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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the quarterly period ended December 31, 2003



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------



For the transition period from  to



Commission file number 000-50161



HEWITT HOLDINGS LLC

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Illinois                                                       |  | 36-3974824                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



100 Half Day Road;
Lincolnshire, Illinois 60069; 847-295-5000

(Address, including zip code, and telephone number, including area code, of
registrants principal executive offices)



N/A

(Former Name, Former Address & Former Fiscal Year, if changed since last report)



Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES x NO ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). YES ̈NO x



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HEWITT HOLDINGS LLC



FORM 10-Q

FOR THE PERIOD ENDED

DECEMBER 31, 2003



INDEX



|           |  |                                                                                                  |  |     
|---------- |  | ------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                  |  | PAGE
|PART I.    |  | FINANCIAL INFORMATION                                                                            |  |     
|           |  |                                                                                                 
|ITEM 1.    |  | Financial Statements:                                                                            |  |     
|           |  |                                                                                                 
|           |  | Consolidated Balance Sheets  December 31, 2003 (Unaudited), and September 30, 2003              |  | 3   
|           |  |                                                                                                 
|           |  | Consolidated Statements of Operations Three Months Ended December 31, 2003 and 2002 (Unaudited) |  | 4   
|           |  |                                                                                                 
|           |  | Consolidated Statements of Cash Flows Three Months Ended December 31, 2003 and 2002 (Unaudited) |  | 5   
|           |  |                                                                                                 
|           |  | Notes to Consolidated Financial Statements                                                       |  | 6   
|           |  |                                                                                                 
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations            |  | 16  
|           |  |                                                                                                 
|ITEM 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                       |  | 22  
|           |  |                                                                                                 
|ITEM 4.    |  | Controls and Procedures                                                                          |  | 22  
|           |  |                                                                                                 
|PART II.   |  | OTHER INFORMATION                                                                                |  |     
|           |  |                                                                                                 
|ITEM 1.    |  | Legal Proceedings                                                                                |  | 23  
|           |  |                                                                                                 
|ITEM 6.    |  | Exhibits and Reports on Form 8-K                                                                 |  | 23  
|           | 
|SIGNATURES |  | 24                                                                                              



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PART I. FINANCIAL INFORMATION



|ITEM1. | Financial Statements
|------ | --------------------



HEWITT HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                                                           |  |                   |         |                    |   |        
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ------------------ | - | -------
|                                                                                                                           |  | December 31, 2003 |         | September 30, 2003
|                                                                                                                           |  | (Unaudited)       |         |                   
|ASSETS                                                                                                                     |  |                   |         |                    |   |        
|Current Assets                                                                                                             |  |                   |         |                    |   |        
|Cash and cash equivalents                                                                                                  |  | $                 | 4,936   |                    | $ | 5,937  
|Client receivables and unbilled work in process, less allowances of $0 at December 31, 2003 and $221 at September 30, 2003 |  |                   | 137     |                    |   | 744    
|Prepaid expenses and other current assets                                                                                  |  |                   | 120     |                    |   | 113    
|                                                                                                                           |  |                   |         |                    |   |        
|Total current assets                                                                                                       |  | $                 | 5,193   |                    | $ | 6,794  
|                                                                                                                           |  |                   |         |                    |   |        
|Non-Current Assets                                                                                                         |  |                   |         |                    |   |        
|Property and equipment, net                                                                                                |  |                   | 227,742 |                    |   | 229,912
|Intangible assets, net                                                                                                     |  |                   | 890     |                    |   | 905    
|Investment in Hewitt Associates (Note 1)                                                                                   |  |                   | 17,233  |                    |   | 15,960 
|Related party deferred rent receivable                                                                                     |  |                   | 3,863   |                    |   | 3,928  
|Due from owners                                                                                                            |  |                   | 1,280   |                    |   | 739    
|Investment in Overlook Associates                                                                                          |  |                   | 3,263   |                    |   | 3,181  
|                                                                                                                           |  |                   |         |                    |   |        
|Total non-current assets                                                                                                   |  |                   | 254,271 |                    |   | 254,625
|                                                                                                                           |  |                   |         |                    |   |        
|Total Assets                                                                                                               |  | $                 | 259,464 |                    | $ | 261,419
|                                                                                                                           |  |                   |         |                    |   |        
|LIABILITIES                                                                                                                |  |                   |         |                    |   |        
|Current Liabilities                                                                                                        |  |                   |         |                    |   |        
|Accounts payable                                                                                                           |  | $                 |        |                    | $ | 327    
|Accrued expenses                                                                                                           |  |                   | 123     |                    |   | 1,675  
|Current portion of long-term debt                                                                                          |  |                   | 8,882   |                    |   | 8,733  
|                                                                                                                           |  |                   |         |                    |   |        
|Total current liabilities                                                                                                  |  |                   | 9,005   |                    |   | 10,735 
|                                                                                                                           |  |                   |         |                    |   |        
|Long-Term Liabilities                                                                                                      |  |                   |         |                    |   |        
|Debt, less current portion                                                                                                 |  |                   | 203,036 |                    |   | 205,314
|Other long-term liabilities                                                                                                |  |                   | 725     |                    |   | 738    
|                                                                                                                           |  |                   |         |                    |   |        
|Total long-term liabilities                                                                                                |  |                   | 203,761 |                    |   | 206,052
|                                                                                                                           |  |                   |         |                    |   |        
|Total Liabilities                                                                                                          |  | $                 | 212,766 |                    | $ | 216,787
|                                                                                                                           |  |                   |         |                    |   |        
|Commitments and Contingencies (Note 7)                                                                                     |  |                   |         |                    |   |        
|                                                                                                                           |  |                  
|Owners Capital                                                                                                            |  |                   |         |                    |   |        
|Accumulated earnings and paid-in capital                                                                                   |  | $                 | 46,019  |                    | $ | 44,542 
|Accumulated other comprehensive income                                                                                     |  |                   | 679     |                    |   | 90     
|                                                                                                                           |  |                   |         |                    |   |        
|Total owners capital                                                                                                      |  |                   | 46,698  |                    |   | 44,632 
|                                                                                                                           |  |                   |         |                    |   |        
|Total Liabilities and Owners Capital                                                                                      |  | $                 | 259,464 |                    | $ | 261,419
|                                                                                                                           |  |                   |         |                    |   |        



The accompanying notes
are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (1)

(Unaudited)

