarter NHS adjustments, SG&A expenses were $3.23 billion, or 19.0 percent of net revenues. This compares with fiscal 2005 SG&A expenses of $3.07 billion, or 19.7 percent of net revenues, on a GAAP basis and $3.08 billion, or 19.8 percent of net revenues, on an options-adjusted basis.
Accenture’s annual effective tax rate for the full fiscal year 2006 was 25.5 percent.
GAAP income before minority interest for the full fiscal year was $1.43 billion, compared with $1.51 billion on a GAAP basis and $1.36 billion on an options-adjusted basis for fiscal 2005.
For the year ended Aug. 31, 2006, operating cash flow was $2.67 billion, well above the company’s expected range of $2.10 billion to $2.20 billion, and property and equipment additions were $306 million. Free cash flow, defined as operating cash flow net of property and equipment additions, was $2.36 billion, exceeding the company’s previous outlook of $1.75 billion to $1.85 billion. For the year ended Aug. 31, 2005, operating cash flow was $1.89 billion, property and equipment additions were $318 million and free cash flow was $1.57 billion.
Accenture’s total cash balance at Aug. 31, 2006 was $3.07 billion, compared with $2.48 billion at Aug. 31, 2005 and $2.79 billion at May 31, 2006. Cash combined with $463 million of fixed-income securities classified as investments on the company’s balance sheet was $3.53 billion at Aug. 31, 2006, compared with $3.18 billion at Aug. 31, 2005 and $3.12 billion at May 31, 2006. Total debt at Aug. 31, 2006 was $52 million.
New Bookings
Fourth Quarter 2006
New bookings for the fourth quarter totaled $4.92 billion.
Fiscal Year 2006
New bookings for the full fiscal year 2006 totaled $20.4 billion, at the upper end of the company’s previously stated outlook of $19 billion to $21 billion.
Dividend
Accenture Ltd has declared a cash dividend of $0.35 per share on Accenture Class A common shares for shareholders of record at the close of business on Oct. 13, 2006, and Accenture SCA will declare a cash dividend of $0.35 per share on Class I common shares for shareholders of record at the close of business on Oct. 5, 2006. These dividends, both payable on Nov. 15, 2006, represent an increase over the $0.30 per share dividend the company paid last year.
Share Repurchase Activity
During the fourth quarter of fiscal 2006, Accenture repurchased or redeemed 9.2 million shares for a total of approximately $260 million.
During the full fiscal year 2006, Accenture repurchased or redeemed 83.8 million shares, for a total of $2.09 billion.
At Aug. 31, 2006, Accenture had $1.92 billion of share repurchase authority remaining.
Accenture’s board of directors recently approved the use of up to an additional $773 million in connection with Accenture SCA’s offer to redeem up to 26.3 million of its Class I common shares at a price not greater than $24.75 per share. The offer is expected to expire at midnight EDT on Oct. 6, 2006.
Business Outlook
Fiscal Year 2007
For the full fiscal year 2007, Accenture expects net revenue growth to be in the range of 9 percent to 12 percent in local currency. The company now expects GAAP diluted EPS for the full fiscal year to be in the range of $1.77 to $1.82.
The company expects operating cash flow to be $1.95 billion to $2.15 billion; property and equipment additions to be $335 million; and free cash flow to be in the range of $1.6 billion to $1.8 billion. The annual effective tax rate is expected to be in the range of 34 percent to 37 percent. Accenture is targeting new bookings for fiscal 2007 in the range of $22 billion to $24 billion.
First Quarter Fiscal 2007
Accenture expects net revenues for the first quarter of fiscal 2007 to be in the range of $4.45 billion to $4.65 billion.
Conference Call and Webcast Details
Accenture will host a conference call at 4:30 p.m. EDT today to discuss its fourth-quarter and full-year 2006 financial results. To participate, please dial +1 (800) 230-1096 [+1 (612) 288-0337 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 and podcast of the conference call will be available online at www.accenture.com for approximately two weeks beginning at 9:45 p.m. EDT today, Thursday, Sep. 28. The replay will also be available via telephone by dialing +1 (800) 475-6701 [+1 (320) 365-3844 outside the United States, Puerto Rico and Canada] and entering access code 842205 from 9:45 p.m. EDT Thursday, Sept. 28 through 11:59 p.m. EDT Thursday, Oct. 12.
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 140,000 people in 48 countries, the company generated net revenues of US$16.65 billion for the fiscal year ended Aug. 31, 2006. 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 and other documents filed with or furnished to 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.
