Prepared by R.R. Donnelley Financial -- Amendment #2 to Form S-1
 
As filed with the Securities and Exchange Commission on May 9, 2002.
Registration No. 333-84492

 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
ACCENTURE LTD
(Exact Name of Registrant as Specified in its Charter)
 
Bermuda
 
54161
 
98-0341111
(State or Other Jurisdiction of
Incorporation or Organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
 
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
(441) 296-8262
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s 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
 
John J. Huber
Raymond Y. Lin
Latham & Watkins
885 Third Avenue
New York, NY 10022
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
 
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.
 


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 May 8, 2002.
 
LOGO
    
98,498,696 Class A Common Shares
 

 
Accenture Ltd is offering 62,418,047 of the Class A common shares to be sold in the offering. The selling shareholders identified in this prospectus are offering an additional 36,080,649 Class A common shares.
 
The Class A common shares are listed on the New York Stock Exchange under the symbol “ACN.” The last reported sale price of the Class A common shares on May 8, 2002 was $22.22 per share.
 
See “Risk Factors” beginning on page 12 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.
 

 
    
Per Share

    
Total

Initial price to public
  
$
        
    
$
        
Underwriting discount
  
$
 
    
$
 
Proceeds, before expenses, to Accenture Ltd
  
$
 
    
$
 
Proceeds, before expenses, to the selling shareholders
  
$
 
    
$
 
 
To the extent that the underwriters sell more than 98,498,696 Class A common shares, the underwriters have the option to purchase up to an additional 14,774,804 Class A common shares from Accenture Ltd at the initial price to public less the underwriting discount.
 

 
The underwriters expect to deliver the shares in New York, New York on                     , 2002.
 

 
Goldman, Sachs & Co.
 
Morgan Stanley
 

 
Credit Suisse First Boston
 
Deutsche Bank Securities
JPMorgan
 
Salomon Smith Barney
UBS Warburg
Banc of America Securities LLC
Lehman Brothers
ABN AMRO Rothschild LLC
 
SG Cowen
  
Wachovia Securities
 

 
Prospectus dated                     , 2002.


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 and for the transfer of the Accenture Ltd Class A common shares which the selling shareholders 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 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.

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2


SUMMARY
 
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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our historical financial statements and related notes included elsewhere in this prospectus, before making an investment decision.
 
Accenture
 
Accenture is the world’s leading management consulting and technology services organization. We have more than 75,000 employees based in over 110 offices in 47 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 world’s leading companies and governments. We serve 89 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 the following five operating groups, 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 client’s industry.
 
                     









Communications
& High Tech
  
Financial Services
  
Products
  
Resources
  
Government









ŸCommunications
ŸElectronics &
High Tech
ŸMedia & Entertainment
  
ŸBanking
ŸHealth Services
ŸInsurance
  
ŸAutomotive
ŸConsumer Goods
& Services
ŸIndustrial Equipment
ŸPharmaceuticals
& Medical Products
ŸRetail
ŸTransportation & Travel Services
  
ŸChemicals
ŸEnergy
ŸForest Products
ŸMetals & Mining
ŸUtilities
  
ŸGovernment









Percent of revenues before reimbursements for the 12 months ended February 28, 2002
26%
  
24%
  
21%
  
18%
  
11%









 
We develop and deliver a full spectrum of services and solutions that address business opportunities and challenges common across industries through eight service lines and several of our solution units. Our service lines are responsible for developing our knowledge capital, world-class skills and innovative capabilities for clients across all of the industries we serve. Our solution units develop asset-based

3


scalable solutions that can be offered to multiple clients. We organize our service lines and the solution units that serve multiple industries into two capability groups, based on their applicability: Business Consulting and Technology & Outsourcing.
 
     



Business Consulting
 
Technology & Outsourcing



Ÿ Strategy & Business Architecture Service Line
Ÿ Customer Relationship Management Service Line
Ÿ Supply Chain Management Service Line
Ÿ Human Performance Service Line
Ÿ Finance & Performance Management Service Line
Ÿ e-peopleserve Solution Unit
Ÿ Accenture Learning Solution Unit
 
Ÿ Technology Research & Innovation Service Line
Ÿ Solutions Engineering Service Line
Ÿ Solutions Operations Service Line
Ÿ Avanade Solution Unit



 
Our affiliates and alliances enhance our management consulting and technology services 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, sometimes 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 today’s 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. Although we have not generated material revenues from our affiliates and alliances, we believe that our “network of businesses” approach — through which we enhance the service offerings of our operating groups and service lines with the insight into and access to emerging business models, solutions and technologies provided by our affiliates and alliances — 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 solutions and services that add value to our clients. We derive substantially all of our revenues from contracts for management consulting 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 consulting and technology services markets results from the fact that we have more consulting professionals than any other consulting firm, with nearly 54,000 professionals working within our operating groups, complemented by nearly 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 service lines and solution units. In total, we have more than 75,000 employees, not including those of our affiliates, who provide global scale and reach through over 110 offices in 47 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 consulting and technology services and solutions to as many industry groups in as many geographic markets as we do.

4


 
Our Corporate Information
 
Accenture Ltd is organized under the laws of Bermuda. We maintain a registered 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 world’s leading business centers, including New York, Chicago, Dallas, Los Angeles, San Francisco, London, Frankfurt, Madrid, Milan, Paris, Sydney and Tokyo. In total, we have over 110 offices in 47 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 in fiscal 2001. These individuals became our executive employees following our transition to a corporate structure but have 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. We have more than 2,700 partners.
 
As a result of a restructuring in 1989, we and our “member firms,” which are now our subsidiaries, became legally separate and distinct from the Arthur Andersen firms. Thereafter, until August 7, 2000, we had contractual relationships with an administrative entity, Andersen Worldwide, and indirectly with the separate Arthur Andersen firms. Under these contracts, called member firm agreements, we and our member firms, on the one hand, and the Arthur Andersen firms, on the other hand, were two stand-alone business units linked through such agreements to Andersen Worldwide for administrative and other services. In addition, during this period our partners individually were members of the administrative entity, Andersen Worldwide. Following arbitration proceedings between us and Andersen Worldwide and the Arthur Andersen firms that were completed in August 2000, the tribunal terminated our contractual relationships with Andersen Worldwide and all the Arthur Andersen firms. On January 1, 2001, we began to conduct business under the name Accenture. See “Certain Relationships and Transactions—Relationship with Andersen Worldwide and Arthur Andersen Firms.”
 
Organizational Structure
 
Accenture Ltd is a Bermuda holding company with no material assets other than an equity interest in our subsidiary, Accenture SCA, a Luxembourg partnership limited by shares. Accenture Ltd’s only business is to hold this interest and to act as the sole general partner of Accenture SCA. As the general partner of Accenture SCA and as a result of Accenture Ltd’s majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its financial statements. We operate our business through subsidiaries of Accenture SCA.
 
Some of our partners and former partners own shares in Accenture SCA or Accenture Canada Holdings Inc., an indirect subsidiary of Accenture SCA. Subject to contractual transfer restrictions, these partners have the option to redeem or exchange each of these shares for a Class A common share or, at our option, cash generally equal to the market value of a Class A common share. Generally, these partners and former partners also own a corresponding number of Accenture Ltd Class X common shares which entitle their holders to vote at Accenture Ltd shareholder meetings but do not carry any economic rights.
 
Immediately following the offering and the transactions related to the offering, our partners will own approximately 72% of the equity in our business, or approximately 71% if the underwriters exercise their overallotment options in full, and will own or control shares representing, in the aggregate,

5


approximately 72% of the voting interest in Accenture Ltd or approximately 71% if the underwriters exercise their overallotment options in full. Information in this prospectus reflects our estimate of selling shareholder participation in the offering.
 
You should read “Accenture Organizational Structure,” “Certain Transactions and Relationships” and “Description of Share Capital” for additional information about our corporate structure.
 
Share Management Plan
 
We recognize the need to address three important objectives related to the ownership of our shares: increased public float, broader ownership of the Accenture Ltd Class A common shares and the orderly entry of our shares into the market. We also recognize the needs of our partners to diversify their portfolios and to achieve additional liquidity over time. To balance these objectives, and to effectively incentivize our current and future partners, we are undertaking the offering and the related transactions and expect to implement a number of arrangements which we refer to collectively as our “Share Management Plan.” These arrangements include:
 
 
 
our agreement with 2,997 of our partners and former partners holding an aggregate of more than 787,972,151 Accenture Ltd Class A common shares, Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares (or 697,329,125 after the offering and the transactions related to the offering) to further restrict the transfer of their equity interests acquired from Accenture until July 24, 2005, except for transfers in Accenture-approved transactions such as the offering, as described in “Certain Transactions and Relationships—Share Management Plan—Common Agreements”;
 
 
 
our plan to allow our partners and former partners to transfer their equity interests to their heirs or charitable donees in connection with estate and/or tax planning strategies, provided these transferees agree to be bound by the restrictions on transfer described above;
 
 
 
our plan to provide our partners and former partners with quarterly opportunities to sell or redeem, in Accenture-approved transactions with us or third parties, at or below market prices, equity interests as to which the transfer restrictions imposed prior to our initial public offering are no longer in effect; and
 
 
 
our creation of a share employee compensation trust that will acquire Class A common shares to fund equity awards to our future partners to preserve Accenture’s partnership culture and sense of stewardship.
 
In addition, our agreements and arrangements with partners and former partners described above are intended to allow us the flexibility to accommodate changes and additions to the Share Management Plan.
 
We expect that our partners and former partners will, any time they sell shares in Accenture-approved underwritten public offerings, including this offering, generally pay to us an amount equal to 3% of the gross proceeds from the sale of the shares, less the amount of any underwriting discount. Similarly, our partners and former partners participating in any quarterly share transactions will generally pay to us an amount equal to 3 1/2% of the gross proceeds, less any brokerage costs. We will apply these amounts to cover the expenses of these transactions, with the excess being applied to fund the share employee compensation trust.
 
For more information about our Share Management Plan, please see “Certain Transactions and Relationships—Share Management Plan.”

6


 
The Offering
 
Class A common shares offered by Accenture Ltd(1)
62,418,047 Class A common shares. For local tax reasons in certain jurisdictions, we intend to use proceeds from the offering to acquire or redeem an aggregate of 62,418,047 Class A common shares, Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares from our partners and former partners in these jurisdictions.
 
Class A common shares offered by the selling shareholders
36,080,649 Class A common shares. To obtain the Accenture Ltd Class A common shares they will sell in the offering, some of the selling shareholders will redeem or exchange an aggregate of 13,589,540 Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares for Accenture Ltd Class A common shares on a one-for-one basis immediately prior to the offering.
 
Class A common shares outstanding immediately before the offering and transactions related to the offering(2)
406,226,861 Class A common shares (or 1,001,402,161 Class A common shares if all Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares not held by Accenture are redeemed or exchanged for newly issued Class A common shares on a one-for-one basis).
 
Class A common shares outstanding immediately after the offering and transactions related to the offering(2)
478,190,668 Class A common shares (or 1,001,402,161 Class A common shares if all Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares not held by Accenture are redeemed or exchanged for newly issued Class A common shares on a one-for-one basis).

(1)
 
Unless otherwise indicated, all information in this prospectus is provided assuming no exercise of the underwriters’ option to purchase up to an aggregate of 14,774,804 additional Class A common shares from Accenture Ltd.
(2)
 
Class A common shares outstanding and other information in this prospectus based thereon do not reflect:
 
 
 
6,300,506 Class A common shares underlying restricted share units that are not fully vested; and
 
 
89,539,518 Class A common shares issuable pursuant to options.
(footnote continued)

7


Class A common shares outstanding and other information in this prospectus based thereon reflect Class A common shares underlying fully vested restricted share units and assume the acquisition by Accenture Ltd of an equivalent amount of Accenture SCA common shares in connection with these restricted share units. We intend to accelerate the delivery of 9,889,765 Class A common shares underlying restricted share units to immediately prior to the offering to allow partners holding these restricted share units to participate in the offering as selling shareholders; 5,823,626 of these  Class A common shares will be sold in the offering. Immediately before the offering and the transactions related to the offering, there are 67,554,897 Class A common shares underlying fully vested restricted share units, and immediately after the offering and the transactions related to the offering there will be 57,665,132 Class A common shares underlying fully vested restricted share units.
 
Use of proceeds
For local tax reasons in certain jurisdictions, we intend to use the net proceeds from Accenture Ltd’s sale of 62,418,047 Class A common shares in the offering to acquire or redeem an aggregate of 62,418,047 Class A common shares, Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares from some of our partners and former partners in these jurisdictions at a price equal to the initial price to public less the underwriting discount. We intend to use any proceeds from an exercise of the underwriters’ overallotment option to fund the share employee compensation trust.
 
 
The partners and certain former partners who are selling shareholders in the offering or from whom we intend to acquire or redeem shares as described above have each agreed to pay to us an amount equal to 3% of the gross proceeds from the disposition of their shares, less the amount of any underwriting discount. We will apply these amounts to cover all of the expenses of the offering, with the excess being applied to fund the share employee compensation trust.
 
Voting rights
Each Class A common share and each Class X common share entitles its holder to one vote per share on all matters submitted to a vote of shareholders of Accenture Ltd. Immediately following the offering and the transactions related to the offering, our partners will own or control Class A common shares and Class X common shares representing, in the aggregate, approximately 72% of the voting interest in Accenture Ltd, or approximately 71% 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

8


 
Transactions and Relationships—Voting Agreement.” Our partners will effectively control us for as long as they continue to hold a significant block of voting rights. Upon redemption or exchange of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares, Accenture Ltd will redeem a corresponding number of Accenture Ltd Class X common 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.
 