(Dollars in thousands)



|                                                                        |  |                                 |        |   |      |   |         |  
|----------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------- | -
|                                                                        |  | Three Months Ended December 31, |       
|                                                                        |  | 2003                            |        |   | 2002 |  
|Revenues:                                                               |  |                                 |        |   |      |   |         |  
|Revenues before reimbursements                                          |  | $                               |       |   |      | $ | 480,319 |  
|Rental revenues from Hewitt Associates                                  |  |                                 | 5,709  |   |      |   |        |  
|Other rental revenues                                                   |  |                                 |       |   |      |   | 1,130   |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Total revenues before reimbursements (net revenues)                     |  |                                 | 5,709  |   |      |   | 481,449 |  
|Reimbursements                                                          |  |                                 |       |   |      |   | 13,606  |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Total revenues                                                          |  |                                 | 5,709  |   |      |   | 495,055 |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Operating expenses:                                                     |  |                                 |        |   |      |   |         |  
|Compensation and related expenses, excluding restricted stock awards    |  |                                 |       |   |      |   | 312,318 |  
|Restricted stock awards                                                 |  |                                 |       |   |      |   | 24,885  |  
|Reimbursable expenses                                                   |  |                                 |       |   |      |   | 13,606  |  
|Other operating expenses                                                |  |                                 | 1,941  |   |      |   | 91,848  |  
|Selling, general and administrative expenses                            |  |                                 | 354    |   |      |   | 19,856  |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Total operating expenses                                                |  |                                 | 2,295  |   |      |   | 462,513 |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Operating income                                                        |  |                                 | 3,414  |   |      |   | 32,542  |  
|                                                                        |  |                                
|Other expenses, net:                                                    |  |                                 |        |   |      |   |         |  
|Interest expense                                                        |  |                                 | (3,646 | ) |      |   | (8,682  | )
|Interest income                                                         |  |                                 | 10     |   |      |   | 736     |  
|Gain on sales of property                                               |  |                                 | 377    |   |      |   | 179     |  
|Other income (expense), net                                             |  |                                 | 1,319  |   |      |   | 321     |  
|                                                                        |  |                                 |        |   |      |   |         |  
|                                                                        |  |                                 | (1,940 | ) |      |   | (7,446  | )
|                                                                        |  |                                 |        |   |      |   |         |  
|Income before owner distributions                                       |  | $                               | 1,474  |   |      |   |         |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Income before taxes, minority interest and owner distributions          |  |                                 |        |   |      |   | 25,096  |  
|Provision for income taxes                                              |  |                                 |        |   |      |   | 10,337  |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Income after taxes and before minority interest and owner distributions |  |                                 |        |   |      |   | 14,759  |  
|Minority interest                                                       |  |                                 |        |   |      |   | 4,185   |  
|                                                                        |  |                                 |        |   |      |   |         |  
|Income after taxes and minority interest and before owner distributions |  |                                 |        |   |      | $ | 10,574  |  
|                                                                        |  |                                 |        |   |      |   |         |  



|(1) | On July 1, 2003, Hewitt Holdings distributed the shares of Hewitt Associates, Inc. Class B common stock it previously held, to its owners, with the exception of
certain owners resident outside the United States who continue to hold their shares through Hewitt Holdings. The distribution reduced Hewitt Holdings ownership interest in Hewitt Associates, Inc. to approximately 2%; accordingly the Company no
longer consolidates the results of Hewitt Associates, Inc., but accounts for the remaining investment in Hewitt Associates, Inc. using the equity method of accounting. As a result, the Companys consolidated statement of operations for three
months ended December 31, 2003, does not include the consolidated results from operations for Hewitt Associates, Inc. However, for the three months ended December 31, 2002, the Companys results include the consolidated results from operations
for Hewitt Associates, Inc. Please see the pro forma financial statements included in Note 3.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                                                                                                                     |  | Three Months Ended December 31, |       
|                                                                                                                                                                                     |  | 2003                            |        |   | 2002 |  
|Cash flows from operating activities:                                                                                                                                                |  |                                 |        |   |      |   |         |  
|Income before owner distributions                                                                                                                                                    |  | $                               | 1,474  |   |      |   |         |  
|Income after taxes and minority interest and before owner distributions                                                                                                              |  |                                 |        |   |      | $ | 10,574  |  
|Adjustments to reconcile income before owner distributions and income after taxes and minority interest and before owner distributions to net
cash provided by operating activities: |  |                                 |        |   |      |   |         |  
|Depreciation                                                                                                                                                                         |  |                                 | 2,046  |   |      |   | 21,429  |  
|Amortization                                                                                                                                                                         |  |                                 | 15     |   |      |   | 7,563   |  
|Restricted stock awards                                                                                                                                                              |  |                                 |       |   |      |   | 22,624  |  
|Deferred income taxes                                                                                                                                                                |  |                                 |       |   |      |   | 7       |  
|Minority interest                                                                                                                                                                    |  |                                 |       |   |      |   | 4,185   |  
|Equity in earnings from unconsolidated investments                                                                                                                                   |  |                                 | (1,354 | ) |      |   | (675    | )
|Gain on sales of property                                                                                                                                                            |  |                                 | (377   | ) |      |   | (179    | )
|Changes in operating assets and liabilities:                                                                                                                                         |  |                                 |        |   |      |   |         |  
|Client receivables and unbilled work in process                                                                                                                                      |  |                                 | 607    |   |      |   | 18,216  |  
|Prepaid expenses and other current assets                                                                                                                                            |  |                                 | (7     | ) |      |   | (30,714 | )
|Related party deferred rent receivable                                                                                                                                               |  |                                 | 65     |   |      |   | 3,928   |  
|Deferred contract costs                                                                                                                                                              |  |                                 |       |   |      |   | (480    | )
|Accounts payable                                                                                                                                                                     |  |                                 | (327   | ) |      |   | 1,722   |  
|Accrued expenses                                                                                                                                                                     |  |                                 | (1,545 | ) |      |   | 4,938   |  
|Advanced billings to clients                                                                                                                                                         |  |                                 |       |   |      |   | 19,718  |  
|Deferred contract revenues                                                                                                                                                           |  |                                 |       |   |      |   | (1,919  | )
|Employee deferred compensation and accrued profit sharing                                                                                                                            |  |                                 |       |   |      |   | (2,685  | )
|Other long-term liabilities                                                                                                                                                          |  |                                 |       |   |      |   | (6,074  | )
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|Net cash provided by operating activities                                                                                                                                            |  |                                 | 597    |   |      |   | 72,178  |  
|Cash flows from investing activities:                                                                                                                                                |  |                                 |        |   |      |   |         |  
|Additions to property and equipment                                                                                                                                                  |  |                                 |       |   |      |   | (5,444  | )
|Cash paid for acquisitions, net of cash received                                                                                                                                     |  |                                 |       |   |      |   | (6,846  | )
|Distributions from equity investment                                                                                                                                                 |  |                                 | 581    |   |      |   |        |  
|Proceeds from sale of property                                                                                                                                                       |  |                                 | 488    |   |      |   |        |  
|Increase in other assets                                                                                                                                                             |  |                                 |       |   |      |   | (14,770 | )
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|Net cash provided by (used in) investing activities                                                                                                                                  |  |                                 | 1,069  |   |      |   | (27,060 | )
|Cash flows from financing activities:                                                                                                                                                |  |                                 |        |   |      |   |         |  
|Capital contributions (distributions), net                                                                                                                                           |  |                                 | 3      |   |      |   | (58,156 | )
|Short-term borrowings                                                                                                                                                                |  |                                 |       |   |      |   | 13,481  |  
|Taxes paid on behalf of owners                                                                                                                                                       |  |                                 | (541   | ) |      |   |        |  
|Repayments of long-term debt                                                                                                                                                         |  |                                 | (2,129 | ) |      |   | (1,988  | )
|Repayments of capital lease obligations                                                                                                                                              |  |                                 |       |   |      |   | (2,305  | )
|Payment of offering costs by Hewitt Associates                                                                                                                                       |  |                                 |       |   |      |   | (32     | )
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|Net cash used in financing activities                                                                                                                                                |  |                                 | (2,667 | ) |      |   | (49,000 | )
|Effect of exchange rate changes on cash and cash equivalents                                                                                                                         |  |                                 |       |   |      |   | 396     |  
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                                                                                                            |  |                                 | (1,001 | ) |      |   | (3,486  | )
|Cash and cash equivalents, beginning of period                                                                                                                                       |  |                                 | 5,937  |   |      |   | 173,736 |  
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  
|Cash and cash equivalents, end of period                                                                                                                                             |  | $                               | 4,936  |   |      | $ | 170,250 |  
|                                                                                                                                                                                     |  |                                 |        |   |      |   |         |  