Non-GAAP Financial Information
This press release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to Accenture’s financial statements as prepared under generally accepted accounting principles (GAAP) are included in this press release. Accenture’s management believes providing investors with this information gives additional insights into Accenture’s results of operations. While Accenture’s management believes that these non-GAAP financial measures are useful in evaluating Accenture’s operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.
CONSOLIDATED INCOME STATEMENTS
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended August 31,
Year Ended August 31,
(Unaudited)
(Unaudited)
(Unaudited)
REVENUES:
Revenues before reimbursements (Net revenues)
$3,966,052
100%
$3,924,579
100%
$16,646,391
100%
$15,547,029
100%
Reimbursements
422,859
384,475
1,581,975
1,547,391
Revenues
4,388,911
4,309,054
18,228,366
17,094,420
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses
2,614,862
65.9%
2,631,385
67.0%
11,652,352
70.0%
10,454,830
67.2%
Reimbursable expenses
422,859
384,475
1,581,975
1,547,391
Cost of services
3,037,721
3,015,860
13,234,327
12,002,221
Sales and marketing
452,533
11.4%
401,166
10.2%
1,708,256
10.2%
1,558,266
10.0%
General and administrative costs
391,526
9.9%
377,229
9.6%
1,492,690
9.0%
1,511,952
9.7%
Reorganization costs (benefits), net
6,064
5,611
(47,966)
(89,257)
Total operating expenses
3,887,844
3,799,866
16,387,307
14,983,182
OPERATING INCOME
501,067
12.6%
509,188
13.0%
1,841,059
11.1%
2,111,238
13.6%
(Loss) gain on investments, net
(1,227)
2,163
2,018
21,468
Interest income
43,042
30,977
129,547
108,236
Interest expense
(7,051)
(4,984)
(21,146)
(23,973)
Other (expense) income
(9,698)
5,125
(27,811)
(10,967)
INCOME BEFORE INCOME TAXES
526,133
13.3%
542,469
13.8%
1,923,667
11.6%
2,206,002
14.2%
Provision for income taxes
23,758
179,738
490,535
697,097
INCOME BEFORE MINORITY INTEREST
502,375
12.7%
362,731
9.2%
1,433,132
8.6%
1,508,905
9.7%
Minority interest in Accenture SCA and Accenture Canada Holdings Inc.
(150,749)
(127,439)
(447,382)
(556,485)
Minority interest – other (1)
(5,181)
(6,157)
(12,421)
(11,946)
NET INCOME
$346,445
8.7%
$229,135
5.8%
$973,329
5.8%
$940,474
6.0%
CALCULATION OF EARNINGS PER SHARE:
Net income
$346,445
$229,135
$973,329
$940,474
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (2)
150,749
127,439
447,382
556,485
Net income for diluted earnings per share calculation
$497,194
$356,574
$1,420,711
$1,496,959
EARNINGS PER SHARE:
Basic
$0.58
$0.39
$1.65
$1.60
Diluted
$0.56
$0.38
$1.59
$1.56
WEIGHTED AVERAGE SHARES:
Basic
592,545,040
584,088,816
589,099,824
588,505,335
Diluted
880,535,375
931,041,385
893,810,585
960,853,814
Cash Dividends Per Share
$ —
$ —
$0.30
$ —
[1]
Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc.
[2]
Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares on a one-for-one basis.