Dividend policy
We currently do not anticipate that Accenture Ltd or Accenture SCA will pay dividends.
 
Transfer restrictions
2,997 of our current and former partners, including all of our partners who will be participating in the offering and the transactions related to the offering, holding an aggregate of more than 787,972,151 Accenture Ltd Class A common shares, Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares (or 697,329,125 after the offering and the transactions related to the offering), have agreed not to transfer their equity interests acquired from Accenture until July 24, 2005, except for sales in underwritten public offerings, share repurchases, sales or redemptions or other transactions, in each case as approved by Accenture, or to estate and/or tax planning vehicles approved by Accenture. See “Certain Transactions and Relationships—Share Management Plan.” The existing transfer restrictions in the voting agreement and the transfer rights agreement, which generally restrict sales until July 24, 2002 and then permit sales in increasing amounts over the subsequent seven years, will continue to apply. These transfer restrictions will be waived, however, to permit the Accenture-approved transactions described above, including the offering and the transactions related to the offering. See “Certain Transactions and Relationships—Voting Agreement” and “—Accenture SCA Transfer Rights Agreement.” See also “Risk Factors—Risks That Relate to Your Ownership of Our Class A Common Shares—Our share price may decline due to the large number of Class A common shares eligible for future sale.”
 
New York Stock Exchange symbol
“ACN”
 
Risk factors
For a discussion of some of the factors you should consider before buying our Class A common shares, see “Risk Factors.”

9


 
Summary Financial Data
 
The following unaudited summary historical and pro forma as adjusted financial information should be read in conjunction with “Selected Financial Data,” our historical financial statements and related notes included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
   
Historical

    
Pro forma
asadjusted

    
Historical

    
Pro forma
as adjusted

    
Historical

 
   
Year ended August 31,

    
Year ended
August 31,
2001

    
Six months ended February 28, 2001

    
Six months
ended
February 28, 2001

    
Six months
ended
February 28, 2002

 
   
1997

   
1998

   
1999

   
2000

   
2001

             
   
(in millions, except share and per share data)
 
Income Statement Data:
                                                                           
Revenues:
                                                                           
Revenues before reimbursements
 
$
6,275
 
 
$
8,215
 
 
$
9,550
 
 
$
9,752
 
 
$
11,444
 
  
$
11,444
 
  
$
5,713
 
  
$
5,713
 
  
$
5,902
 
Reimbursements
 
 
1,172
 
 
 
1,425
 
 
 
1,529
 
 
 
1,788
 
 
 
1,904
 
  
 
1,904
 
  
 
909
 
  
 
909
 
  
 
917
 
   


 


 


 


 


  


  


  


  


Revenues
 
 
7,447
 
 
 
9,640
 
 
 
11,079
 
 
 
11,540
 
 
 
13,348
 
  
 
13,348
 
  
 
6,622
 
  
 
6,622
 
  
 
6,819
 
Operating expenses:
                                                                           
Cost of services:*
                                                                           
Cost of services before reimbursable
expenses*
 
 
3,470
 
 
 
4,700
 
 
 
5,457
 
 
 
5,486
 
 
 
6,200
 
  
 
6,925
 
  
 
2,943
 
  
 
3,502
 
  
 
3,514
 
Reimbursable expenses
 
 
1,172
 
 
 
1,425
 
 
 
1,529
 
 
 
1,788
 
 
 
1,904
 
  
 
1,904
 
  
 
909
 
  
 
909
 
  
 
917
 
   


 


 


 


 


  


  


  


  


Cost of services*
 
 
4,642
 
 
 
6,125
 
 
 
6,986
 
 
 
7,274
 
 
 
8,104
 
  
 
8,829
 
  
 
3,852
 
  
 
4,411
 
  
 
4,431
 
Sales and marketing*
 
 
611
 
 
 
696
 
 
 
790
 
 
 
883
 
 
 
1,217
 
  
 
1,507
 
  
 
453
 
  
 
672
 
  
 
759
 
General and administrative costs*
 
 
819
 
 
 
1,036
 
 
 
1,271
 
 
 
1,297
 
 
 
1,516
 
  
 
1,560
 
  
 
765
 
  
 
797
 
  
 
826
 
Reorganization and rebranding costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
848
 
  
 
 
  
 
189
 
  
 
 
  
 
 
Restricted share unit-based compensation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
967
 
  
 
 
  
 
 
  
 
 
  
 
 
   


 


 


 


 


  


  


  


  


Total operating expenses*
 
 
6,072
 
 
 
7,857
 
 
 
9,047
 
 
 
9,454
 
 
 
12,652
 
  
 
11,896
 
  
 
5,259
 
  
 
5,880
 
  
 
6,016
 
   


 


 


 


 


  


  


  


  


Operating income*
 
 
1,375
 
 
 
1,783
 
 
 
2,032
 
 
 
2,086
 
 
 
696
 
  
 
1,452
 
  
 
1,363
 
  
 
742
 
  
 
803
 
Gain (loss) on investments, net
 
 
 
 
 
 
 
 
92
 
 
 
573
 
 
 
107
 
  
 
107
 
  
 
189
 
  
 
189
 
  
 
(306
)
Interest income
 
 
 
 
 
 
 
 
60
 
 
 
67
 
 
 
80
 
  
 
80
 
  
 
42
 
  
 
42
 
  
 
24
 
Interest expense
 
 
(19
)
 
 
(17
)
 
 
(27
)
 
 
(24
)
 
 
(44
)
  
 
(59
)
  
 
(11
)
  
 
(21
)
  
 
(24
)
Other income (expense)
 
 
4
 
 
 
(6
)
 
 
(5
)
 
 
51
 
 
 
17
 
  
 
17
 
  
 
24
 
  
 
24
 
  
 
2
 
Equity in losses of affiliates
 
 
 
 
 
(1
)
 
 
(6
)
 
 
(46
)
 
 
(61
)
  
 
(61
)
  
 
(41
)
  
 
(41
)
  
 
(6
)
   


 


 


 


 


  


  


  


  


Income before taxes*
 
 
1,360
 
 
 
1,759
 
 
 
2,146
 
 
 
2,707
 
 
 
795
 
  
 
1,536
 
  
 
1,566
 
  
 
935
 
  
 
493
 
Provision for taxes (1)
 
 
118
 
 
 
74
 
 
 
123
 
 
 
243
 
 
 
503
 
  
 
614
 
  
 
136
 
  
 
374
 
  
 
268
 
   


 


 


 


 


  


  


  


  


Income before minority interest and accounting change*
 
 
1,242
 
 
 
1,685
 
 
 
2,023
 
 
 
2,464
 
 
 
292
 
  
 
922
 
  
 
1,430
 
  
 
561
 
  
 
225
 
Minority interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
577
 
  
 
(545
)
  
 
 
  
 
(332
)
  
 
(133
)
   


 


 


 


 


  


  


  


  


Income before accounting change*
 
 
1,242
 
 
 
1,685
 
 
 
2,023
 
 
 
2,464
 
 
 
869
 
  
 
377
 
  
 
1,430
 
  
 
229
 
  
 
92
 
Cumulative effect of accounting change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
188
 
  
 
 
  
 
188
 
  
 
 
  
 
 
   


 


 


 


 


  


  


  


  


Partnership income before partner
distributions* (2)
 
$
1,242
 
 
$
1,685
 
 
$
2,023
 
 
$
2,464
 
                   
$
1,618
 
                 
   


 


 


 


                   


                 
Net income*
                                 
$
1,057
 
  
$
377
 
           
$
229
 
  
$
92
 
                                   


  


           


  



*
 
Historical information excludes payments for partner distributions in respect of periods ended on or prior to May 31, 2001.
(1)
 
For periods ended on or prior to May 31, 2001, 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 respect of periods ended on or prior to May 31, 2001 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.

10


 
    
Historical

 
Pro forma
as adjusted

    
Historical

 
Pro forma
as adjusted

 
Historical

    
Year ended August 31,

 
Year ended
August 31,
2001

    
Six months ended February 28, 2001

 
Six months
ended
February 28, 2001

 
Six months
ended
February 28, 2002

    
1997

  
1998

  
1999

  
2000

  
2001

          
Earnings Per Share Data:
                                                 
Earnings per share:
                                                 
—basic
                          
$
0.91
        
$
0.56
 
$
0.23
                            

        

 

—diluted
                          
$
0.91
        
$
0.56
 
$
0.22
                            

        

 

Weighted average shares:
                                                 
—basic
                          
 
412,705,954
        
 
412,705,954
 
 
410,027,002
                            

        

 

—diluted
                          
 
1,008,163,290
        
 
1,008,163,290
 
 
1,027,557,818
                            

        

 

 
    
As of August 31,

  
As of February 28,
    
1997

  
1998

  
1999

  
2000

  
2001

  
2002

    
(in millions)
Balance Sheet Data:
                                         
Cash and cash equivalents
  
$
325
  
$
736
  
$
1,111
  
$
1,271
  
$
1,880
  
$
1,131
Working capital
  
 
175
  
 
531
  
 
913
  
 
1,015
  
 
401
  
 
852
Total assets
  
 
2,550
  
 
3,704
  
 
4,615
  
 
5,451
  
 
6,061
  
 
5,199
Long-term debt
  
 
192
  
 
157
  
 
127
  
 
99
  
 
1
  
 
4
Total partners’ capital
  
 
761
  
 
1,507
  
 
2,208
  
 
2,368
  
 
  
 
Shareholders’ equity
  
 
  
 
  
 
  
 
  
 
282
  
 
262
 
Recent Developments
 
As a result of the difficult economic environment, some clients have reduced or deferred expenditures for consulting services and we have also experienced pricing pressure over the last year which has eroded our revenues somewhat. However, we have implemented cost-management programs such that operating margins have been maintained or improved over this period. Current and future cost-management initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters. We expect revenues before reimbursements for the third quarter ending May 31, 2002 to be at or about the level of revenues before reimbursements for the third quarter of fiscal 2001, which were $2,953 million. We expect diluted earnings per share for the third quarter to be approximately $0.26-$0.27 per share.

11


RISK FACTORS
 
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. Current economic conditions have caused some clients to reduce or defer their expenditures for consulting services. This has caused a reduction in our growth rate, particularly in the Americas and in our Communications & High Tech and Financial Services operating groups, in the first half of this fiscal year as compared with the first half of fiscal 2001. While total revenues before reimbursements for the first half of fiscal 2002 increased by 3% over the first half of fiscal 2001, revenues before reimbursements for the first half of fiscal 2002 for our Communications & High Tech and Financial Services operating groups declined by 11% and 6%, respectively, over the first half of fiscal 2001. Revenues before reimbursements for the first half of fiscal 2002 for our Americas geographic area decreased by 7% over the first half of fiscal 2001. We have implemented and will continue to implement cost-savings initiatives to manage our expenses as a percentage of revenues. However, current and future cost-management initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters.
 
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 services and 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 offerings may not be successful in the marketplace. Also, services, solutions and technologies developed by our competitors may make our service or solution offerings uncompetitive or obsolete. Any one of these circumstances could have a material adverse effect on our ability to obtain and successfully complete 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. The growth in the use of technology slows down in a challenging economic environment, such as the one we are experiencing now. 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 solutions, including those of subcontractors we employ, it

12


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 exposure to legal liability may be increased in the case of business transformation outsourcing contracts in which we become more involved in our clients’ operations. Our contracts typically include provisions to limit our exposure to legal claims relating to our services and the solutions we develop, but these provisions may not protect us or may not be enforceable in all cases.
 
Our services or solutions may infringe upon the intellectual property rights of others.
 
We cannot be sure that our services and solutions, or the solutions 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 solutions. 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 solution 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.    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. 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.
 
Under many of our contracts the payment of some or all of our fees is conditioned upon our performance.    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, goals attained and our adherence to schedule. For example, we are entering into an increasing number of business transformation outsourcing contracts under which payment of all or a portion of our fees is contingent upon our clients meeting cost-saving or other contractually-defined goals. We estimate that a majority of our contracts have some fixed-price, incentive-based or other pricing terms that condition some or all of our fees on our ability to deliver defined goals. Our failure to meet contractually-defined goals or a client’s 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

13


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, which we may fail to collect. A client must meet established criteria to receive financing, and any significant extension of credit requires approval by senior levels of our management. We have extended $177 million of financing as of February 28, 2002, which is in line with historical levels.
 
If our affiliates or alliances do not succeed, we may not be successful in implementing our growth strategy.
 
We have committed a substantial amount of time and financial resources to our affiliates and in our relationships with our alliance partners and we plan to commit substantial additional financial resources in the future. The benefits we anticipate from these relationships are an important component of our growth strategy. If these relationships do not succeed, we may fail to obtain the benefits we hope to derive or lose the financial resources we have committed. 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. Poor performance or failures of our affiliates or alliances 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 47 countries around the world. In fiscal 2001, approximately 54% of our revenues were attributable to activities in the Americas, 39% of our revenues were attributable to our activities in Europe, the Middle East and Africa, and 7% 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;
 
 
 
political instability;
 
 
 
currency fluctuations;

14


 
 
 
longer payment cycles;
 
 
 
restrictions on the import and export of certain technologies;
 
 
 
price controls or restrictions on exchange of foreign currencies; and
 
 
 
trade barriers.
 
The consulting, technology and outsourcing markets are highly competitive, and we may not be able to compete effectively.
 
The consulting, 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;
 
 
 
information technology service providers;
 
 
 
application service providers;
 
 
 
service groups of 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 more or 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. Many of our competitors are taking greater advantage of the lower labor costs in certain countries to allow them to reduce prices. 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 fiscal year 2000 and more than 20,000 new employees in fiscal year 2001. The cumulative rate of turnover among our employees was approximately 22% for fiscal year 2000, 12% for fiscal year 2001 and  8% on an annualized basis for the six months ended February 28, 2002, 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.
 