The accompanying notes
are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2003 AND 2002

(Unaudited)

(Dollars in thousands)



1. Description of Business



Hewitt Holdings LLC and Subsidiaries (Hewitt Holdings or the
Company) consists of the Property Entities which consist of Hewitt Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC, Hewitt Properties V LLC, Hewitt Properties VI LLC, Hewitt
Properties VII LLC and The Bayview Trust. Prior to July 1, 2003, Hewitt Associates, Inc. and its subsidiaries or its predecessor, Hewitt Associates LLC and Affiliates (Hewitt Associates) was the principal operating subsidiary of the
Company. Hewitt Associates provides human resources outsourcing and consulting services. The term owner refers to the individuals who are current or retired owners of limited liability company interests of Hewitt Holdings.



Hewitt Holdings owns significant real estate assets directly and through its Property
Entities. Substantially all of the activities of the Property Entities involve assets that are leased to Hewitt Associates on terms which at inception, were intended to be comparable to those which would have been obtained in an arms length
transaction. The investments in these properties were funded through capital contributions of Hewitt Holdings owners and third-party debt. The debt is a non-recourse obligation of Hewitt Holdings Property Entities and is not an
obligation of nor guaranteed by Hewitt Associates. The properties the Company owns are located in Illinois, Florida, and Texas.



In fiscal 2002, Hewitt Associates completed its transition to a corporate structure and initial public offering. As part of that transition, Hewitt Holdings, received
70,819,520 shares of Hewitt Associates Class B common stock. On July 1, 2003, Hewitt Holdings distributed the shares of Class B common stock of Hewitt Associates to its owners, with the exception of certain owners resident outside the United
States who continue to hold their shares through Hewitt Holdings. The shares continue to be subject to the same restrictions with respect to voting, transfer and book to market phase-in as they were when the shares were held by Hewitt Holdings. The
distribution reduced Hewitt Holdings majority interest in Hewitt Associates of approximately 72% at June 30, 2003, to a minority interest of approximately 2% at July 1, 2003 and December 31, 2003.



On August 6, 2003, Hewitt Associates completed a registered secondary offering of Hewitt
Associates Class A common stock. In conjunction with Hewitt Associates secondary offering, the Company distributed 350,431 shares of Hewitt Associates Class B common stock to certain owners resident outside the United States who
had held their shares through Hewitt Holdings.



2. Summary of Significant
Accounting Policies



Basis of Presentation



The accompanying unaudited interim consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position,
results of operations and cash flows as of December 31, 2003, and for all periods presented. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial
statements are not necessarily indicative of the financial position or operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto,
together with managements discussion and analysis of financial condition and results of operations, included in the Companys Form 10-K for the fiscal year ended September 30, 2003 as filed with the Securities and Exchange Commission.
Certain previously reported amounts have been reclassified to conform to the current period presentation.



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The consolidated financial statements are prepared on the accrual basis of accounting. The significant accounting
policies are summarized below:



Principles of Consolidation



The accompanying consolidated financial statements reflect the operations of the Company
and its majority owned subsidiaries after elimination of intercompany transactions and profits.



Investments in less than 50%-owned affiliated companies over which the Company has the ability to exercise significant influence are accounted for using the equity method of accounting. The Company applies the equity
method of accounting and does not consolidate its 51% interest in Overlook Associates, an Illinois partnership, as Hewitt Holdings does not exercise control over this partnership. Overlook Associates owns and operates commercial office buildings and
develops and sells vacant land in Lincolnshire, Illinois.



On July 1, 2003, the
Company distributed 67,783,937 shares of Class B common stock of Hewitt Associates then held by the Company to its owners (the Distribution). The Distribution reduced Hewitt Holdings majority interest in Hewitt Associates to
approximately 2% so that the Company no longer consolidates the results of Hewitt Associates, but accounts for the remaining investment in Hewitt Associates using the equity method of accounting. Prior to the Distribution, all of the assets,
liabilities and earnings of Hewitt Associates and its subsidiaries were consolidated in the Companys financial statements, and the non-affiliated investors Class A, Class B and Class C common stock interests in Hewitt Associates were
recorded as a Minority Interest on the consolidated balance sheet and statement of operations for financial reporting purposes. The Companys consolidated balance sheets at December 31, 2003 and September 30, 2003 do not reflect the
consolidated assets, liabilities and capital of Hewitt Associates. However, the Companys consolidated statement of operations and statement of cash flows for the three months ended December 31, 2002, include the consolidated results of
operations of Hewitt Associates.