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT, AS REPORTED (GAAP),
TO CONSOLIDATED INCOME STATEMENT ON AN ADJUSTED BASIS (NON-GAAP)
For the Three Months Ended August 31, 2006
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
(GAAP)Adjustments
% of Net Revenues
REVENUES:
Revenues before reimbursements (Net revenues)
$3,966,052
$338,904
(1)
$4,304,956
100%
Reimbursements
422,859
-
422,859
Revenues
4,388,911
338,904
4,727,815
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses
2,614,862
338,904
(1)
2,953,766
68.6%
Reimbursable expenses
422,859
-
422,859
Cost of services
3,037,721
338,904
3,376,625
Sales and marketing
452,533
-
452,533
10.5%
General and administrative costs
391,526
-
391,526
9.1%
Reorganization costs, net
6,064
40
(2)
6,104
Total operating expenses
3,887,844
338,944
4,226,788
OPERATING INCOME
501,067
(40)
501,027
11.6%
Loss on investments, net
(1,227)
-
(1,227)
Interest income
43,042
-
43,042
Interest expense
(7,051)
-
(7,051)
Other expense
(9,698)
-
(9,698)
INCOME BEFORE INCOME TAXES
526,133
(40)
526,093
12.2%
Provision for income taxes
23,758
149,953
(3)
173,711
INCOME BEFORE MINORITY INTEREST
502,375
(149,993)
352,382
8.2%
Minority interest in Accenture SCA and Accenture Canada Holdings Inc
(150,749)
-
(150,749)
Minority interest – other (4)
(5,181)
-
(5,181)
NET INCOME
$346,445
$(149,993)
$196,452
4.6%
CALCULATION OF EARNINGS PER SHARE:
Net income
$346,445
$196,452
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (5)
150,749
150,749
Net income for diluted earnings per share calculation
$497,194
$347,201
EARNINGS PER SHARE:
Basic
$0.58
$0.33
Diluted
$0.56
$0.39
WEIGHTED AVERAGE SHARES:
Basic
592,545,040
592,545,040
Diluted
880,535,375
880,535,375
[1]
Adjustments include the financial impact of the resolution of the National Health Service (NHS) matter, resulting in a $338,904 reduction to Revenues, offset by a corresponding decrease in Cost of services.
[2]
Adjustment represents reorganization benefits recorded during the quarter.
[3]
Adjustments include $142,928 of tax benefit recorded in June and the tax impact of prior-period reorganization benefits of $7,025.
[4]
Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc.
[5]
Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares on a one-for-one basis.
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT, AS REPORTED (GAAP),
TO CONSOLIDATED INCOME STATEMENT ON AN ADJUSTED BASIS (NON-GAAP)
For the Year Ended August 31, 2006
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
(GAAP)Adjustments
% of Net Revenues
REVENUES:
Revenues before reimbursements (Net revenues)
$16,646,391
$338,904
(1)
$16,985,295
100%
Reimbursements
1,581,975
-
1,581,975
Revenues
18,228,366
338,904
18,567,270
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses
11,652,352
(31,096)
(1)
11,621,256
68.4%
Reimbursable expenses
1,581,975
-
1,581,975
Cost of services
13,234,327
(31,096)
13,203,231
Sales and marketing
1,708,256
20,000
(1)
1,728,256
10.2%
General and administrative costs
1,492,690
8,000
(1)
1,500,690
8.8%
Reorganization (benefits) costs, net
(47,966)
72,362
(2)
24,396
Total operating expenses
16,387,307
69,266
16,456,573
OPERATING INCOME
1,841,059
269,638
2,110,697
12.4%
Gain on investments, net
2,018
-
2,018
Interest income
129,547
-
129,547
Interest expense
(21,146)
-
(21,146)
Other expense
(27,811)
-
(27,811)
INCOME BEFORE INCOME TAXES
1,923,667
269,638
2,193,305
12.9%
Provision for income taxes
490,535
247,928
(3)
738,463
INCOME BEFORE MINORITY INTEREST
1,433,132
21,710
1,454,842
8.6%
Minority interest in Accenture SCA and Accenture Canada Holdings Inc
(447,382)
-
(447,382)
Minority interest – other (4)
(12,421)
-
(12,421)
NET INCOME
$973,329
$21,710
$995,039
5.9%
CALCULATION OF EARNINGS PER SHARE:
Net income
$973,329
$995,039
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (5)
447,382
447,382
Net income for diluted earnings per share calculation
$1,420,711
$1,442,421
EARNINGS PER SHARE:
Basic
$1.65
$1.69
Diluted
$1.59
$1.61
WEIGHTED AVERAGE SHARES:
Basic
589,099,824
589,099,824
Diluted
893,810,585
893,810,585
| [1] | Adjustments include the financial impact of the resolution of the National Health Service (NHS) matter in the fourth quarter, resulting in a $338,904 reduction to Revenues, offset by a corresponding decrease in Cost of services and the net NHS adjustments of $342 million recorded in the second quarter. |