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.

15


 
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 in fiscal 2001. 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 of approximately $7,310,380, based on the last reported sale price of the Class A common shares on the New York Stock Exchange on May 8, 2002 of $22.22 per share), 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 of approximately $7,888,100, based on the last reported sale price of the Class A common shares on the New York Stock Exchange on May 8, 2002 of $22.22 per share). Their ownership of this equity is not dependent upon their continued employment. In addition, in connection with our transition to a corporate structure, our partners 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 and motivate 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 our initial public offering and our transition to a corporate structure in fiscal 2001, our non-partner employees also received equity-based 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 and others adopted from time to time 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 solutions 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.
 
Our profitability will suffer if we are not able to maintain our pricing 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 recover for our services and the utilization rate, or chargeability, of our professionals. Accordingly, if we are not able to maintain the pricing for our services or an appropriate utilization rate for our professionals without corresponding cost reductions, we will not be able to sustain our profit margin and our profitability will suffer. For example, we are currently experiencing pressure on the pricing for our systems integration services. The rates we are able to recover for our services are affected by a number of factors, including:
 
 
 
our clients’ perception of our ability to add value through our services;

16


 
 
 
competition;
 
 
 
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 in the appropriate areas of our workforce; and
 
 
 
our ability to manage attrition.
 
Our profitability is also a function of our ability to control our costs and improve our efficiency. Current and future cost reduction initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters. Further, 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:
 
 
 
seasonality;
 
 
 
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 revenue or 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 and political conditions and related risks, including acts of terrorism.
 
We may be named in lawsuits as a result of Arthur Andersen’s current legal and financial situation based on misconceptions about the nature of our past relationship with Arthur Andersen firms.
 
We may be named as a defendant in lawsuits arising from audits or other services provided by Arthur Andersen firms for Enron Corporation or other companies as a result of concerns of the plaintiffs as to the current legal and financial situation of Arthur Andersen firms. Such actions would be based on

17


misconceptions about the nature of our past relationship with Arthur Andersen LLP and the other Arthur Andersen firms. We may be more likely to be named in these lawsuits if Arthur Andersen firms are, or are perceived to be, unable to satisfy judgments against them for any reason. If commenced, litigation of this nature, particularly given the public and media attention focused on the Enron situation, could divert management time and attention, and we could incur defense costs that we might not be able to recover. See “Business—Legal Matters and Insurance” and “Certain Transactions and Relationships—Relationship with Andersen Worldwide and Arthur Andersen Firms.”
 
Negative publicity about Bermuda companies may lead to new tax legislation that could increase our tax burden and may affect our relationships with our clients.
 
Several members of the United States Congress have introduced legislation relating to the tax treatment of U.S. companies that have undertaken certain types of expatriation transactions. The application of this legislation to us, if enacted, is unclear at this time. It is possible that legislation enacted in this area could reduce the tax benefits of our structure and materially increase our future tax burden, or otherwise adversely affect our business. In addition, there have recently been negative comments regarding Bermuda companies in the media. This negative publicity could harm our reputation and impair our ability to generate new business if companies or government agencies decline to do business with us as a result of the negative public image of Bermuda companies or the possibility of our clients receiving negative media attention from doing business with a Bermuda company.
 
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 and the transactions related to the offering, our partners will own or control shares representing, in the aggregate, a 72% voting interest in Accenture Ltd, or 71% 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 Transactions and Relationships —Voting 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 enables 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 variety of matters over which neither shareholders nor employees of a public company typically have input. The partner matters agreement provides mechanisms for our partners to:
 
 
 
select, for three to five years after our initial public offering, five partner nominees for election to membership on the board of directors of Accenture Ltd;

18


 
 
 
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 our initial public 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 prepares 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) 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), 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, 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 Transactions and Relationships—Partner Matters Agreement.”
 
In addition, immediately after the offering and the transactions related to the offering, Accenture Ltd will own shares representing a 64% voting interest in Accenture SCA and certain of our partners and former partners will own shares representing a 36% 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. A substantial number of Class A common shares are eligible for future sale as described below:
 
 
 
802,598,610 Class A common shares (or 711,955,584 after the offering and the transactions related to the offering) held by our partners and former partners or issuable upon redemption or exchange of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares held by our partners and former partners are subject to contractual transfer restrictions. 2,997 of our current and former partners, including all of the partners who will be participating in the offering and the transactions related to the offering, holding an aggregate of more than 787,972,151 Accenture Ltd Class A common shares, Accenture SCA Class I common

19


shares and Accenture Canada Holdings exchangeable shares (or 697,329,125 after the offering and the transactions related to the offering), have agreed not to transfer their equity interests acquired from Accenture until July 24, 2005, except for sales in underwritten public offerings, share repurchases, sales or redemptions or other transactions, in each case as approved by Accenture, or to estate and/or tax planning vehicles approved by Accenture. See “Certain Transactions and Relationships—Share Management Plan—Common Agreements.” The existing transfer restrictions in the voting agreement and the transfer rights agreement, which generally restrict sales until July 24, 2002 and then permit sales in increasing amounts over the subsequent seven years, will continue to apply. These transfer restrictions will be waived, however, to permit the Accenture-approved transactions described above. These contractual restrictions on transfer may not be enforceable in all cases. See “Certain Transactions and Relationships—Voting Agreement” and “—Accenture SCA Transfer Rights Agreement.” Accenture will approve the transfer by its partners and former partners of Class A common shares in connection with the offering and expects to approve additional transfers from time to time prior to 2005. All of these Class A common shares will also be subject to the underwriters’ lock-up described under “Underwriting.”
 
 
 
In addition, 68,847,156 Class A common shares underlying restricted share units granted in connection with our initial public offering generally are scheduled to be delivered as follows:
 
Number of Shares

 
Scheduled Delivery Date

10,028,372
 
July 19, 2002
17,311,162
 
January 19, 2003
  8,186,143
 
July 19, 2003
19,368,821
 
July 19, 2004
  2,236,788
 
July 19, 2005
  2,219,986
 
July 19, 2006
  2,108,616
 
July 19, 2007
  2,002,219
 
July 19, 2008
  4,768,940
 
July 19, 2009
    616,109
 
After July 19, 2009
 
Of the 10,028,372 Class A common shares scheduled to be delivered on July 19, 2002, we intend to accelerate the delivery of 9,889,765 of these Class A common shares to immediately prior to the offering to allow partners and former partners holding these restricted share units to participate in the offering as selling shareholders; 5,823,626 of these Class A common shares will be sold in the offering.
 
In addition, 4,988,897 Class A common shares underlying restricted share units granted since our initial public offering generally are scheduled to be delivered over a period of eight years, beginning on July 19, 2002 and 19,350 Class A common shares underlying restricted share units granted to certain directors generally are scheduled to be delivered 12 months after the grant date.
 
24,306,656 of all of these Class A common shares underlie restricted share units granted to current partners, and we expect that, when delivered, these Class A common shares will be subject to contractual restrictions on transfer. See “Certain Transactions and Relationships—Share Management Plan.” Class A common shares held by our non-partner employees are not subject to contractual restrictions on transfer.
 
 
 
In addition, 87,995,157 Class A common shares are issuable pursuant to options granted in connection with our initial public offering, of which:
 
 
 
options to purchase an aggregate of 14,205,000 Class A common shares generally will become exercisable in five equal annual installments beginning on July 19, 2002,

20


 
 
 
options to purchase an aggregate of 73,490,157 Class A common shares generally will become exercisable in four equal annual installments beginning on July 19, 2002 and
 
 
 
options to purchase an aggregate of 300,000 Class A common shares generally will become exercisable on January 19, 2004.
 
In addition, 1,175,000 Class A common shares are issuable pursuant to options granted since our initial public offering. These options generally will become exercisable in five equal annual installments beginning on the first anniversary of their grant dates.
 
15,555,000 of all of these Class A common shares are issuable pursuant to options which have been granted to current partners, and we expect that, when purchased, these Class A common shares will be subject to contractual restrictions on transfer. See “Certain Transactions and Relationships—Share Management Plan.” Class A common shares held by our non-partner employees are not subject to contractual restrictions on transfer.
 
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.
 
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 solutions; 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. Also, in connection with the offering, we have agreed, among other things, not to offer or sell Class A common shares in a firm commitment underwritten public offering for one year from the date of this prospectus without the prior consent of Goldman Sachs & Co. and Morgan Stanley & Co. Incorporated.
 
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

21


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.

22


DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act 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.”

23


 
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 Ltd’s 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 Ltd’s majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its financial statements. We operate our business through subsidiaries of Accenture SCA. Accenture SCA reimburses Accenture Ltd for its expenses but does not pay Accenture Ltd any fees.
 
Prior to our transition to a corporate structure in fiscal 2001, 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 generally exchanged all of their interests in these partnerships and corporations for Accenture Ltd Class A common shares or, in the case of partners in certain 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.
 
Immediately after the offering and the transactions related to the offering, our partners will own approximately 72% of the equity in our business, or approximately 71% if the underwriters exercise their overallotment option in full, and will own or control shares representing, in the aggregate, approximately 72% of the voting interest in Accenture Ltd, or approximately 71% if the underwriters exercise their overallotment option in full.
 
You should read “Certain Transactions and Relationships” and “Description of Share Capital” for additional information about our corporate structure.

24


 
Our organizational structure is as shown in the diagram below. The percentage interests give effect to the offering and the transactions related to the offering. The diagram does not display the subsidiaries of Accenture SCA and does not reflect exercise of the underwriters’ overallotment option.
 
LOGO

(1)
 
Includes non-partner employees and former partners.
(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 or former partners in Australia, Canada, Denmark, France, Italy, New Zealand, Norway, Spain, Sweden and the United States; certain of these Accenture partners did not receive Accenture Ltd Class X common shares and two Dutch foundations, Stichting Naritaweg I and Stichting Naritaweg II, hold these shares. Accenture 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.
 
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.

25


Accenture Ltd holds all of the Class II common shares of Accenture SCA. In the opinion of our counsel, under Accenture SCA’s 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 partner’s 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 Ltd’s economic interest in Accenture SCA, Accenture Ltd will acquire additional Accenture SCA common shares each time it issues additional Accenture Ltd Class A common shares.
 
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 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.
 
To obtain the Accenture Ltd Class A common shares that they will sell in the offering, certain selling shareholders will redeem or exchange Accenture SCA Class I common shares or Accenture Canada Holdings exchangeable shares for Accenture Ltd Class A common shares on a one-for-one basis immediately prior to the offering. Accenture Ltd will redeem a corresponding number of Accenture Ltd Class X common shares at that time.

26


 
USE OF PROCEEDS
 
The net proceeds to Accenture Ltd from the offering, based on a price of $22.22 per share (the last reported sale price of the Class A common shares on the New York Stock Exchange on May 8, 2002), after deducting estimated underwriting discounts, will be approximately $1,387 million, or $1,707 million if the underwriters fully exercise the overallotment option we have granted to them.
 
For local tax reasons in certain jurisdictions, we intend to use the net proceeds from Accenture Ltd’s sale of 62,418,047 Class A common shares in the offering to acquire or redeem an aggregate of 62,418,047 Class A common shares, Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares from some of our partners and former partners in these jurisdictions at a price equal to the initial price to public less the underwriting discount. We intend to use any proceeds from an exercise of the underwriters’ overallotment option to fund the share employee compensation trust.
 
The partners and certain of the former partners who are selling shareholders in the offering or from whom we intend to acquire or redeem shares as described above have each agreed to pay to us an amount equal to 3% of the gross proceeds from the disposition of their shares, less the amount of any underwriting discount. We will apply these amounts to cover all of the expenses of the offering, with the excess being applied to fund the share employee compensation trust.
 
Pending specific application of the net proceeds, we intend to invest them in short-term marketable securities.
 
DIVIDEND POLICY
 
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.
 
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.

27


 
PRICE RANGE OF THE CLASS A COMMON SHARES
 
Trading in the Accenture Ltd Class A common shares commenced on the New York Stock Exchange on July 19, 2001 under the symbol “ACN.” The table below sets forth, on a per share basis for the periods indicated, the high and low sale prices for the Class A common shares as reported by the New York Stock Exchange.
 
    
Price Range

    
High

  
Low

Calendar Year 2001

             
Third Quarter (commencing July 19, 2001)
  
$
15.65
  
$
11.61
Fourth Quarter
  
$
28.00
  
$
12.12
Calendar Year 2002

             
First Quarter
  
$
30.50
  
$
23.13
Second Quarter (through May 8, 2002)
  
$
26.70
  
$
19.75
 
The closing sale price of Class A common shares as reported by the New York Stock Exchange on May 8, 2002 was $22.22. As of April 30, 2002, there were 862 holders of record of the Class A common shares.
 
There is no trading market for the Accenture Ltd Class X common shares. As of April 30, 2002, there were 1,472 holders of record of the Class X common shares.

28


 
CAPITALIZATION
 
The following table sets forth our consolidated capitalization as of February 28, 2002:
 
 
 
on a historical basis; and
 
 
 
as adjusted to reflect the offering at an assumed initial price to public of $22.22 per share (the last reported sale price of the Class A common shares on the New York Stock Exchange on May 8, 2002) and the transactions related to the offering.
 
This table should be read in conjunction with our historical financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.
 