Prior to July 1, 2003, significant
eliminating entries resulting from the consolidation of Hewitt Associates included the elimination of intercompany capital leases and the reversal of intercompany rental income and expense and the recognition of depreciation and interest expense
related to the real estate under capital leases. As such, on a consolidated basis, the Companys financial statements prior to July 1, 2003, reflect the Companys owned real estate and related third-party debt and no intercompany lease
obligations and related activities.



Revenue Recognition



HR services revenues include fees generated from outsourcing contracts and from consulting
services provided to Hewitt Associates clients. Under outsourcing contracts, which typically have a three- to five-year term, clients generally pay an implementation fee and an ongoing service fee. In accordance with the Securities and
Exchange Commissions Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements,Hewitt Associates recognizes revenues for non-refundable, upfront implementation fees evenly over the period between the initiation of
ongoing services through the end of the contract term (on a straight-line basis). Indirect costs of implementation are expensed as incurred. However, incremental direct costs of implementation are deferred and recognized as expense over the same
period that deferred implementation fees are recognized. If a client terminates an outsourcing contract prematurely, both the deferred implementation revenues and related costs are recognized in the period in which the termination occurs.



HR services revenues related to ongoing service fees and to services provided
outside the scope of outsourcing contracts are recognized when persuasive evidence of an arrangement exists, services have been rendered, the fee is determinable and collectibility of the fee is reasonably assured. Ongoing service fees are typically
billed and recognized on a monthly basis, typically based on the number of plan participants or services and often with a minimum monthly fee. Services provided outside the scope of outsourcing contracts are billed and recognized on a
time-and-material or fixed fee basis.



Losses on outsourcing or consulting
arrangements are recognized during the period in which a loss becomes probable and the amount of the loss is reasonably estimable. Contract or project losses are determined to be the amount by which the estimated direct and a portion of indirect
costs exceed the estimated total revenues that will be



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generated by the arrangement. Estimates are continuously monitored during the term of the arrangement and any changes to estimates are recorded in the
current period and can result in either increases or decreases to income.



Clients typically pay for consulting services either on a time-and-materials or, to a lesser degree, on a fixed-fee basis. HR services revenues are recognized under time-and-material based arrangements as services are provided. On fixed-fee
engagements, HR services revenues are recognized as the services are performed, which is measured by hours incurred in proportion to total hours estimated to complete a project.



Revenues earned in excess of billings are recorded as unbilled work in process. Billings in excess of revenues earned are recorded as
advanced billings to clients, a deferred revenue liability, until services are rendered.



The Company considers the criteria established by Emerging Issues Task Force (EITF) Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent,in determining whether revenue
should be recognized on a gross versus a net basis. In consideration of these criteria, the Company recognizes revenue primarily on a gross basis. Factors considered in determining if gross or net recognition is appropriate include whether Hewitt
Associates is primarily responsible to the client for the services, changes the delivered product, performs part of the service delivered, has discretion on vendor selection, or bears credit risk. In accordance with EITF Issue No. 01-14, Income
Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred,reimbursements received for out-of-pocket expenses incurred are characterized as revenues and are shown as a separate component of total
revenues. Similarly, related reimbursable expenses are also shown separately within operating expenses.



The Company leases its real estate properties pursuant to operating leases. The Company records rental income for the full term of each lease on a straight-line basis. Generally, the leases provide for lessee
occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease. Accordingly, a receivable is recorded from lessees for the current difference between the straight-line rent and the rent that is
contractually due from the lessee. During the three months ended December 31, 2003, 100% of the Companys rental income was derived from leases with Hewitt Associates. Prior to the Distribution, all rental income and related receivables from
Hewitt Associates were eliminated in the consolidation of Hewitt Associates.



Deferred Contract Costs and Deferred Contract Revenues



For
new outsourcing services, upfront implementation efforts are required to set up a client and their human resource or benefit programs on Hewitt Associates systems. The direct implementation or set up costs and any upfront set up
fees are deferred and recognized into earnings over the life of the outsourcing agreement. Specific, incremental and direct costs of implementation are deferred and recognized as primarily compensation and related expenses evenly over the period
between the initiation of ongoing services through the end of the contract term. Implementation fees may be received either upfront or over the ongoing services period in the fee per participant. By deferring the upfront set up fees over the ongoing
services period, all set up revenues are recognized evenly over the contract term along with the corresponding deferred contract costs.



Performance-Based Compensation



Hewitt Associates compensation program includes a performance-based component that is determined by Hewitt Associates management. Performance-based
compensation is discretionary and is based on individual, team, and Hewitt Associates performance. Performance-based compensation is paid once per fiscal year after Hewitt Associates annual operating results are finalized. The amount of
expense for performance-based compensation recognized at interim and annual reporting dates involves judgment, is based on quarterly and annual results as compared to internal targets, and takes into account other factors, including industry-wide
results and the general economic environment. Annual performance-based compensation levels may vary from current expectations as a result of changes in the actual performance of the individual, team, or Hewitt Associates. As such, accrued amounts
are subject to change in future periods if actual future performance varies from performance levels anticipated in prior interim periods.



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Use of Estimates



The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, the accounting for contract and project loss reserves,
performance-based compensation, the allowance for doubtful accounts, depreciation and amortization, asset impairment, taxes, and any contingencies. Although these estimates are based on managements best knowledge of current events and actions
that the Company may undertake in the future, actual results may be different from the estimates.



Stock-Based Compensation



The Company
applies the intrinsic value method for accounting for stock-based compensation as outlined in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employeesand provides the pro forma disclosures
required by SFAS No. 123, Accounting for Stock-Based Compensationas amended by SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosure.



Hewitt Associates restricted stock awards, including restricted stock and restricted stock units, are measured using the fair market
value of the stock as of the grant date and are recorded as unearned compensation on the balance sheet. As the restricted stock awards vest, the unearned compensation is amortized to compensation expense on a straight-line basis. Employer payroll
taxes are also recorded as expense when they become due over the vesting period. The shares are subject to forfeiture and restrictions on sale or transfer for four years from the grant date.