| [2] | Adjustment represents reorganization benefits recorded during the quarter. |
| [3] | Adjustments represent $142,928 of tax benefit recorded in June and $105,000 in tax benefit resulting from the NHS adjustments recorded in the second quarter. |
| [4] | Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc. |
| [5] | Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares on a one-for-one basis. |
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT, AS REPORTED (GAAP),
TO CONSOLIDATED INCOME STATEMENT ON AN OPTIONS-ADJUSTED BASIS (NON-GAAP)
For the Three Months Ended August 31, 2005
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
As Reported
(GAAP)Adjustments(3)
Options- Adjusted (Non-GAAP)
% of Net Revenues
REVENUES:
Revenues before reimbursements (Net revenues)
$3,924,579
-
$3,924,579
100%
Reimbursements
384,475
-
384,475
Revenues
4,309,054
-
4,309,054
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses
2,631,385
64,650
2,696,035
68.7%
Reimbursable expenses
384,475
-
384,475
Cost of services
3,015,860
64,650
3,080,510
Sales and marketing
401,166
1,728
402,894
10.2%
General and administrative costs
377,229
2,766
379,995
9.7%
Reorganization costs, net
5,611
-
5,611
Total operating expenses
3,799,866
69,144
3,869,010
OPERATING INCOME
509,188
(69,144)
440,044
11.2%
Gain on investments, net
2,163
-
2,163
Interest income
30,977\
-
30,977
Interest expense
(4,984)
-
(4,984)
Other expense
5,125
-
5,125
INCOME BEFORE INCOME TAXES
542,469
(69,144)
473,325
12.1%
Provision for income taxes
179,738
(20,758)
158,980
INCOME BEFORE MINORITY INTEREST
362,731
(48,386)
314,345
8.0%
Minority interest in Accenture SCA and Accenture Canada Holdings Inc
(127,439)
15,054
(112,385)
Minority interest – other (1)
(6,157)
-
(6,157)
NET INCOME
$229,135
$(33,332)
$195,803
5.0%
CALCULATION OF EARNINGS PER SHARE:
Net income
$229,135
$195,803
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (2)
127,439
112,385
Net income for diluted earnings per share calculation
$356,574
$308,188
EARNINGS PER SHARE:
Basic
$0.39
$0.34
Diluted
$0.38
$0.33
Basic
584,088,816
584,088,816
Diluted
931,041,385
931,041,385
[1]
Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc.
[2]
Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares, on a one-for-one basis.
[3]
Adjustments represent the estimated amounts that Accenture would have incurred if it had expensed employee stock options and employee share purchase plans for the three months ended August 31, 2005.
RECONCILIATION OF CONSOLIDATED INCOME STATEMENT, AS REPORTED (GAAP),
TO CONSOLIDATED INCOME STATEMENT ON AN OPTIONS-ADJUSTED BASIS (NON-GAAP)
For the Year Ended August 31, 2005
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
As Reported
(GAAP)Adjustments(3)
Options- Adjusted (Non-GAAP)
% of Net Revenues
REVENUES:
Revenues before reimbursements (Net revenues)
$15,547,029
-
$15,547,029
100%
Reimbursements
1,547,391
-
1,547,391
Revenues
17,094,420
-
17,094,420
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable expenses
10,454,830
203,423
10,658,253
68.6%
Reimbursable expenses
1,547,391
-
1,547,391
Cost of services
12,002,221
203,423
12,205,644
Sales and marketing
1,558,266
5,439
1,563,705
10.0%
General and administrative costs
1,511,952
8,703
1,520,655
9.8%
Reorganization benefits, net
(89,257)
-
(89,257)
Total operating expenses
14,983,182
217,565
15,200,747
OPERATING INCOME
2,111,238
(217,565)
1,893,673
12.2%
Gain on investments, net
21,468
-
21,468
Interest income
108,236
-
108,236
Interest expense
(23,973)
-
(23,973)
Other expense
(10,967)
-
(10,967)
INCOME BEFORE INCOME TAXES
2,206,002
(217,565)
1,988,437
12.8%
Provision for income taxes
697,097
(65,189)
631,908
INCOME BEFORE MINORITY INTEREST
1,508,905
(152,376)
1,356,529
8.7%
Minority interest in Accenture SCA and Accenture Canada Holdings Inc.
(556,485)
54,136
(502,349)
Minority interest – other (1)
(11,946)
-
(11,946)
NET INCOME
$940,474
$(98,240)
$842,234
5.4%
CALCULATION OF EARNINGS PER SHARE:
Net income
$940,474
$842,234
Minority interest in Accenture SCA and Accenture Canada Holdings Inc. (2)
556,485
502,349
Net income for diluted earnings per share calculation
$1,496,959
$1,344,583
EARNINGS PER SHARE:
Basic
$1.60
$1.43
Diluted
$1.56
$1.40
Basic
588,505,335
588,505,335
Diluted
960,853,814
960,853,814
[1]
Minority interest – other is comprised primarily of minority interest attributable to the minority shareholders of Avanade, Inc.