    
As of February 28, 2002

 
    
Historical

    
As adjusted

 
    
(in millions, except
share amounts)
 
Cash and cash equivalents
  
$
1,131
 
  
$
1,131
 
    


  


Short-term bank borrowings
  
$
158
 
  
$
158
 
Current portion of long-term debt
  
 
3
 
  
 
3
 
Long-term debt
  
 
4
 
  
 
4
 
Minority interest
  
 
568
 
  
 
499
 
Shareholders’ equity:
                 
Preferred shares, 2,000,000,000 shares authorized; 0 shares issued and outstanding, actual and as adjusted
  
 
 
  
 
 
Class A common shares, par value $0.0000225 per share, 20,000,000,000 shares authorized; 344,745,157 shares issued, actual; 431,183,294 shares issued, 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, actual; 520,617,719 shares issued and outstanding, as adjusted
  
 
 
  
 
 
Restricted share units (related to Class A common shares), 68,112,102 units issued and outstanding, actual; 57,681,552 units issued and outstanding, as adjusted
  
 
987
 
  
 
836
 
Additional paid-in capital
  
 
860
 
  
 
2,467
 
Treasury shares, at cost, 5,929,587 shares, actual; 68,347,634 shares,
as adjusted
  
 
(124
)
  
 
(1,511
)
Retained deficit
  
 
(1,343
)
  
 
(1,343
)
Accumulated other comprehensive loss
  
 
(118
)
  
 
(118
)
    


  


Total shareholders’ equity
  
 
262
 
  
 
331
 
    


  


Total capitalization
  
$
995
 
  
$
995
 
    


  


29


 
SELECTED FINANCIAL DATA
 
The following selected financial data have been presented on a historical cost basis for all periods presented. The data as of August 31, 2000 and 2001 and for the years ended August 31, 1999, 2000 and 2001 are derived from the audited historical financial statements and related notes which are included elsewhere in this prospectus. The data as of February 28, 2002 and for the six months ended February 28, 2001 and 2002 are derived from the historical unaudited financial statements and related notes which are included elsewhere in this prospectus. The data as of August 31, 1999 and for the year ended August 31, 1998 are derived from audited historical financial statements and related notes which are not included in this prospectus. The data as of August 31, 1997 and 1998 and for the year ended August 31, 1997 are derived from unaudited historical financial statements and related notes which are not included in this prospectus. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes included elsewhere in this prospectus.
 
    
Year ended August 31,

    
Six months ended February 28,

 
    
1997

    
1998

    
1999

    
2000

    
2001

    
2001

    
2002

 
    
(in millions, except share and per share data)
 
Income Statement Data:
                                                              
Revenues:
                                                              
Revenues before reimbursements
  
$
6,275
 
  
$
8,215
 
  
$
9,550
 
  
$
9,752
 
  
$
11,444
 
  
$
5,713
 
  
$
5,902
 
Reimbursements
  
 
1,172
 
  
 
1,425
 
  
 
1,529
 
  
 
1,788
 
  
 
1,904
 
  
 
909
 
  
 
917
 
    


  


  


  


  


  


  


Revenues
  
 
7,447
 
  
 
9,640
 
  
 
11,079
 
  
 
11,540
 
  
 
13,348
 
  
 
6,622
 
  
 
6,819
 
Operating expenses:
                                                              
Cost of services:*
                                                              
Cost of services before reimbursable expenses*
  
 
3,470
 
  
 
4,700
 
  
 
5,457
 
  
 
5,486
 
  
 
6,200
 
  
 
2,943
 
  
 
3,514
 
Reimbursable expenses
  
 
1,172
 
  
 
1,425
 
  
 
1,529
 
  
 
1,788
 
  
 
1,904
 
  
 
909
 
  
 
917
 
    


  


  


  


  


  


  


Cost of services*
  
 
4,642
 
  
 
6,125
 
  
 
6,986
 
  
 
7,274
 
  
 
8,104
 
  
 
3,852
 
  
 
4,431
 
Sales and marketing*
  
 
611
 
  
 
696
 
  
 
790
 
  
 
883
 
  
 
1,217
 
  
 
453
 
  
 
759
 
General and administrative costs*
  
 
819
 
  
 
1,036
 
  
 
1,271
 
  
 
1,297
 
  
 
1,516
 
  
 
765
 
  
 
826
 
Reorganization and rebranding costs
  
 
 
  
 
 
  
 
 
  
 
 
  
 
848
 
  
 
189
 
  
 
 
Restricted share unit-based compensation
  
 
 
  
 
 
  
 
 
  
 
 
  
 
967
 
  
 
 
  
 
 
    


  


  


  


  


  


  


Total operating expenses*
  
 
6,072
 
  
 
7,857
 
  
 
9,047
 
  
 
9,454
 
  
 
12,652
 
  
 
5,259
 
  
 
6,016
 
    


  


  


  


  


  


  


Operating income*
  
 
1,375
 
  
 
1,783
 
  
 
2,032
 
  
 
2,086
 
  
 
696
 
  
 
1,363
 
  
 
803
 
Gain (loss) on investments, net
  
 
 
  
 
 
  
 
92
 
  
 
573
 
  
 
107
 
  
 
189
 
  
 
(306
)
Interest income
  
 
 
  
 
 
  
 
60
 
  
 
67
 
  
 
80
 
  
 
42
 
  
 
24
 
Interest expense
  
 
(19
)
  
 
(17
)
  
 
(27
)
  
 
(24
)
  
 
(44
)
  
 
(11
)
  
 
(24
)
Other income (expense)
  
 
4
 
  
 
(6
)
  
 
(5
)
  
 
51
 
  
 
17
 
  
 
24
 
  
 
2
 
Equity in losses of affiliates
  
 
 
  
 
(1
)
  
 
(6
)
  
 
(46
)
  
 
(61
)
  
 
(41
)
  
 
(6
)
    


  


  


  


  


  


  


Income before taxes*
  
 
1,360
 
  
 
1,759
 
  
 
2,146
 
  
 
2,707
 
  
 
795
 
  
 
1,566
 
  
 
493
 
Provision for taxes (1)
  
 
118
 
  
 
74
 
  
 
123
 
  
 
243
 
  
 
503
 
  
 
136
 
  
 
268
 
    


  


  


  


  


  


  


Income before minority interest and accounting change*
  
 
1,242
 
  
 
1,685
 
  
 
2,023
 
  
 
2,464
 
  
 
292
 
  
 
1,430
 
  
 
225
 
Minority interest
  
 
 
  
 
 
  
 
 
  
 
 
  
 
577
 
  
 
 
  
 
(133
)
    


  


  


  


  


  


  


Income before accounting change*
  
 
1,242
 
  
 
1,685
 
  
 
2,023
 
  
 
2,464
 
  
 
869
 
  
 
1,430
 
  
 
92
 
Cumulative effect of accounting change
  
 
 
  
 
 
  
 
 
  
 
 
  
 
188
 
  
 
188
 
  
 
 
    


  


  


  


  


  


  


Partnership income before partner distributions* (2)
  
$
1,242
 
  
$
1,685
 
  
$
2,023
 
  
$
2,464
 
           
$
1,618
 
        
    


  


  


  


           


        
Net income*
                                      
$
1,057
 
           
$
92
 
                                        


           



*
 
Excludes payments for partner distributions in respect of periods ended on or prior to May 31, 2001.
(1)
 
For periods ended on or prior to May 31, 2001, 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 respect of periods ended on or prior to May 31, 2001 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 for periods prior to May 31, 2001.

30


 
    
Year ended August 31,

  
Six months ended
February 28,

    
1997

  
1998

  
1999

  
2000

  
2001

  
2001

  
2002

Earnings Per Share Data:
                                    
Earnings per share:
                                    
—basic
                                
$
0.23
                                  

—diluted
                                
$
0.22
                                  

Weighted average shares:
                                    
—basic
                                
 
410,027,002
                                  

—diluted
                                
 
1,027,557,818
                                  

 
    
As of August 31,

    
As of
February 28,
    
1997

  
1998

  
1999

  
2000

  
2001

    
2002

    
(in millions)
Balance Sheet Data:
                                           
Cash and cash equivalents
  
$
325
  
$
736
  
$
1,111
  
$
1,271
  
$
1,880
    
$
1,131
Working capital
  
 
175
  
 
531
  
 
913
  
 
1,015
  
 
401
    
 
852
Total assets
  
 
2,550
  
 
3,704
  
 
4,615
  
 
5,451
  
 
6,061
    
 
5,199
Long-term debt
  
 
192
  
 
157
  
 
127
  
 
99
  
 
1
    
 
4
Total partners’ capital
  
 
761
  
 
1,507
  
 
2,208
  
 
2,368
  
 
    
 
Shareholders’ equity
  
 
  
 
  
 
  
 
  
 
282
    
 
262

31


 
MANAGEMENT’S 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.
 
All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “2001” or “fiscal year 2001” means the 12-month period that ended on August 31, 2001. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
 
Overview
 
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. Our cost management 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.
 
Prior to May 31, 2001, we operated as a series of related partnerships and corporations under the control of our partners. We now operate in a corporate structure. As a business, whether in partnership form or in a corporate structure, our profitability is driven by many of the same factors. Revenues are driven by our partners’ and senior executives’ ability to secure contracts for new engagements and to deliver solutions 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. While current economic conditions have caused some clients to reduce or defer their expenditures for consulting services, we are positioning ourselves to achieve revenue growth through our business transformation outsourcing solutions, among other areas. While new contract bookings were strong in the first half of fiscal 2002, such bookings include an increasing proportion of business transformation outsourcing contracts which have slower impacts on short-term revenue growth. We are unable to predict the level of impact that the current economic environment will have on our ability to secure contracts for new engagements.
 
Cost of services is primarily driven by the cost of client service personnel, which consists primarily of compensation and other personnel 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. For example, in 2001, we announced initiatives to reduce our staff in certain parts of the world, in certain skill groups and in some support positions. 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.
 
Presentation
 
As a result of a restructuring in 1989, we and our “member firms,” which are now our subsidiaries, became legally separate and distinct from the Arthur Andersen firms. Thereafter, until August 7, 2000, we had contractual relationships with an administrative entity, Andersen Worldwide, and indirectly with the separate Arthur Andersen firms. Under these contracts, called member firm agreements, we and our member firms, on the one hand, and the Arthur Andersen firms, on the other hand, were two stand-alone business units linked through such agreements to Andersen Worldwide for administrative and other

32


services. In addition, during this period our partners individually were members of the administrative entity, Andersen Worldwide. Following arbitration proceedings between us and Andersen Worldwide and the Arthur Andersen firms that were completed in August 2000, the tribunal terminated our contractual relationships with Andersen Worldwide and all the Arthur Andersen firms. On January 1, 2001, we began to conduct business under the name Accenture. See “Certain Relationships and Transactions—Relationship with Andersen Worldwide and Arthur Andersen Firms.”
 
Because 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 received salaries. Therefore, our historical financial statements in respect of periods ended on or prior to May 31, 2001 do not reflect any compensation or benefit costs for services rendered by them. Following our transition to a corporate structure, operating expenses include partner compensation, which consists of salary, variable compensation and benefits. Similarly, in periods when we operated primarily in the form of partnerships, our partners paid income tax on their shares of the partnerships’ income. Therefore, our historical financial statements in respect of periods ended on or prior to May 31, 2001 do not reflect the income tax liability that we would have paid as a corporation. Following our transition to a corporate structure, we are subject to corporate tax on our income. For purposes of comparing our results for 2000 with our results for 2001, we have included pro forma financial information below.
 
Segments
 
Our five reportable operating segments are our operating groups (formerly referred to as global market units), which are Communications & High Tech, Financial Services, Government, Products and Resources. Operating groups are managed on the basis of revenues before reimbursements because our management believes it is a better indicator of operating group performance than revenues. Generally, operating expenses for each operating group 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 typically lower as a percentage of revenues in industry groups whose client base is concentrated and higher in industry groups whose client base is more fragmented. The discussion and analysis related to each operational expense category applies to all segments, unless otherwise indicated.
 
In the first quarter of fiscal 2002 we made certain changes in the format of information presented to the chief executive officer. The most significant of these changes was the elimination of interest expense from the five operating groups’ operating income and the elimination of interest credit from Other’s operating income. Also, the consolidated affiliated companies’ revenue and operating income (loss) results are included in the five operating groups’ results rather than being reported in Other. Segment results for all periods presented have been revised to reflect these changes.
 
Revenues
 
Revenues include all amounts that are billable to clients. Revenues are recognized on a time-and-materials basis, or on a percentage-of-completion basis, depending on the contract, as services are provided by employees and subcontractors. In fiscal 2001, approximately 54% of our revenues were attributable to activities in the Americas, 39% of our revenues were attributable to our activities in Europe, the Middle East and Africa, and 7% of our revenues were attributable to our activities in the Asia/Pacific region.
 
Revenues before reimbursements include the 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 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 is included in cost of services.

33


 
Client prepayments (even if nonrefundable) are deferred, i.e., classified as a liability, and recognized over future periods as services are delivered or performed.
 
Generally, our contracts are terminable by the client on short notice or without notice. 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.
 
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. The trend to include greater incentives in our contracts related to costs incurred, benefits produced or adherence to schedule may increase the variability in revenues and margins earned on such contracts. We conduct rigorous reviews prior to signing such contracts to evaluate whether these incentives are reasonably achievable.
 
As a result of the difficult economic environment, some clients have reduced or deferred expenditures for consulting services and we have also experienced pricing pressure over the last year which has eroded our revenues somewhat. However, we have implemented cost-management programs such that operating margins have been maintained or improved over this period. Current and future cost-management initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters. We expect revenues before reimbursements for the third quarter ending May 31, 2002 to be at or about the level of revenues before reimbursements for the third quarter of fiscal 2001, which were $2,953 million. We expect diluted earnings per share for the third quarter to be approximately $0.26-$0.27 per share.
 
Operating Expenses
 
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.
 
We record bonuses to our partners and other senior employees based on our quarterly and annual results as compared to our budgets and taking into account other factors, including industry-wide results and the general economic environment. These costs are reflected in cost of services, sales and marketing, and general and administrative costs in relation to the activities performed by our partners and other senior employees.
 