Hewitt Associates also grants nonqualified stock options at an exercise price equal to the
fair market value of Hewitt Associates stock on the grant date. Since the stock options have no intrinsic value on the grant date, no compensation expense is recorded in connection with the stock option grants. Generally, Hewitt
Associates stock options vest 25 percent on each anniversary of the grant date, are fully vested four years from the grant date and have a term of ten years.



For purposes of pro forma disclosures, the estimated fair value of the stock options is amortized to compensation expense over the stock
options vesting period. The Companys pro forma income after taxes and minority interest and before owner distributions for the three months ended December 31, 2002, would have been as follows:



|                                                                                                   |  |      |         |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ------- | -
|                                                                                                   |  | 2002 |        
|Income after taxes and minority interest and before owner distributions:                           |  |      |         |  
|As reported                                                                                        |  | $    | 10,574  |  
|Stock-based compensation expense included in reported net income, net of tax and minority interest |  |      | 10,518  |  
|Pro forma stock compensation expense, net of tax and minority interest                             |  |      | (11,561 | )
|                                                                                                   |  |      |         |  
|Adjusted income after taxes and minority interest and before owner distributions                   |  | $    | 9,531   |  
|                                                                                                   |  |      |         |  



New Accounting
Pronouncements



In January 2003, the FASB issued FASB
Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest Entities,to expand upon existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and
activities of another entity. In December 2003, the FASB revised FIN No. 46 to provide more clarification. Until now, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through
voting interests. FIN No. 46 changes that by requiring a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual returns or both. FIN No. 46, as revised, is not expected to have a material impact on the Companys consolidated financial statements.



9



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3. Distribution of Hewitt Associates Shares



On July 1, 2003, the Company distributed 67,783,937 shares of Hewitt Associates Class B common stock it held to its owners (the
Distribution). The Distribution reduced Hewitt Holdings majority interest in Hewitt Associates to approximately 2% so that the Company no longer consolidates the results of Hewitt Associates, but accounts for the remaining
investment in Hewitt Associates using the equity method of accounting. As a result, the Companys consolidated balance sheets at December 31, 2003 and September 30, 2003 do not reflect the consolidated assets, liabilities and capital of Hewitt
Associates and the Companys statements of operations and cash flows for the three months ended December 31, 2003 do not reflect the operations of Hewitt Associates. However, the Companys statements of operations and cash flows for the
three months ended December 31, 2002, do include the operations of Hewitt Associates. The following unaudited pro forma results give effect to the de-consolidation as if it had occurred on October 1, 2002, the beginning of fiscal 2003, and exclude
any non-recurring adjustments, to allow for comparability.



The Hewitt
Associates historical results in the following pro forma consolidated income statements reflect Hewitt Associates results for the three months ended December 31, 2002. The information presented is not necessarily indicative of the results of
operations that might have occurred had the events described above actually taken place as of the dates specified. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. This
information and the accompanying notes should also be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report and our Annual Report on Form 10-K.



10



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Hewitt Holdings LLC

Pro Forma Consolidated Income Statements

(unaudited)



|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|-------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | -------------------------- | - | -------- | --------------------------- |  | - | --------- | ---- |  | - | ------ | -
|                                                                                 | 
|                                                                                 |  | Three Months Ending December 31, 2002 |        
|                                                                                 |  | Hewitt Holdings Historical            |         |   | HewittAssociatesHistorical |   |          | De-consolidationAdjustments |  |   | Pro Forma |     
|                                                                                 |  | (Dollars in thousands)                |        
|Revenues:                                                                        |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|HR services revenues before reimbursements                                       |  | $                                     | 480,319 |   |                            | $ | (480,319 | )                           |  | $ |          |      |  | $ |       |  
|Rental revenues from Hewitt Associates                                           |  |                                       |        |   |                            |   |         |                             |  |   | 5,709     | (a)  |  |   | 5,709  |  
|Other rental revenues                                                            |  |                                       | 1,130   |   |                            |   |         |                             |  |   |          |      |  |   | 1,130  |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Total revenues before reimbursements (net revenues)                              |  |                                       | 481,449 |   |                            |   | (480,319 | )                           |  |   | 5,709     |      |  |   | 6,839  |  
|Reimbursements                                                                   |  |                                       | 13,606  |   |                            |   | (13,606  | )                           |  |   |          |      |  |   |       |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Total revenues                                                                   |  |                                       | 495,055 |   |                            |   | (493,925 | )                           |  |   | 5,709     |      |  |   | 6,839  |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Operating expenses:                                                              |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                                       | 312,318 |   |                            |   | (311,539 | )                           |  |   | (779      | )(b) |  |   |       |  
|Restricted stock award compensation                                              |  |                                       | 24,885  |   |                            |   | (24,885  | )                           |  |   |          |      |  |   |       |  
|Reimbursable expenses                                                            |  |                                       | 13,606  |   |                            |   | (13,606  | )                           |  |   |          |      |  |   |       |  
|Other operating expenses                                                         |  |                                       | 91,848  |   |                            |   | (94,413  | )                           |  |   | 5,709     | (a)  |  |   | 3,543  |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   | 399       | (c)  |  |   |        |  
|Selling, general and administrative expenses                                     |  |                                       | 19,856  |   |                            |   | (19,436  | )                           |  |   |          |      |  |   | 420    |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Total operating expenses                                                         |  |                                       | 462,513 |   |                            |   | (463,879 | )                           |  |   | 5,329     |      |  |   | 3,963  |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Operating income                                                                 |  |                                       | 32,542  |   |                            |   | (30,046  | )                           |  |   | 380       |      |  |   | 2,876  |  
|Other expenses, net                                                              |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Interest expense                                                                 |  |                                       | (8,682  | ) |                            |   | 5,316    |                             |  |   | (438      | )(d) |  |   | (3,804 | )
|Interest income                                                                  |  |                                       | 736     |   |                            |   | (643     | )                           |  |   |          |      |  |   | 93     |  
|Gains on disposal of properties                                                  |  |                                       | 179     |   |                            |   |         |                             |  |   |          |      |  |   | 179    |  
|Other income (expense), net                                                      |  |                                       | 321     |   |                            |   | 278      |                             |  |   | 344       | (e)  |  |   | 943    |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|                                                                                 |  |                                       | (7,446  | ) |                            |   | (4,951   | )                           |  |   | (94       | )    |  |   | (2,589 | )
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Income before income taxes, minority interest and owner distributions            |  |                                       | 25,096  |   |                            |   | (25,095  | )                           |  |   | 286       |      |  |   | 287    |  
|Provision for income taxes                                                       |  |                                       | 10,337  |   |                            |   | (10,337  | )                           |  |   |          |      |  |   |       |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Net income                                                                       |  |                                       |         |   |                            | $ | (14,758  | )                           |  |   |           |      |  |   |        |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Income after taxes and before minority interest and owner distributions          |  |                                       | 14,759  |   |                            |   |          |                             |  |   | 286       |      |  |   | 287    |  
|Minority interest                                                                |  |                                       | 4,185   |   |                            |   |          |                             |  |   | (4,185    | )(f) |  |   |       |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  
|Income after taxes and minority interest and before owner distributions          |  | $                                     | 10,574  |   |                            |   |          |                             |  | $ | 4,471     |      |  | $ | 287    |  
|                                                                                 |  |                                       |         |   |                            |   |          |                             |  |   |           |      |  |   |        |  