[2]
Diluted earnings per share assumes the redemption and exchange of all Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares, respectively, for Accenture Ltd Class A common shares on a one-for-one basis.
[3]
Adjustments represent the estimated amounts that Accenture would have incurred if it had expensed employee stock options and employee share purchase plans for the year ended August 31, 2005.
SUMMARY OF REVENUES
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended
August 31, 2006(Unaudited)
August 31, 2005(Unaudited)
Percent
Increase
(Decrease) US$ Percent Increase
(Decrease) Local
Currency Percent of
Total 2006
Net Revenues
OPERATING GROUPS
Communication & High Tech
$1,024,208
$1,009,356
1%
0%
26%
Financial Services
948,237
832,716
14%
11%
24%
Government
426,473
549,296
(22%)
(22%)
11%
Products
872,692
923,703
(6%)
(6%)
22%
Resources
689,014
607,396
13%
11%
17%
Other
5,428
2,112
n/m
n/m
—
TOTAL Net Revenues
3,966,052
3,924,579
1%
0%
100%
Reimbursements
422,859
384,475
10%
TOTAL REVENUES
$4,388,911
$4,309,054
2%
GEOGRAPHY
Americas
$1,969,465
$1,857,778
6%
5%
50%
EMEA
1,645,535
1,788,346
(8%)
(10%)
41%
Asia Pacific
351,052
278,455
26%
27%
9%
TOTAL Net Revenues
$3,966,052
$3,924,579
1%
0%
100%
TYPE OF WORK
Consulting (1)
$2,193,446
$2,375,613
(8%)
(9%)
55%
Outsourcing
1,772,606
1,548,966
14%
12%
45%
TOTAL Net Revenues
$3,966,052
$3,924,579
1%
0%
100%
Year Ended
August 31, 2006 (Unaudited)
August 31, 2005
Percent Increase (Decrease)US$
Percent Increase
Local
Currency Percent of
Total 2006
Net Revenues
OPERATING GROUPS
Communication & High Tech
$4,177,061
$4,001,347
4%
6%
25%
Financial Services
3,558,147
3,408,166
4%
7%
22%
Government
2,221,121
2,171,458
2%
4%
13%
Products
4,010,698
3,569,975
12%
15%
24%
Resources
2,665,778
2,388,845
12%
12%
16%
Other
13,586
7,238
n/m
n/m
—
TOTAL Net Revenues
16,646,391
15,547,029
7%
9%
100%
Reimbursements
1,581,975
1,547,391
2%
TOTAL REVENUES
$18,228,366
$17,094,420
7%
GEOGRAPHY
Americas
$7,741,139
$6,729,626
15%
14%
46%
EMEA
7,643,712
7,734,932
(1%)
3%
46%
Asia Pacific
1,261,540
1,082,471
17%
20%
8%
TOTAL Net Revenues
$16,646,391
$15,547,029
7%
9%
100%
TYPE OF WORK
Consulting
$9,892,128
$9,559,157
3%
6%
59%
Outsourcing
6,754,263
5,987,872
13%
14%
41%
TOTAL Net Revenues
$16,646,391
$15,547,029
7%
9%
100%
n/m = not meaningful
[1]
Consulting Net Revenues excluding the $338,904 reduction in Revenues related to the resolution of the National Health Service matter were $2,532,350 for the three months ended August 31, 2006.
OPERATING INCOME BY OPERATING GROUP (OG)
(In thousands of U.S. dollars)
(Unaudited)
Operating Income as Reported (GAAP)
Three Months Ended August 31,
2006
2005
Operating Groups
Operating Income
Percent of OG
Net RevenuesOperating Income
Percent of OG Net Revenues
Percent Increase (Decrease)
Communications & High Tech
$107,192
10%
$162,838
16%
(34%)
Financial Services
78,309
8%
113,950
14%
(31%)
Government
92,242
22%
39,945
7%
131%
Products
134,847
15%
111,948
12%
20%
Resources
88,477
13%
80,507
13%
10%
Total
$501,067
12.6%
$509,188
13.0%
(2%)
Operating Income on an Options-Adjusted Basis and
Excluding Reorganization Benefits (Non-GAAP)
Three Months Ended August 31,
2006
2005
Operating Groups
Reorg. Benefits (1)
Adjusted Operating Income
Percent of OG Net Revenues
Options Adjs. (2)
Reorg. Benefits (1)
Adjusted Operating Income
Percent of OG Net Revenues
Percent Increase (Decrease)
Communications & High Tech
$11
$107,181
10%
$16,517
$160
$146,161
14%
(27%)
Financial Services
10
78,299
8%
16,777
139
97,034
12%
(19%)
Government
4
92,238
22%
8,314
97
31,534
6%
193%
Products
9
134,838
15%
16,267
159
95,522
10%
41%
Resources
6
88,471
13%
11,269
98
69,140
11%
28%
Total
$40
$501,027
12.6%
$69,144
$653
$439,391
11.2%
14%
[1]
Represents reorganization benefits related to certain reorganization liabilities established in connection with Accenture’s transition to a corporate structure in 2001, which are included in Reorganization costs (benefits), net on the Income statement.