Cost of Services
 
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 facilities for outsourcing contracts and 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 is included in cost of services.
 
Sales and Marketing
 
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.

34


 
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 manage 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 to rename our organization Accenture and other costs to transition to a corporate structure. Substantially all of these costs were incurred in fiscal year 2001 and no material costs are expected in fiscal year 2002.
 
Restricted Share Unit-based Compensation
 
Restricted share unit-based compensation reflects restricted share unit awards that were granted at the time of the initial public offering of the Accenture Ltd Class A common shares on July 19, 2001, and vested prior to August 31, 2001. These restricted share units were granted to some of our partners, former partners, employees and former employees pursuant to a formula adopted by the board of directors of Accenture Ltd.
 
Gain (Loss) on Investments
 
Gain (loss) on investments primarily represents gains and losses on the sales of marketable securities and writedowns on investments in 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 Statement of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.”
 
Interest Income
 
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
 
Interest expense reflects interest incurred on borrowings and retirement obligations and other non-current liabilities.
 
Other Income (Expense)
 
Other income (expense) consists of currency exchange gains (losses) and the recognition of income from the vesting of options for services by our representatives on the boards of directors of some of those companies in which we have invested. In general, we earn revenues and incur related costs in the same currency. We hedge significant planned movements of funds between countries, which potentially give rise to currency exchange gains (losses).
 
Equity in Gains (Losses) of Affiliates
 
Equity in gains (losses) of affiliates represents our share of the operating results of non-consolidated companies over which we have significant influence.
 
Provision for Taxes
 
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

35


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 paid some entity-level taxes, with the amount varying from year to year depending on the mix of earnings among the countries. Where applicable, we accounted for these taxes under the asset and liability method. Therefore, our historical financial statements in respect of periods ended on or prior to May 31, 2001 do not reflect the income tax liability that we would have paid as a corporation. Following our transition to a corporate structure, we are subject to corporate tax on our income.
 
Minority Interest
 
Minority interest eliminates the income earned or expense incurred attributable to the equity interest that some of our partners have in our subsidiary Accenture SCA and the equity interest that some of our partners have in our subsidiary Accenture Canada Holdings Inc. See “Accenture Organizational Structure.” The resulting net income of Accenture Ltd represents the income attributable to the shareholders of Accenture Ltd. Effective January 2002, minority interest also includes immaterial amounts attributable to minority shareholders in our subsidiary, Avanade, Inc.
 
Partnership Income Before Partner Distributions
 
Our historical financial statements in respect of periods ended on or prior to May 31, 2001 reflect our organization as a series of related 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 in those periods partner compensation was comprised of distributions of current earnings, out of which our partners were responsible for their payroll taxes and benefits.
 
Net Income
 
Net income reflects the earnings of our organization under a corporate structure. We have provided pro forma financial results that include adjustments to exclude one-time items and other adjustments to include partner compensation and income taxes necessary to present our historical financial statements in respect of periods ended on or prior to May 31, 2001 in corporate structure as if the transition had occurred on September 1, 2000.
 
Critical Accounting Policies and Estimates
 
Revenue Recognition
 
We derive substantially all our revenues from contracts for management consulting 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 system integration contracts are recognized 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. This method is followed where reasonably dependable estimates of the revenues and costs applicable to various elements of a contract can be made. Estimates of total contract revenues and costs are continuously monitored during the term of the contract, and recorded revenues and costs are subject to revision as the contract progresses. Such revisions, which may result in increases or decreases to revenues and income, are reflected in the financial statements in the period in which they are first identified.

36


 
Each contract has different terms based on the scope, deliverables and complexity of the engagement, the terms of which frequently require us to make judgments and estimates about recognizing revenue. 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, goals attained 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 some or all of our fees on our ability to deliver defined goals. For systems integration contracts, estimated revenues for applying the percentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. Incentives relating to non-systems integration projects are not recorded until the contingency is achieved.
 
In recent years, our outsourcing business has increased significantly. Determining revenue and margins on outsourcing contracts requires judgment. Typically the terms of these contracts span several years. In a number of these arrangements we hire client employees and become responsible for client obligations. Revenues are recognized as services are performed or as transactions are processed in accordance with contractual standards, and costs on outsourcing contracts are generally charged to expense as incurred. This typically results in a relatively stable margin percentage over the life of the contract. Outsourcing contracts can also include incentive payments for benefits delivered to clients. Revenues relating to such incentive payments are not recorded until the contingency is satisfied.
 
Income Taxes
 
Determining the consolidated provision for income tax expense, deferred tax assets and liabilities and related valuation allowance involves judgment. As a global company with offices in 47 countries, we are required to calculate and provide for income taxes in each of the tax jurisdictions where we operate. This involves estimating current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. To determine the quarterly tax rate we are required to estimate full-year income and the related income tax expense in each jurisdiction. The estimated effective tax rate, so determined, is adjusted for the tax related to significant unusual items such as the one-time charge of $212 million recorded in the first half of fiscal 2002 related to investment writedowns for which tax benefits are not expected to be realized. Tax exposures can involve complex issues and may require an extended period to resolve. Changes in the geographic mix or estimated level of annual pre-tax income can affect the overall effective tax rate.
 
Valuation of Investments
 
Gains and losses on investments are not predictable and can cause fluctuations in net income. Management conducts periodic impairment reviews of each investment in our portfolio, including historical and projected financial performance, expected cash needs and recent funding events. Other-than-temporary impairments are recognized in the income statement if the market value of the investment is below its cost basis for an extended period or the issuer has experienced significant financial declines or difficulties in raising capital to continue operations. Judgment is required to first determine the market value of each investment and then to assess whether impairments are temporary or other-than-temporary. Changes in the market value of equity derivatives are reflected in the income statement in the current period. Adverse changes in the financial condition of our investments could result in impairment charges.
 
After exploring a number of alternatives, we have decided to sell substantially all of our minority ownership interests in our venture and investment portfolio that could cause volatility in our future earnings. We have engaged an investment bank and are currently in discussions with potential

37


purchasers. We expect to receive offers that allow us to retain a modest percentage of ownership in the venture and investment portfolio through an ongoing alliance with the buyer. We believe the transaction will be completed by the end of the calendar year. Related to this decision, our loss on investments in the six months ended February 28, 2002 included a charge of $212 million, before and after tax, related to investment writedowns of our venture and investment portfolio and the loss we expect to incur on this sale transaction. As of February 28, 2002, after giving effect to the charge, our venture and investment portfolio has a net book value of $109 million, $58 million of which is hedged.
 
We will continue to make investments and will accept equity and equity-linked securities using guidelines intended to eliminate volatility, but we will discontinue venture capital investing.
 
Historical Results of Operations
 
The following table sets forth the unaudited percentage of revenues represented by items in our Combined and Consolidated Income Statements for the periods presented.
 
    
Year ended August 31,

    
Six months ended February 28,

 
    
1999

    
2000

    
2001

    
2001

    
2002

 
Revenues:
                                  
Revenues before reimbursements
  
86
%
  
85
%
  
86
%
  
86
%
  
87
%
Reimbursements
  
14
 
  
15
 
  
14
 
  
14
 
  
13
 
    

  

  

  

  

Revenues
  
100
 
  
100
 
  
100
 
  
100
 
  
100
 
Operating expenses:
                                  
Cost of services:*
                                  
Cost of services before reimbursable expenses*
  
49
 
  
48
 
  
47
 
  
44
 
  
52
 
Reimbursable expenses
  
14
 
  
15
 
  
14
 
  
14
 
  
13
 
    

  

  

  

  

Cost of services*
  
63
 
  
63
 
  
61
 
  
58
 
  
65
 
Sales and marketing*
  
7
 
  
8
 
  
9
 
  
7
 
  
11
 
General and administrative costs*
  
12
 
  
11
 
  
11
 
  
12
 
  
12
 
Reorganization and rebranding costs
  
 
  
 
  
7
 
  
2
 
  
 
Restricted share unit-based compensation
  
 
  
 
  
7
 
  
 
  
 
    

  

  

  

  

Total operating expenses*
  
82
 
  
82
 
  
95
 
  
79
 
  
88
 
Operating income*(1)
  
18
 
  
18
 
  
5
 
  
21
 
  
12
 
Gain (loss) on investments, net
  
1
 
  
5
 
  
1
 
  
3
 
  
(5
)
Interest income
  
n/m
 
  
n/m
 
  
n/m
 
  
1
 
  
n/m
 
Interest expense
  
n/m
 
  
n/m
 
  
n/m
 
  
n/m
 
  
n/m
 
Other income (expense)
  
n/m
 
  
n/m
 
  
n/m
 
  
n/m
 
  
n/m
 
Equity in losses of affiliates
  
n/m
 
  
n/m
 
  
n/m
 
  
(1
)
  
n/m
 
    

  

  

  

  

Income before taxes*
  
19
 
  
23
 
  
6
 
  
24
 
  
7
 
Provision for taxes
  
1
 
  
2
 
  
4
 
  
2
 
  
4
 
    

  

  

  

  

Income before minority interest and accounting change*
  
18
 
  
21
 
  
2
 
  
22
 
  
3
 
Minority interest
  
 
  
 
  
4
 
  
 
  
(2
)
    

  

  

  

  

Income before accounting change*
  
18
 
  
21
 
  
6
 
  
22
 
  
1
 
Cumulative effect of accounting change
  
 
  
 
  
2
 
  
3
 
  
 
    

  

  

  

  

Partnership income before partner distributions*
  
18
%
  
21
%
         
25
%
      
    

  

         

      
Net income*
                
8
%
         
1
%
                  

         


n/m = not meaningful
*
 
Excludes payments for partner distributions in respect of periods ended on or prior to May 31, 2001.
(1)
 
Operating income as a percentage of revenues before reimbursements was 21%, 21% and 6% for 1999, 2000 and 2001, respectively. Operating income as a percentage of revenues before reimbursements was 24% and 14% for the six months ended February 28, 2001 and 2002, respectively.

38


 
We provide services through five operating groups. The following table provides unaudited financial information for each of these operating groups.
 
    
Year ended August 31,

    
Six months ended
February 28,

 
    
1999

    
2000

    
2001

    
2001

    
2002

 
    
(in millions, except percentages)
 
Revenues:
                                            
Communications & High Tech
  
$
2,499
 
  
$
2,806
 
  
$
3,238
 
  
$
1,674
 
  
$
1,495
 
Financial Services
  
 
2,736
 
  
 
2,542
 
  
 
2,894
 
  
 
1,465
 
  
 
1,379
 
Government
  
 
777
 
  
 
797
 
  
 
1,003
 
  
 
451
 
  
 
660
 
Products
  
 
1,699
 
  
 
1,932
 
  
 
2,357
 
  
 
1,175
 
  
 
1,297
 
Resources
  
 
1,812
 
  
 
1,661
 
  
 
1,933
 
  
 
935
 
  
 
1,066
 
Other
  
 
27
 
  
 
14
 
  
 
19
 
  
 
13
 
  
 
5
 
    


  


  


  


  


Total revenues before reimbursements
  
 
9,550
 
  
 
9,752
 
  
 
11,444
 
  
 
5,713
 
  
 
5,902
 
Reimbursements
  
 
1,529
 
  
 
1,788
 
  
 
1,904
 
  
 
909
 
  
 
917
 
    


  


  


  


  


Total
  
$
11,079
 
  
$
11,540
 
  
$
13,348
 
  
$
6,622
 
  
$
6,819
 
    


  


  


  


  


Revenues as a percentage of total:
                                            
Communications & High Tech
  
 
23
%
  
 
24
%
  
 
24
%
  
 
25
%
  
 
22
%
Financial Services
  
 
25
 
  
 
22
 
  
 
22
 
  
 
22
 
  
 
20
 
Government
  
 
7
 
  
 
7
 
  
 
8
 
  
 
7
 
  
 
10
 
Products
  
 
15
 
  
 
17
 
  
 
18
 
  
 
18
 
  
 
19
 
Resources
  
 
16
 
  
 
15
 
  
 
14
 
  
 
14
 
  
 
16
 
Other
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
    


  


  


  


  


Total revenues before reimbursements
  
 
86
 
  
 
85
 
  
 
86
 
  
 
86
 
  
 
87
 
Reimbursements
  
 
14
 
  
 
15
 
  
 
14
 
  
 
14
 
  
 
13
 
    


  


  


  


  


Total
  
 
100
%
  
 
100
%
  
 
100
%
  
 
100
%
  
 
100
%
    


  


  


  


  


Operating Income (Loss):
                                            
Communications & High Tech
  
$
557
 
  
$
671
 
  
$
449
 
  
$
413
 
  
$
130
 
Financial Services
  
 
824
 
  
 
666
 
  
 
537
 
  
 
435
 
  
 
157
 
Government
  
 
103
 
  
 
80
 
  
 
75
 
  
 
45
 
  
 
114
 
Products
  
 
263
 
  
 
416
 
  
 
363
 
  
 
270
 
  
 
259
 
Resources
  
 
285
 
  
 
264
 
  
 
235
 
  
 
196
 
  
 
144
 
Other
  
 
0
 
  
 
(11
)
  
 
(963
)
  
 
3
 
  
 
(1
)
    


  


  


  


  


Total
  
$
2,032
 
  
$
2,086
 
  
$
696
 
  
$
1,362
 
  
$
803
 
    


  


  


  


  


Operating Income (Loss) as a percentage of total:
                                            
Communications & High Tech
  
 
27
%
  
 
32
%
  
 
64
%
  
 
30
%
  
 
16
%
Financial Services
  
 
41
 
  
 
32
 
  
 
77
 
  
 
32
 
  
 
20
 
Government
  
 
5
 
  
 
4
 
  
 
11
 
  
 
3
 
  
 
14
 
Products
  
 
13
 
  
 
20
 
  
 
52
 
  
 
20
 
  
 
32
 
Resources
  
 
14
 
  
 
13
 
  
 
34
 
  
 
15
 
  
 
18
 
Other
  
 
 n/m
 
  
 
(1
)
  
 
(138
)
  
 
n/m
 
  
 
n/m
 
    


  


  


  


  


Total
  
 
100
%
  
 
100
%
  
 
100
%
  
 
100
%
  
 
100
%
    


  


  


  


  


Operating Income as a percentage of total revenues before reimbursements by operating group:
                                            
Communications & High Tech
  
 
22
%
  
 
24
%
  
 
14
%
  
 
25
%
  
 
9
%
Financial Services
  
 
30
 
  
 
26
 
  
 
19
 
  
 
30
 
  
 
11
 
Government
  
 
13
 
  
 
10
 
  
 
7
 
  
 
10
 
  
 
17
 
Products
  
 
15
 
  
 
22
 
  
 
15
 
  
 
23
 
  
 
20
 
Resources
  
 
16
 
  
 
16
 
  
 
12
 
  
 
21
 
  
 
14
 
Other
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
  
 
n/m
 
Operating Income as a percentage of revenues before reimbursements
  
 
21
%
  
 
21
%
  
 
6
%
  
 
24
%
  
 
14
%
    


  


  


  


  


Operating Income as a percentage of revenues
  
 
18
%
  
 
18
%
  
 
5
%
  
 
21
%
  
 
12
%
    


  


  


  


  



n/m = not meaningful

39


 
Pro Forma Financial Information
 
The following pro forma consolidated income statements for the year ended August 31, 2001 and for the six months ended February 28, 2001 are based on our historical financial statements included elsewhere in this prospectus.
 