|(a) | Represents rental income from Hewitt Associates for the three months ended December 31, 2002.
This adjustment reverses the elimination of the intercompany rental revenues and rent expense when Hewitt Associates was consolidated by the Company.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | Reclassification of payments made on behalf of owners.
|--- | ------------------------------------------------------



|(c) | Represents Hewitt Associates depreciation expense on a property leased under a capital lease
from Hewitt Holdings. This adjustment reverses the elimination of the depreciation for a building capitalized under a capital lease at Hewitt Associates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | Represents Hewitt Associates interest expense on a property leased under a capital lease from
Hewitt Holdings. This adjustment reverses the elimination of interest expense on the capital lease at Hewitt Associates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(e) | An adjustment to record the estimated equity earnings of the Companys remaining
investment in Hewitt Associates as if the Company had its approximate 2% ownership interest in Hewitt Associates for the three months ended December 31, 2002.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(f) | An adjustment to eliminate the minority interest generated prior to the de-consolidation of
Hewitt Associates.
|--- | --------------------------------------------------------------------------------------------------------------



4. Other Comprehensive Income



The following table presents the pre-tax and after-tax components of the
Companys other comprehensive income for the periods presented:



|                                                                        |  |                                |       |      |   |       
|----------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | - | ------
|                                                                        |  | Three MonthsEnded December 31,
|                                                                        |  | 2003                           |       | 2002
|Income before owner distributions                                       |  | $                              | 1,474 |      |   |       
|Income after taxes and minority interest and before owner distributions |  |                                |       |      | $ | 10,574
|Other comprehensive income:                                             |  |                                |       |      |   |       
|Foreign currency translation adjustments                                |  |                                | 589   |      |   | 3,708 
|                                                                        |  |                                |       |      |   |       
|Total other comprehensive income                                        |  | $                              | 2,063 |      | $ | 14,282
|                                                                        |  |                                |       |      |   |       



5. Related Party Transactions



The Company entered into real estate operating leases with Hewitt
Associates and its subsidiaries on terms which at inception, were intended to be comparable to those which would have been obtained in an arms length transaction. The investments in the properties were funded through capital contributions by
Hewitt Holdings owners and third-party debt. The debt is reflected on the Companys balance sheet and is not an obligation of, nor guaranteed by, Hewitt Associates.



In June 2002, Hewitt Associates entered into a 15-year capital lease with The Bayview Trust to lease office space in Newport Beach,
California. On March 7, 2003, The Bayview Trust sold the property in Newport Beach, California, and Hewitt Associates lease was assigned to the third-party purchaser of the building.



From May 31, 2002, through September 30, 2007, Hewitt Associates LLC, a subsidiary of Hewitt
Associates, Inc., will provide certain support services to Hewitt Holdings, primarily in the financial, real estate and legal departments, as may be requested by Hewitt Holdings from time to time. Hewitt Holdings will pay Hewitt Associates LLC an
annual fee of $50 for basic services. Hewitt Associates LLC may charge Hewitt Holdings separately for additional services on a time and materials basis. Through December 31, 2003, fees for all services Hewitt Associates LLC has provided under the
services agreement, totaling $35 for the three months ended December 31, 2003 and $13 for the comparable prior year period, have been paid by Hewitt Holdings.



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6. Client Receivables and Unbilled Work in Process



Client receivables and unbilled work in process, net of allowances, at December 31, 2003 and September 30, 2003, consisted of the following:



|                         |  |                   |     |                    |   |    
|------------------------ |  | ----------------- | --- | ------------------ | - | ---
|                         |  | December 31, 2003 |     | September 30, 2003
|Client receivables       |  | $                 | 137 |                    | $ | 563
|Unbilled work in process |  |                   |    |                    |   | 181
|                         |  |                   |     |                    |   |    
|                         |  | $                 | 137 |                    | $ | 744
|                         |  |                   |     |                    |   |    



7. Legal Proceedings



The Company is occasionally subject to lawsuits and claims arising in the
normal conduct of business. Management does not expect the outcome of any pending claim to have a material adverse affect on the business, financial condition or results of operations of the Company.



Hewitt Associates provides indemnifications of varying scope and size to certain customers
against claims of intellectual property infringement made by third parties arising from the use of our products or receipt of our services. The Company evaluates estimated losses for such indemnifications under SFAS 5, Accounting for
Contingencies, as interpreted by FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others. Management considers such factors as the
degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. As of December 31, 2003, the Company had no outstanding claims and was not subject to any pending litigation alleging that the
Companys products or services infringe the intellectual property rights of any third parties.



8. Stock-Based Compensation Plans



Hewitt Associates has a Global Stock and Incentive Compensation Plan (the Plan) for its employees and directors. The Plan is administered by the Compensation and Leadership Committee of the Board of Directors of the Company (the
Committee). Under the Plan, employees and directors may receive awards of nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and cash-based awards, and
employees can also receive incentive stock options. A total of 25,000,000 shares of Class A common stock have been reserved for issuance under the Plan. Through the Distribution date, only restricted stock and restricted stock units and nonqualified
stock options had been granted.