[2]
Adjustments represent the estimated amounts that Accenture would have incurred if it had expensed employee stock options and employee share purchase plans for the three months ended August 31, 2005.
OPERATING INCOME BY OPERATING GROUP (OG)
(In thousands of U.S. dollars)
(Unaudited)
Operating Income as Reported (GAAP)
Year Ended August 31,
2006
2005
Operating Groups
Operating Income
Percent of OG
Net RevenuesOperating Income
Percent of OG Net Revenues
Percent Increase (Decrease)
Communications & High Tech
$630,502
15%
$673,183
17%
(6%)
Financial Services
387,786
11%
499,647
15%
(22%)
Government (1)
83,416
4%
168,736
8%
(51%)
Products (1)
399,853
10%
413,188
12%
(3%)
Resources
339,502
13%
356,484
15%
(5%)
Total
$1,841,059
11.1%
$2,111,238
13.6%
(13%)
Operating Income on an Options-Adjusted Basis and
Excluding Reorganization Benefits (Non-GAAP)
Year Ended August 31,
2006
2005
Operating Groups
Reorg. Benefits (2)
Adjusted Operating Income
Percent of OG Net Revenues
Options Adjs. (3)
Reorg. Benefits (2)
Adjusted Operating Income
Percent of OG Net Revenues
Percent Increase (Decrease)
Communications & High Tech
$17,194
$613,308
15%
$51,415
$27,670
$594,098
15%
3%
Financial Services
14,911
372,875
10%
52,273
26,463
420,911
12%
(11%)
Government (1)
10,988
72,428
3%
27,230
17,346
124,160
6%
(42%)
Products (1)
17,751
382,102
10%
51,780
27,179
334,229
9%
14%
Resources
11,518
327,984
12%
34,867
16,786
304,831
13%
8%
Total
$72,362
$1,768,697
10.6%
$217,565
$115,444
$1,778,229
11.4%
(1%)
[1]
Includes the impact of the resolution of the National Health Service (NHS) matter and the second-quarter NHS adjustments.
[2]
Represents reorganization benefits related to certain reorganization liabilities established in connection with Accenture’s transition to a corporate structure in 2001, which are included in Reorganization costs (benefits), net on the Income statement.
[3]
Adjustments represent the estimated amounts that Accenture would have incurred if it had expensed employee stock options and employee share purchase plans for the year ended August 31, 2005.
CONSOLIDATED BALANCE SHEETS
August 31, 2006 and August 31, 2005
(In thousands of U.S. dollars)
August 31, 2006
(Unaudited)August 31, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$3,066,988
$2,483,990
Short-term investments
352,951
463,460
Receivables from clients, net
1,916,450
1,752,937
Unbilled services
1,350,211
1,353,676
Other current assets
667,221
631,204
Total current assets
7,353,821
6,685,267
NON-CURRENT ASSETS:
Unbilled services
105,081
472,430
Investments
125,119
262,873
Property and equipment, net
727,692
693,710
Other non-current assets
1,106,367
843,072
Total non-current assets
2,064,259
2,272,085
TOTAL ASSETS
$9,418,080
$8,957,352
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt
$24,792
$31,072
Accounts payable
856,087
807,317
Deferred revenues
1,511,259
1,284,303
Accrued payroll and related benefits
1,693,796
1,430,998
Other accrued liabilities
1,730,548
1,377,443
Total current liabilities
5,816,482
4,931,133
NON-CURRENT LIABILITIES:
Long-term debt
27,065
44,116
Other non-current liabilities
812,400
1,304,230
Total non-current liabilities
839,465
1,348,346
MINORITY INTEREST
867,878
980,959
SHAREHOLDERS' EQUITY
1,894,255
1,696,914
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$9,418,080
$8,957,352
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