The pro forma consolidated income statements give effect to the following as if they occurred on September 1, 2000:
 
 
 
the transactions related to our transition to a corporate structure described under “Certain Transactions and Relationships—Reorganization and Related Transactions”;
 
 
 
compensation payments to employees who were partners prior to our transition to a corporate structure;
 
 
 
provision for corporate income taxes; and
 
 
 
Accenture Ltd’s initial public offering in July 2001.
 
The pro forma as adjusted consolidated income statements give effect to the pro forma adjustments described above and also to the exclusion of one-time rebranding costs of $304 million incurred in connection with our name change to Accenture. Management believes that this pro forma as adjusted information provides useful supplemental information in understanding its results of operations.
 
The pro forma and pro forma as adjusted consolidated income statements for the year ended August 31, 2001 and for the six months ended February 28, 2001 exclude one-time events directly attributable to Accenture Ltd’s initial public 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 Accenture Ltd’s initial public offering; and
 
 
 
approximately $544 million for costs associated with our transition to a corporate structure.
 
The pro forma and pro forma as adjusted consolidated income statement for the year ended August 31, 2001 excludes the effect of a cumulative change in accounting principle to implement SFAS 133.
 
The pro forma adjustments 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.
 

40


Pro Forma Consolidated Income Statement For the Year Ended August 31, 2001
(Unaudited)
 
    
As reported

    
Adjustments

    
Pro forma

      
As adjusted adjustments

    
Pro forma as adjusted

    
% of
revenues

 
    
(in millions, except percentages and share and per share data)
 
Revenues:
                                                     
Revenues before reimbursements
  
$
11,444
 
  
$
 
  
$
11,444
 
    
$
 
  
$
11,444
 
  
86
%
Reimbursements
  
 
1,904
 
  
 
  —
 
  
 
1,904
 
    
 
 
  
 
1,904
 
  
14
 
    


  


  


    


  


  

Revenues
  
 
13,348
 
  
 
 
  
 
13,348
 
    
 
 
  
 
13,348
 
  
100
 
Operating expenses:
                                                     
Cost of services:*
                                                     
Cost of services before reimbursable expenses*
  
 
6,200
 
  
 
725
(a)
  
 
6,925
 
    
 
 
  
 
6,925
 
  
52
 
Reimbursable expenses
  
 
1,904
 
  
 
 
  
 
1,904
 
    
 
 
  
 
1,904
 
  
14
 
    


  


  


    


  


  

Cost of services*
  
 
8,104
 
  
 
725
 
  
 
8,829
 
    
 
 
  
 
8,829
 
  
66
 
Sales and marketing*
  
 
1,217
 
  
 
290
(a)
  
 
1,507
 
    
 
 
  
 
1,507
 
  
11
 
General and administrative costs*
  
 
1,516
 
  
 
44
(a)
  
 
1,560
 
    
 
 
  
 
1,560
 
  
12
 
Reorganization and rebranding costs
  
 
848
 
  
 
(544
)(b)
  
 
304
 
    
 
(304
)(h)
  
 
 
  
n/m
 
Restricted share unit-based compensation
  
 
967
 
  
 
(967
)(c)
  
 
 
    
 
 
  
 
 
  
n/m
 
    


  


  


    


  


  

Total operating expenses*
  
 
12,652
 
  
 
(452
)
  
 
12,200
 
    
 
(304
)
  
 
11,896
 
  
89
 
    


  


  


    


  


  

Operating income*
  
 
696
 
  
 
452
 
  
 
1,148
 
    
 
304
 
  
 
1,452
 
  
11
 
Gain on investments, net
  
 
107
 
  
 
 
  
 
107
 
    
 
 
  
 
107
 
  
1
 
Interest income
  
 
80
 
  
 
 
  
 
80
 
    
 
 
  
 
80
 
  
n/m
 
Interest expense
  
 
(44
)
  
 
(15
)(d)
  
 
(59
)
    
 
 
  
 
(59
)
  
n/m
 
Other income (expense)
  
 
17
 
  
 
 
  
 
17
 
    
 
 
  
 
17
 
  
n/m
 
Equity in losses of affiliates
  
 
(61
)
  
 
 
  
 
(61
)
    
 
 
  
 
(61
)
  
n/m
 
    


  


  


    


  


  

Income before taxes*
  
 
795
 
  
 
437
 
  
 
1,232
 
    
 
304
 
  
 
1,536
 
  
12
 
Provision for taxes
  
 
503
 
  
 
(10
)(e)
  
 
493
 
    
 
121
(e)
  
 
614
 
  
5
 
    


  


  


    


  


  

Income before minority interest and accounting change*
  
 
292
 
  
 
447
 
  
 
739
 
    
 
183
 
  
 
922
 
  
7
 
Minority interest
  
 
577
 
  
 
(1,013
)(f)
  
 
(436
)
    
 
(109
)(f)
  
 
(545
)
  
(4
)
    


  


  


    


  


  

Income before accounting change*
  
$
869
 
  
$
(566
)
  
$
303
 
    
$
74
 
  
$
377
 
  
3
%
    


  


  


    


  


  

Earnings per share:
                                                     
—basic
                    
$
0.73
 
             
$
0.91
 
      
                      


             


      
—diluted
                    
$
0.73
 
             
$
0.91
 
      
                      


             


      
Outstanding shares at August 31, 2001:
                                                     
—basic
                    
 
412,705,954
(g)
             
 
412,705,954
(g)
      
                      


             


      
—diluted
                    
 
1,008,163,290
(g)
             
 
1,008,163,290
(g)
      
                      


             


      

n/m
 
= not meaningful
*
 
Historical information excludes payments for partner distributions in respect of periods ended on or prior to May 31, 2001.

41


Pro Forma Consolidated Income Statement for the Six Months Ended February 28, 2001
(Unaudited)
 
      
As reported

    
Adjustments

    
Pro forma

      
As adjusted adjustments

    
Pro forma
as adjusted

    
% of
revenues

 
      
(in millions, except percentages and share and per share data)
 
Revenues:
                                            
Revenues before reimbursements
    
$
5,713
 
  
$
 
  
$
5,713
 
    
$
 
  
$
5,713
 
  
86
%
Reimbursements
    
 
909
 
  
 
 
  
 
909
 
    
 
 
  
 
909
 
  
14
 
      


  


  


    


  


  

Revenues
    
 
6,622
 
  
 
 
  
 
6,622
 
    
 
 
  
 
6,622
 
  
100
 
Operating expenses:
                                                       
Cost of services:*
                                                       
Cost of services before reimbursable expenses*
    
 
2,943
 
  
 
559
(a)
  
 
3,502
 
    
 
 
  
 
3,502
 
  
53
 
Reimbursable expenses
    
 
909
 
  
 
 
  
 
909
 
    
 
 
  
 
909
 
  
14
 
      


  


  


    


  


  

Cost of services*
    
 
3,852
 
  
 
559
 
  
 
4,411
 
    
 
 
  
 
4,411
 
  
67
 
Sales and marketing*
    
 
453
 
  
 
219
(a)
  
 
672
 
    
 
 
  
 
672
 
  
10
 
General and administrative costs*
    
 
765
 
  
 
32
(a)
  
 
797
 
    
 
 
  
 
797
 
  
12
 
Reorganization and rebranding costs
    
 
189
 
  
 
(13
)(b)
  
 
176
 
    
 
(176
)(h)
  
 
 
  
 
      


  


  


    


  


  

Total operating expenses*
    
 
5,259
 
  
 
797
 
  
 
6,056
 
    
 
(176
)
  
 
5,880
 
  
89
 
      


  


  


    


  


  

Operating income*
    
 
1,363
 
  
 
(797
)
  
 
566
 
    
 
176
 
  
 
742
 
  
11
 
Gain on investments, net
    
 
189
 
  
 
 
  
 
189
 
    
 
 
  
 
189
 
  
3
 
Interest income
    
 
42
 
  
 
 
  
 
42
 
    
 
 
  
 
42
 
  
1
 
Interest expense
    
 
(11
)
  
 
(10
)(d)
  
 
(21
)
    
 
 
  
 
(21
)
  
n/m
 
Other income (expense)
    
 
24
 
  
 
 
  
 
24
 
    
 
 
  
 
24
 
  
n/m
 
Equity in losses of affiliates
    
 
(41
)
  
 
 
  
 
(41
)
    
 
 
  
 
(41
)
  
(1
)
      


  


  


    


  


  

Income before taxes*
    
 
1,566
 
  
 
(807
)
  
 
759
 
    
 
176
 
  
 
935
 
  
14
 
Provision for taxes
    
 
136
 
  
 
168
(e)
  
 
304
 
    
 
70
(e)
  
 
374
 
  
6
 
      


  


  


    


  


  

Income before minority interest and accounting change*
    
 
1,430
 
  
 
(975
)
  
 
455
 
    
 
106
 
  
 
561
 
  
8
 
Minority interest
    
 
 
  
 
(269
)(f)
  
 
(269
)
    
 
(63
)(f)
  
 
(332
)
  
(5
)
      


  


  


    


  


  

Income before accounting change*
    
$
1,430
 
  
$
(1,244
)
  
$
186
 
    
$
43
 
  
$
229
 
  
3
%
      


  


  


    


  


  

Earnings per share:
                                                       
—basic
                      
$
0.45
 
             
$
0.56
 
      
                        


             


      
—diluted
                      
$
0.45
 
             
$
0.56
 
      
                        


             


      
Outstanding shares at August 31, 2001:
                                                       
—basic
                      
 
412,705,954
(g)
             
 
412,705,954
(g)
      
                        


             


      
—diluted
                      
 
1,008,163,290
(g)
             
 
1,008,163,290
(g)
      
                        


             


      

n/m
 
= not meaningful
*
 
Historical information excludes payments for partner distributions in respect of periods ended on or prior to May 31, 2001.

42


 
Notes to Pro Forma Financial Information
(Unaudited)
(in millions, except percentages and share and per share data)
 
(a)
 
Adjustments totaling $1,059 and $810 for the year ended August 31, 2001 and for the six months ended February 28, 2001, respectively, reflect the effects of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 2000. Prior to our transition to a corporate structure, payments to our partners were generally accounted for as distributions of partners’ income, rather than compensation expense. For the year ended August 31, 2001 and for the six months ended February 28, 2001, compensation and benefit costs of partners have been allocated 69% to cost of services, 27% to sales and marketing, and 4% to general and administrative costs based on an estimate of the time spent on each activity at the appropriate cost rates.
 
The compensation plan adopted upon our transition to a corporate structure includes a fixed salary, benefits and performance-based bonuses. All elements of the new compensation plan, including bonuses, have been reflected in the pro forma adjustments because our partners would have earned the bonuses based on our results of operations for the historical periods. 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.
 
(b)
 
One-time reorganization costs were incurred during the year ended August 31, 2001. Reorganization costs for the year ended August 31, 2001 include $89 of restructuring costs relating to our transition to a corporate structure and $455 of indirect taxes, such as capital and stamp duty imposed on transfers of assets to the new corporate holding company structure. Reorganization costs for the six months ended February 28, 2001 include $13 of restructuring costs relating to our transition to a corporate structure.
 
(c)
 
In connection with Accenture Ltd’s initial public offering, 68,481,815 fully vested restricted share units at $14.50 per share were granted in July 2001 to certain partners, former partners and employees. The $967 expense represents the fair value of fully vested restricted share units less $26 relating to canceled liabilities for a deferred bonus plan for employees. Each restricted share unit represents an unfunded, unsecured right, which is nontransferable except in the event of death, of a participant to receive an Accenture Ltd Class A common share on the date specified in the participant’s award agreement.
 
(d)
 
Reflects adjustments of $15 and $10 for the year ended August 31, 2001 and for the six months ended February 28, 2001, respectively, representing estimated interest expense on early-retirement benefits payable to partners.
 