In connection with its initial public offering
in June 2002, Hewitt Associates granted 5,789,908 shares of Class A restricted stock and restricted stock units to employees. The restricted stock and restricted stock units have substantially the same terms, except the holders of restricted stock
units do not have voting rights. The one-time initial public offering-related awards were valued at $110,141 on the June 27, 2002, grant date (a weighted price of $19.02 per share) and 37% were amortized on a straight-line basis as non-cash
compensation expense from the grant date until December 31, 2002 and 63% are being amortized on a straight-line basis as non-cash compensation expense over four years following the grant date. As a result of the Distribution and subsequent
de-consolidation of Hewitt Associates, the Company did not recognize any compensation expense for the initial public offering restricted stock awards in the three months ended December 31, 2003. For the three months ended December 31, 2002,
compensation expense for the initial public offering restricted stock awards was $24,885, representing amortization and applicable payroll taxes for the period.



The Committee also granted 4,041,393 nonqualified stock options to purchase shares of Hewitt Associates Class A common stock prior to the Distribution. The option
prices were determined by the Committee, provided that for options issued to participants in the United States, the option price could not be less than 100% of the fair market value of the shares on the date the option was granted and no option was
exercisable later than the tenth aniversary of its grant. The nonqualified stock options granted vest over a period of four years.



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9. Intangible Assets



The Company tests intangible assets for impairment whenever indicators of impairment arise. During the three months ended December 31, 2003 and for the year ended
September 30, 2003, no impairments on intangible assets were recognized.



Intangible assets with definite useful lives are amortized over their respective estimated useful lives. The following is a summary of intangible assets at December 31, 2003 and September 30, 2003:



|                     |  |                     |       |                         |   |       |  |                     |     |                         |   |       |  |   |     |  |   |    
|-------------------- |  | ------------------- | ----- | ----------------------- | - | ----- |  | ------------------- | --- | ----------------------- | - | ----- |  | - | --- |  | - | ---
|                     |  | December 31, 2003   |       | September 30, 2003     
|                     |  | GrossCarryingAmount |       | AccumulatedAmortization |   | Total |  | GrossCarryingAmount |     | AccumulatedAmortization |   | Total
|Definite useful life |  |                     |       |                         |   |       |  |                     |     |                         |   |       |  |   |     |  |   |    
|Deferred loan costs  |  | $                   | 1,217 |                         | $ | 327   |  | $                   | 890 |                         | $ | 1,217 |  | $ | 312 |  | $ | 905



Amortization expense related to
definite-lived intangible assets for the three months ended December 31, 2003 and 2002, are as follows:



|                     |  |      |    |      |   |      
|-------------------- |  | ---- | -- | ---- | - | -----
|                     |  | 2003 |    | 2002
|Capitalized software |  | $    |   |      | $ | 7,040
|Trademarks           |  |      |   |      |   | 508  
|Deferred loan costs  |  |      | 15 |      |   | 15   
|                     |  |      |    |      |   |      
|Total                |  | $    | 15 |      | $ | 7,563
|                     |  |      |    |      |   |      



Estimated amortization expense related
to intangible assets at September 30, 2003, is $62 in each of the five years that end September 30, 2008 and $595 for years thereafter.



10. Segment Data



As a result of the Distribution and subsequent de-consolidation of Hewitt Associates, Inc., Hewitt Holdings has one business segment consisting of its real estate operations.



Prior to July 1, 2003, pursuant to SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information,the Company determined that it had two reportable segments, Outsourcing and Consulting, based on similarities among the Hewitt Associates operating units including homogeneity of services, service
delivery methods, and use of technology.



Hewitt Associates operates many of
the administrative and support functions of its business through the use of centralized shared service operations to provide an economical and effective means of supporting the outsourcing and consulting businesses. These shared services include
information systems, human resources, general office support and space management, overall corporate management, finance and legal services. Additionally, Hewitt Associates utilizes a client development group that markets the entire spectrum of its
services and devotes resources to maintaining existing client relationships. The compensation and related expenses, other operating expenses, and selling, general and administrative expenses of the administrative and marketing functions are not
allocated to the business segments, rather, they are included in unallocated shared costs. The costs of information services, human resources and the direct client delivery activities provided by the client development function are, however,
allocated to the Outsourcing and Consulting segments on a specific identification basis or based on usage or headcount.



14



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The table below presents information about the Companys reportable segments for the three months ended December 31,
2002:



|                                                                       |  |                                   |        
|---------------------------------------------------------------------- |  | --------------------------------- | -------
|                                                                       |  | Three MonthsEndedDecember 31,2002
|Outsourcing                                                            |  |                                   |        
|Revenues before reimbursements                                         |  | $                                 | 308,173
|Segment income                                                         |  |                                   | 68,713 
|                                                                       | 
|Consulting                                                             |  |                                   |        
|Revenues before reimbursements                                         |  | $                                 | 172,146
|Segment income                                                         |  |                                   | 26,201 
|                                                                       | 
|Total Company                                                          |  |                                   |        
|Revenues before reimbursements                                         |  | $                                 | 480,319
|Other rental revenues                                                  |  |                                   | 1,130  
|                                                                       |  |                                   |        
|Total revenues before reimbursements (net revenues)                    |  |                                   | 481,449
|Reimbursements                                                         |  |                                   | 13,606 
|                                                                       |  |                                   |        
|Total revenues                                                         |  | $                                 | 495,055
|                                                                       |  |                                   |        
|                                                                       | 
|Segment income                                                         |  | $                                 | 94,914 
|Charges not recorded at the Segment level  restricted stock awards(1) |  |                                   | 24,885 
|Unallocated shared costs                                               |  |                                   | 39,983 
|                                                                       |  |                                   |        
|Operating income  Hewitt Associates                                   |  |                                   | 30,046 
|Hewitt Holdings LLC rental revenues                                    |  |                                   | 1,130  
|Other operating income  Hewitt Holdings LLC and Properties Entities   |  |                                   | 1,366  
|                                                                       |  |                                   |        
|Operating income                                                       |  | $                                 | 32,542 
|                                                                       |  |                                   |        



|(1) | Compensation expense of $24,885 for the three months ended December 31, 2002, related to the
amortization of the restricted stock awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



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|ITEM2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------ | -------------------------------------------------------------------------------------



The following information should be read in conjunction with the information contained in our consolidated financial statements and
related notes presented earlier in this Quarterly Report on Form 10-Q. Please also refer to our consolidated financial statements and related notes and the information under the heading Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for additional information. In addition to historical information, this Quarterly Report on Form 10-Q may contain
forward-looking statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from managements expectations. Please see additional risks and uncertainties described below and in the
Notes Regarding Forward-Looking Statements which appears later in this section.