(e)
 
Reflects adjustments for an estimated income tax provision as if we had operated in a corporate structure at a pro forma tax rate of 40%. The adjustment for the year ended August 31, 2001 is net of $222 relating 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. 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)
 
Minority interests for the year ended August 31, 2001 and for the six months ended February 28, 2001 are based on the assumption that minority interests as of August 31, 2001 existed throughout the fiscal year and do not give effect to the offering. As of August 31, 2001 partners owned a 59% minority interest in Accenture SCA and Accenture Canada Holdings Inc. 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.
 

43


(g)
 
Earnings per share calculations for the year ended August 31, 2001 and for the six months ended February 28, 2001 are based on the assumption that shares and share equivalents outstanding as of August 31, 2001 were outstanding throughout the year and do not give effect to the offering. For the purposes of the pro forma earnings per share calculation, diluted outstanding shares include Accenture Class A common shares issuable or exchangeable upon redemption or exchange of shares held by SCA Class I common shareholders and Accenture Canada Holdings Inc. shareholders. The weighted average shares outstanding, basic and diluted, were calculated based on:
 
 
Share issuances

  
Basic

  
Diluted

Accenture Ltd Class A common shares
  
343,307,238
  
343,307,238
Accenture SCA Class I common shares
  
  
587,296,594
Accenture Canada Holdings Inc. exchangeable shares
  
  
8,160,742
Restricted share units
  
69,398,716
  
69,398,716
    
  
Weighted average shares outstanding
  
412,705,954
  
1,008,163,290
    
  
 
(h)
 
One-time rebranding costs were incurred during the year ended August 31, 2001 and during the six months ended February 28, 2001. Rebranding costs for the year ended August 31, 2001 and for the six months ended February 28, 2001 include $157 and $66, respectively, for the amortization of intangible assets relating to the final resolution of arbitration with Andersen Worldwide and Arthur Andersen as well as $147 and $110, respectively, from changing our name to Accenture. These amounts are considered pro forma as adjusted adjustments due to their nonrecurring nature.
 
Six Months Ended February 28, 2002 Compared to Six Months Ended February 28, 2001
 
Our results of operations in respect of periods ended on or prior to May 31, 2001 reflect the fact that we operated as a series of related partnerships and corporations prior to that date, and our results of operations in respect of periods ending after May 31, 2001 reflect that we commenced operations in corporate structure on that date. Accordingly, in order to provide a more meaningful comparison of our results for the six months ended February 28, 2002 as compared to the six months ended February 28, 2001, we comment below on our results for those periods both on a historical basis and a pro forma as adjusted basis.
 
Revenues
 
Revenues for the six months ended February 28, 2002 were $6,819 million, an increase of $197 million, or 3%, over the six months ended February 28, 2001. Revenues before reimbursements for the six months ended February 28, 2002 were $5,902 million, an increase of $189 million, or 3%, over the six months ended February 28, 2001 in U.S. dollars. In local currency terms, revenues before reimbursements in the six months ended February 28, 2002 grew by 5% over the six months ended February 28, 2001. Our revenues before reimbursements in Europe, the Middle East and Africa grew by 19% in both U.S. dollars and local currency terms, revenues before reimbursements in the Americas declined by 7% in U.S. dollars and 5% in local currency terms and revenues before reimbursements in Asia/Pacific declined by 4% in U.S. dollars, while increasing 3% in local currency terms. Growth in business transformation outsourcing revenues offset lower consulting revenues.
 
As a result of the difficult economic environment, some clients have reduced or deferred expenditures for consulting services and we have also experienced pricing pressure over the last year which has eroded our revenues by approximately 1% in local currency terms. However, we have implemented cost-management programs such that operating margins have been maintained or improved over this period. Current and future cost-management initiatives may not be sufficient to maintain our margins if the current challenging economic environment continues for several quarters. We expect revenues before reimbursements for the third quarter ending May 31, 2002 to be at or about the level of revenues before reimbursements for the third quarter of fiscal 2001, which were $2,953 million. We expect diluted earnings per share for the third quarter to be approximately $0.26-$0.27 per share.

44


 
Our Communications & High Tech operating group achieved revenues before reimbursements of $1,495 million in the six months ended February 28, 2002, a decrease of 11% from the six months ended February 28, 2001, primarily due to global economic weakening in the industries which this operating group serves. Our Financial Services operating group achieved revenues before reimbursements of $1,379 million in the six months ended February 28, 2002, a decrease of 6% from the six months ended February 28, 2001, primarily due to the impact of the economic downturn on the capital markets industry. The weakening in our Banking industry group in North America and Europe was partially offset by growth in our Health Services industry group in North America. Our Government operating group achieved revenues before reimbursements of $660 million in the six months ended February 28, 2002, an increase of 46% over the six months ended February 28, 2001, primarily driven by strong growth in North America and Europe. Our Products operating group achieved revenues before reimbursements of $1,297 million in the six months ended February 28, 2002, an increase of 10% over the six months ended February 28, 2001, as a result of strong growth in our Retail industry group in Europe. Our Resources operating group achieved revenues before reimbursements of $1,066 million in the six months ended February 28, 2002, an increase of 14% over the six months ended February 28, 2001, as a result of strong growth in our Chemicals industry group in North America, strong growth in our Energy industry group in Europe and Asia/Pacific and strong growth in our Utilities industry group in North America and Europe.
 
Operating Expenses
 
Operating expenses in the six months ended February 28, 2002 were $6,016 million, an increase of $756 million, or 14%, over the six months ended February 28, 2001 and an increase as a percentage of revenues from 79% in the six months ended February 28, 2001 to 88% in the six months ended February 28, 2002. These increases primarily resulted from higher employee compensation costs following our transition to a corporate structure.
 
Operating expenses for the six months ended February 28, 2002 increased $136 million, or 2%, over the pro forma as adjusted operating expenses for the six months ended February 28, 2001, and decreased as a percentage of revenues from 89% for the six months ended February 28, 2001 to 88% for the six months ended February 28, 2002.
 
Cost of Services
 
Cost of services was $4,431 million in the six months ended February 28, 2002, an increase of $579 million, or 15%, over the six months ended February 28, 2001 and an increase as a percentage of revenues from 58% in the six months ended February 28, 2001 to 65% in the six months ended February 28, 2002. Cost of services before reimbursable expenses was $3,514 million in the six months ended February 28, 2002, an increase of $571 million, or 19%, over the six months ended February 28, 2001 and an increase as a percentage of revenues before reimbursements from 52% in the six months ended February 28, 2001 to 60% in the six months ended February 28, 2002. These increases were primarily attributable to the exclusion of partner compensation from the prior period results.
 
Cost of services before reimbursements for the six months ended February 28, 2002 increased $12 million, or 0%, over the pro forma as adjusted cost of services before reimbursements for the six months ended February 28, 2001 and decreased as a percentage of revenues from 53% for the six months ended February 28, 2001 to 52% for the six months ended February 28, 2002. This decrease as a percentage of revenues reflects lower recruiting and training delivery costs partially offset by higher employee compensation costs and severance costs. The slowdown in the global economy in the second half of fiscal year 2001 led us to redirect some of our resources to selling and marketing efforts in order to promote our business.

45


 
Sales and Marketing
 
Sales and marketing expense was $759 million in the six months ended February 28, 2002, an increase of $306 million, or 68%, over the six months ended February 28, 2001 and an increase as a percentage of revenues from 7% in the six months ended February 28, 2001 to 11% in the six months ended February 28, 2002. These increases were primarily due to the higher compensation expense following our transition to a corporate structure.
 
Sales and marketing expense for the six months ended February 28, 2002 increased $87 million, or 13%, over the pro forma as adjusted sales and marketing expense for the six months ended February 28, 2001, and increased as a percentage of revenues from 10% in the six months ended February 28, 2001 to 11% in the six months ended February 28, 2002. The slowdown in the global economy which began in the second half of fiscal year 2001 led us to increase our selling and marketing efforts in order to promote our business.
 
General and Administrative Costs
 
General and administrative costs were $826 million in the six months ended February 28, 2002, an increase of $61 million, or 8%, over the six months ended February 28, 2001, and remained constant as a percentage of revenues at 12%.
 
General and administrative costs for the six months ended February 28, 2002 increased $29 million, or 4%, over the pro forma as adjusted general and administrative costs for the six months ended February 28, 2001, and remained constant as a percentage of revenues at 12%.
 
Reorganization and Rebranding Costs
 
We incurred no reorganization and rebranding costs for the six months ended February 28, 2002. Reorganization and rebranding costs were $189 million, or 3% of revenues for the six months ended February 28, 2001. Reorganization costs for the six months ended February 28, 2001 included $13 million of restructuring costs relating to our transition to a corporate structure, and rebranding costs for the six months ended February 28, 2001 included $176 million resulting from changing our name to Accenture. These costs are excluded from our pro forma as adjusted financial results as they are considered to be one-time items.
 
Operating Income
 
Operating income was $803 million in the six months ended February 28, 2002, a decrease of $559 million, or 41%, from the six months ended February 28, 2001 and a decrease as a percentage of revenues from 21% in the six months ended February 28, 2001 to 12% in the six months ended February 28, 2002. Operating income decreased as a percentage of revenues before reimbursements from 24% in the six months ended February 28, 2001 to 14% in the six months ended February 28, 2002.
 
Operating income for the six months ended February 28, 2002 increased $61 million, or 8%, over the pro forma as adjusted operating income for the six months ended February 28, 2001 and increased as a percentage of revenues from 11% for the six months ended February 28, 2001 to 12% for the six months ended February 28, 2002. Operating income increased as a percentage of revenues before reimbursements from 13% in the pro forma as adjusted results of operations for the six months ended February 28, 2001 to 14% in the six months ended February 28, 2002.

46


 
Gain (Loss) on Investments
 
Loss on investments totaled $306 million for the six months ended February 28, 2002. This loss includes $212 million for the anticipated loss on the planned disposal of substantially all of our minority ownership interests in our venture and investment portfolio.
 
Gain on investments totaled $189 million for the six months ended February 28, 2001. This gain represents the sale of $357 million of a marketable security purchased in 1995, net of other-than-temporary impairment investment writedowns of $41 million and unrealized investment losses of $127 million.
 
Equity in Gains (Losses) of Affiliates
 
Equity in losses of affiliates totaled $6 million in the six months ended February 28, 2002, compared to losses of $42 million in the six months ended February 28, 2001. Amortization of a negative basis difference arising on the formation of a joint venture was $18 million in the six months ended February 28, 2002, compared to $12 million in the six months ended February 28, 2001.
 
Provision for Taxes
 
Including the one-time charge of $212 million related to investment writedowns for which tax benefits are not expected to be realized, the effective tax rate for the six months ended February 28, 2002 was 54%. Excluding the one-time charge of $212 million to write down investments, the effective tax rate for the six months ended February 28, 2002 was 38%. On a pro forma as adjusted basis, the effective tax rate for the six months ended February 28, 2001 was 40%. The actual effective tax rate for the six months ended February 28, 2001 is not comparable to the effective tax rate for the six months ended February 28, 2002 because, prior to May 31, 2001, we operated as a series of related partnerships and corporations and, therefore, generally did not pay income taxes as a corporation.
 
Minority Interest
 
Minority interest was $133 million in the six months ended February 28, 2002. Minority interest for the six months ended February 28, 2002 decreased $199 million, or 60%, over the pro forma as adjusted minority interest for the six months ended February 28, 2001, and remained constant as a percentage of income at 59%.
 
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.
 
Year Ended August 31, 2001 Compared to Year Ended August 31, 2000
 
Our results of operations in respect of periods ended on or prior to May 31, 2001 reflect the fact that we operated as a series of related partnerships and corporations prior to that date, and our results of operations in respect of periods ending after May 31, 2001 reflect that we commenced operations in corporate structure on that date. Accordingly, in order to provide a more meaningful comparison of our results for fiscal year 2001 as compared to fiscal year 2000, we comment below on our results for those periods both on a historical basis and a pro forma as adjusted basis.
 
Revenues
 
Revenues for 2001 were $13,348 million, an increase of $1,808 million, or 16%, over 2000. Revenues before reimbursements for 2001 were $11,444 million, an increase of $1,692 million, or 17%, over 2000 in U.S. dollars. In local currency terms, revenues before reimbursements grew by 23% in 2001 over 2000.

47


 
In 2001, our revenues grew significantly, continuing a trend that began in the second half of 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 was 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 retraining of our client service personnel during the Year 2000-related slowdown, we positioned ourselves to take advantage of the growth opportunities in these new markets. We achieved this strong revenue growth in 2001 despite the difficult economic conditions that many of our clients’ industries experienced. We experienced continued growth in revenues in the fourth quarter of 2001, though at a slower rate of growth than in the third quarter of 2001.
 
Our Communications & High Tech operating group achieved revenues before reimbursements of $3,238 million in 2001, an increase of 15% over 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 operating group achieved revenues before reimbursements of $2,894 million in 2001, an increase of 14% over 2000, primarily due to strong growth in our Banking industry group in Europe and North America and our Health industry group in North America. Our Government operating group achieved revenues before reimbursements of $1,003 million in 2001, an increase of 26% over 2000, primarily driven by strong growth in North America and the United Kingdom. Our Products operating group achieved revenues before reimbursements of $2,357 million in 2001, an increase of 22% over 2000, as a result of strong growth in our Retail and Consumer Goods & Services industry groups in Europe. Our Resources operating group achieved revenues before reimbursements of $1,933 million in 2001, an increase of 16% over 2000, as a result of strong growth in the Chemicals, Forest Products, Metals & Mining and Utilities industry groups in North America.
 
Operating Expenses
 
Operating expenses in 2001 were $12,652 million, an increase of $3,198 million, or 34%, over 2000 and an increase as a percentage of revenues from 82% in 2000 to 95% in 2001.
 
Pro forma as adjusted operating expenses were $11,896 million for 2001, an increase of $1,356 million, or 13%, over pro forma operating expenses of $10,540 million for 2000 (which reflects $1,086 million of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 1999; prior to having a corporate structure, payments to our partners were generally accounted for as distributions of partners’ income, rather than compensation expense) and a decrease as a percentage of revenues from 91% in 2000 to 89% in 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. Such infrastructure costs primarily include occupancy costs, administrative expenses and information technology operating and development 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 $8,104 million in 2001, an increase of $830 million, or 11%, over 2000 and a decrease as a percentage of revenues from 63% in 2000 to 61% in 2001. Cost of services before reimbursable expenses was $6,200 million in 2001, an increase of $714 million, or 13%, over 2000 and a

48


decrease as a percentage of revenues before reimbursements from 56% in 2000 to 54% in 2001. This decrease as a percentage of revenues and revenues before reimbursements resulted from 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.
 
Pro forma as adjusted cost of services before reimbursable expenses was $6,925 million in 2001, an increase of $798 million, or 13%, over pro forma cost of services before reimbursable expenses of $6,127 million for 2000 (which reflects $641 million of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 1999) and a decrease as a percentage of revenues from 53% in 2000 to 52% in 2001. This decrease as a percentage of revenues can be attributed primarily to a favorable mix in the composition of our workforce, reduced costs related to recruiting and training and redirected efforts to sales and marketing in the second half of 2001. Lower attrition enabled us to retain a more experienced workforce, which commands a higher margin. While overall employee chargeability declined in 2001 versus 2000, chargeable hours for our experienced employees as a percentage of total chargeable hours increased. Lower attrition enabled us to reduce our expenditures in recruiting, and the move to Web-enabled and other lower cost distribution methods reduced our costs of delivering training.
 
Sales and Marketing
 
Sales and marketing expense was $1,217 million in 2001, an increase of $334 million, or 38%, over 2000 and an increase as a percentage of revenues from 8% in 2000 to 9% in 2001.
 
Pro forma as adjusted sales and marketing expense was $1,507 million in 2001, an increase of $320 million, or 27%, over pro forma sales and marketing expense of $1,187 million in 2000 (which reflects $304 million of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 1999) and an increase as a percentage of revenues from 10% in 2000 to 11% in 2001.
 
The increase as a percentage of revenues in 2001 is due to higher than normal business development and market development activities during the second half of the year, as the slowdown in the global economy in the second half of the year led us to increase our selling and marketing efforts in order to generate revenue opportunities.
 
General and Administrative Costs
 
General and administrative costs were $1,516 million in 2001, an increase of $219 million, or 17%, over 2000 and remained constant as a percentage of revenues at 11% in years 2000 and 2001.
 
Pro forma as adjusted general and administrative expenses were $1,560 million in 2001, an increase of $122 million, or 8%, over pro forma general and administrative expenses of $1,438 million in 2000 (which reflects $141 million of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 1999) and a decrease as a percentage of revenues from 13% in 2000 to 12% in 2001.
 
Our short-term cost management initiatives in this period of significant growth in revenues enabled us to reduce general and administrative expenses as a percentage of revenues.

49


 
Reorganization and Rebranding Costs
 
Reorganization and rebranding costs were $848 million, or 7% of revenues for 2001. Reorganization costs included $89 million of restructuring costs relating to our transition to a corporate structure and $455 million of indirect taxes and other costs imposed on transfers of assets to the new corporate holding company structure. Rebranding costs included $157 million for the amortization of intangible assets related to the final resolution of the arbitration with Andersen Worldwide and Arthur Andersen and $147 million resulting from changing our name to Accenture. These costs are excluded from our pro forma as adjusted financial results as they are considered to be one-time items.
 
Restricted Share Unit-based Compensation
 
Grants of Accenture Ltd’s restricted share units to partners, former partners and employees resulted in compensation cost of $967 million in the quarter ended August 31, 2001. These costs are excluded from our pro forma as adjusted financial results as they are considered to be one-time items.
 
Operating Income
 
Operating income was $696 million in 2001, a decrease of $1,390 million, or 67%, from 2000 and a decrease as a percentage of revenues from 18% in 2000 to 5% in 2001. Operating income decreased as a percentage of revenues before reimbursements from 21% in 2000 to 6% in 2001.
 
Pro forma as adjusted operating income was $1,452 million in 2001, an increase of $452 million, or 45%, over pro forma operating income of $1,000 million in 2000 (which reflects the effects of $1,086 million of partner compensation and benefit costs as if our transition to a corporate structure had occurred on September 1, 1999) and an increase as a percentage of revenues from 9% in 2000 to 11% in 2001. Pro forma as adjusted operating income increased as a percentage of revenues before reimbursements from 10% in 2000 to 13% in 2001.
 
Gain on Investments
 
Gain on investments totaled $107 million in 2001, compared to a gain of $573 million in 2000. The gain in 2001 was comprised of $382 million from the sale of a marketable security purchased in 1995 and $11 million from the sale of other securities, net of other-than-temporary impairment investment writedowns of $94 million and unrealized investment losses recognized according to SFAS 133 of $192 million. Other-than-temporary impairment writedowns consisted of $19 million in publicly traded equity securities and $75 million in privately traded equity securities. The writedowns relate to investments in 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
 
Interest income was $80 million in 2001, an increase of $13 million, or 19%, over 2000. The increase resulted primarily from the investment of the proceeds of the sale of a portion of a marketable security purchased in 1995 and the investment of cash proceeds received from Accenture Ltd’s initial public offering.
 
Interest Expense
 
Interest expense was $44 million in 2001, an increase of $20 million, or 83%, over 2000. Interest expense on a pro forma as adjusted basis was $59 million for 2001, an increase of $24 million, or 69% over interest expense on a pro forma basis of $35 million in 2000 (which reflects an adjustment of $11 million representing estimated interest expense on early-retirement benefits payable to partners). The increase resulted primarily from the increase in short-term bank borrowings during the third and fourth quarters of 2001.

50


 
Other Income (Expense)
 
Other income was $17 million in 2001, a decrease of $34 million from 2000, primarily resulting from foreign exchange translations.
 
Equity in Losses of Affiliates
 
Equity in losses of affiliates was a $61 million loss in 2001, compared to a $46 million loss in 2000. In 2001, amortization of a negative basis difference arising on the formation of a joint venture of $32 million was reflected as a component of equity in losses of affiliates, compared to $1 million in 2000.
 
Provision for Taxes
 
Taxes were $503 million in 2001, an increase of $260 million over 2000. Pro forma as adjusted taxes were $614 million in 2001, a decrease of $30 million, or 5%, over pro forma taxes of $644 million in 2000 (which reflects an adjustment of $401 million for an estimated income tax provision as if we had operated in a corporate structure at a pro forma tax rate of 40%). This decrease was due to lower pro forma as adjusted income before taxes for 2001 as compared to 2000. Net deferred tax assets totaling $300 million at August 31, 2001 have been recognized following our transition to a corporate structure. These net deferred tax assets include a valuation allowance of $76 million, relating to our ability to recognize the tax benefits associated with capital losses on certain U.S. investments and with specific tax net operating loss carryforwards and tax credit carryforwards of certain non-U.S. operations. Management has concluded that the realizability of the remaining net deferred tax assets is more likely than not.
 
Minority Interest
 
Minority interest was a credit of $577 million in 2001, which represents minority interest since our transition to a corporate structure as of May 31, 2001. Minority interest on a pro forma as adjusted basis was an expense of $545 million for 2001, or a 5% decrease over a pro forma minority interest expense of $571 million for 2000 (which is based on the assumption that minority interests as of August 31, 2001 existed throughout 2000).
 
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
 
Because we operated as a series of related partnerships and corporations in both 2000 and 1999, our results of operations for those periods are comparable.
 
Revenues
 
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

51


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 operating group achieved revenues before reimbursements of $2,806 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 operating group 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 Government operating group 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. Our Products operating group achieved revenues before reimbursements of $1,932 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 operating group 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.
 
Operating Expenses
 
Operating expenses in 2000 were $9,454 million, an increase of $407 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 $29 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.

52


 
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 development and market development activities coupled with an increase in advertising to communicate our electronic commerce capabilities to existing and potential clients. The increased business development and market development activities were directed toward increasing demand for our services and solutions after the Year 2000-related slowdown.
 
General and Administrative Costs
 
General and administrative costs were $1,297 million in 2000, an increase of $26 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
 
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
 
Gain on investments totaled $573 million for 2000, compared to a gain of $93 million in 1999. In 2000, $569 million of gain on investments was related to the sale of a portion of our investment in a marketable security purchased in 1995, compared to $93 million in 1999.
 
Interest Income
 
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 (Expense)
 
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 $46 million in 2000 compared to a loss of $6 million in 1999.
 
Provision for Taxes
 
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.

53


 
Quarterly Results
 
The following tables present unaudited quarterly financial information for each of our last ten 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

   
August 31, 2001

    
November 30,
2001

    
February 28, 2002

 
    
(in millions, except per share data)
 
Revenues:
               
Revenues before reimbursements
  
$
2,412
 
  
$
2,272
 
 
$
2,561
 
 
$
2,507
 
  
$
2,831
 
  
$
2,882
 
 
$
2,953
 
 
$
2,778
 
  
$
2,989
 
  
$
2,913
 
Reimbursements
  
 
364
 
  
 
436
 
 
 
501
 
 
 
487
 
  
 
407
 
  
 
502
 
 
 
566
 
 
 
429
 
  
 
420
 
  
 
497
 
    


  


 


 


  


  


 


 


  


  


Revenues
  
 
2,776
 
  
 
2,708
 
 
 
3,062
 
 
 
2,994
 
  
 
3,238
 
  
 
3,384
 
 
 
3,519
 
 
 
3,207
 
  
 
3,409
 
  
 
3,410
 
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
 
 
 
1,690
 
  
 
1,806
 
  
 
1,708
 
Reimbursable expenses
  
 
364
 
  
 
436
 
 
 
501
 
 
 
487
 
  
 
407
 
  
 
502
 
 
 
566
 
 
 
429
 
  
 
420
 
  
 
497
 
    


  


 


 


  


  


 


 


  


  


Cost of services*
  
 
1,720
 
  
 
1,740
 
 
 
1,841
 
 
 
1,974
 
  
 
1,791
 
  
 
2,062
 
 
 
2,132
 
 
 
2,119
 
  
 
2,226
 
  
 
2,205
 
Sales and marketing*
  
 
199
 
  
 
222
 
 
 
230
 
 
 
232
 
  
 
202
 
  
 
251
 
 
 
318
 
 
 
446
 
  
 
361
 
  
 
399
 
General and administrative costs*
  
 
318
 
  
 
322
 
 
 
296
 
 
 
360
 
  
 
376
 
  
 
389
 
 
 
365
 
 
 
386
 
  
 
408
 
  
 
418
 
Reorganization and rebranding costs
  
 
 
  
 
 
 
 
 
 
 
 
  
 
30
 
  
 
159
 
 
 
588
 
 
 
71
 
  
 
 
  
 
 
Restricted share unit-based compensation
  
 
 
  
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
967
 
  
 
 
  
 
 
    


  


 


 


  


  


 


 


  


  


Total operating expenses*
  
 
2,237
 
  
 
2,284
 
 
 
2,367
 
 
 
2,566
 
  
 
2,399
 
  
 
2,861
 
 
 
3,403
 
 
 
3,989
 
  
 
2,995
 
  
 
3,022
 
    


  


 


 


  


  


 


 


  


  


Operating income (loss)*
  
 
539
 
  
 
424
 
 
 
695
 
 
 
428
 
  
 
839
 
  
 
523
 
 
 
116
 
 
 
(782
)
  
 
414
 
  
 
388
 
Gain (loss) on investments, net
  
 
68
 
  
 
200
 
 
 
266
 
 
 
39
 
  
 
219
 
  
 
(30
)
 
 
(9
)
 
 
(73
)
  
 
(95
)
  
 
(211
)
Interest income
  
 
14
 
  
 
13
 
 
 
18
 
 
 
22
 
  
 
23
 
  
 
20
 
 
 
17
 
 
 
20
 
  
 
15
 
  
 
10
 
Interest expense
  
 
(7
)
  
 
(5
)
 
 
(6
)
 
 
(6
)
  
 
(5
)
  
 
(6
)
 
 
(16
)
 
 
(17
)
  
 
(9
)
  
 
(14
)
Other income (expense)
  
 
6
 
  
 
14
 
 
 
12
 
 
 
19
 
  
 
7
 
  
 
17
 
 
 
(3
)
 
 
(4
)
  
 
(8
)
  
 
10
 
Equity in gains (losses) of affiliates
  
 
(4
)
  
 
(3
)
 
 
(2
)
 
 
(37
)
  
 
(20
)
  
 
(21
)
 
 
(11
)
 
 
(9
)
  
 
6
 
  
 
(13
)
    


  


 


 


  


  


 


 


  


  


Income (loss) before taxes*
  
 
616
 
  
 
643
 
 
 
983
 
 
 
465
 
  
 
1,063
 
  
 
503
 
 
 
94
 
 
 
(865
)
  
 
323
 
  
 
170
 
Provision for taxes
  
 
42
 
  
 
71
 
 
 
81
 
 
 
49
 
  
 
53
 
  
 
83
 
 
 
285
 
 
 
82
 
  
 
123
 
  
 
145
 
    


  


 


 


  


  


 


 


  


  


Income (loss) before minority interest and accounting change
  
 
574
 
  
 
572
 
 
 
902
 
 
 
416
 
  
 
1,010
 
  
 
420
 
 
 
(191
)
 
 
(947
)
  
 
200
 
  
 
25
 
Minority interest
  
 
 
  
 
 
 
 
 
 
 
 
  
&