We use the terms Hewitt Holdings and the Company to refer to Hewitt Holdings LLC and its subsidiaries. We use the term Hewitt Associates to refer to the business of Hewitt
Associates, Inc. and its subsidiaries. We use the term Property Entities to refer to Hewitt Holdings wholly-owned subsidiaries, Hewitt Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC,
Hewitt Properties V LLC, Hewitt Properties VI LLC, Hewitt Properties VII LLC and The Bayview Trust.



We use the term owner to refer to the individuals who are current or retired members of Hewitt Holdings. These individuals (with the exception of our retired owners) became employees of Hewitt
Associates upon the completion of Hewitt Associates transition to a corporate structure on May 31, 2002.



All references to years, unless otherwise noted, refer to our fiscal years, which end on September 30. For example, a reference to 2004or fiscal
2004 means the twelve-month period that ends September 30, 2004. All references to percentages contained in Managements Discussion and Analysis of Financial Condition and Results of Operations refer to calculations based on
the amounts in our consolidated financial statements, presented earlier in this Quarterly Report on Form 10-Q. Certain prior period amounts have been reclassified to conform with the current year presentation.



Overview



On July 1, 2003, Hewitt Holdings distributed the shares of Hewitt Associates Class B common stock to its owners, with the exception of
certain owners resident outside the United States who will continue to hold their shares through Hewitt Holdings (the Distribution). Following the Distribution, Hewitt Holdings ownership in Hewitt Associates decreased to
approximately 2%. As such, Hewitt Holdings applies the equity method of accounting for its investment in Hewitt Associates so that only Hewitt Holdings share of Hewitt Associates earnings will be recognized as Hewitt Holdings other
income. Beginning on July 1, 2003, Hewitt Holdings only business is owning, financing and leasing real estate assets which are primarily used by Hewitt Associates in operating its business. As a result of the Distribution and subsequent
de-consolidation of Hewitt Associates, Hewitt Holdings consolidated balance sheet as of September 30, 2003 does not reflect the consolidated assets, liabilities and equity of Hewitt Associates. However, the Companys consolidated
statement of operations and statement of cash flows for the three months ended December 31, 2002, include Hewitt Associates results.



Prior to the Distribution, Hewitt Associates was the principal operating business of the Company. Hewitt Holdings total revenues were comprised of Hewitt
Associates HR services revenues. Hewitt Holdings third-party rental income was not material in relation to consolidated revenue in fiscal 2003. In fiscal 2004, rental revenues from Hewitt Associates make up all of Hewitt Holdings
revenues.



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##### Table of Contents

Segments



Prior to the Distribution and de-consolidation of Hewitt Associates, the Company had two reportable segments:



| |  | OutsourcingHewitt Associates applies its human resources expertise and employs its integrated technology systems to administer its clients human resource programs:
benefits, payroll and workforce management. Benefits outsourcing services include health and welfare (such as medical plans), defined contribution (such as 401(k) plans), and defined benefit (such as pension plans). Hewitt Associates expanded
outsourcing service offering includes payroll administration, which allows Hewitt Associates to provide clients with a stand-alone payroll service and enables Hewitt Associates to complete its comprehensive range of human resources services. Hewitt
Associates payroll services include installed payroll software and fully outsourced processing. Hewitt Associates workforce management outsourcing services include workforce administration, rewards management, recruiting and staffing,
performance management, learning and development, and talent management.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ConsultingHewitt Associates provide a wide array of consulting and actuarial services covering the design, implementation, communication and operation of health and welfare,
compensation and retirement plans and broader human resources programs and processes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While we report revenues and direct expenses based on these two segments, Hewitt Associates presents its offering to clients as a continuum of human resources services.



Subsequent to the Distribution, Hewitt Holdings has one business segment consisting of its
real estate operations.



Critical Accounting Policies and Estimates



Revenues





We lease our
real estate properties pursuant to operating leases. We record rental income for the full term of each lease on a straight-line basis. However, generally, the leases provide for lessee occupancy during periods for which no rent is due or where
minimum rental payments increase during the term of the lease. Accordingly, a receivable is recorded from lessees for the current difference between the straight-line rent and the rent that is contractually due from the lessee. During the three
months ended December 31, 2003, 100% of our rental income was derived from leases with Hewitt Associates. Prior to July 1, 2003, the date we distributed the majority of our shares in Hewitt Associates, all rental income and related receivables from
Hewitt Associates were eliminated in the consolidation of Hewitt Associates.



Long-Lived Assets Held and Used



We review long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the undiscounted future cash flows from the long-lived asset are less than the carrying value, we recognize a loss
equal to the difference between the carrying value and the discounted future cash flows of the asset.



Our estimate of future cash flows will be based on our experience, knowledge, and typically third-party advice or market data. However, these estimates can be affected by other factors and economic conditions that can
be difficult to predict.



Estimates



Various assumptions and other factors underlie the determination of significant accounting
estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, known facts, current and expected economic conditions. We periodically reevaluate these significant factors
and make adjustments when facts and circumstances dictate, however, actual results may differ from estimates.





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Historical Results of Operations



The following table sets forth our historical results of operations as a percentage of net revenues. The information for each of the
three-month periods is derived from unaudited consolidated financial statements which were prepared on the same basis as the annual consolidated financial statements. In our opinion, information for the three months ended December 31, 2003 and 2002
contains all adjustments, consisting only of normal recurring adjustments necessary to fairly present this information. Operating results for any period are not necessarily indicative of results for any future periods.



|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------- | - | ------- | ------------------------------------------------ |  | - | -------- | - |  | ------ | -- |  | ----- | - |  | ----- | -
|                                                                                 |  | Three Months Ended December 31, |        |   | Increase/(Decrease) |   |         | % of Net Revenue Three Months Ended December 31, | 
|                                                                                 |  | 2003                            |        |   | 2002                |   |         | Amount                                           |  |   | %        |   |  | 2003   |    |  | 2002  |  
|                                                                                 |  | (in thousands)                  |        |   |                     |   |         |                                                  |  |   |          |  
|Revenues:                                                                        |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|HR services revenues before reimbursements                                       |  | $                               |       |   |                     | $ | 480,319 |                                                  |  | $ | (480,319 | ) |  | (100.0 | )% |  |      | % |  | 99.8  | %
|Rental revenues from Hewitt Associates                                           |  |                                 | 5,709  |   |                     |   |        |                                                  |  |   | 5,709    |   |  | 100.0  |    |  | 100.0 |   |  |      |  
|Other rental revenues                                                            |  |                                 |       |   |                     |   | 1,130   |                                                  |  |   | (1,130   | ) |  | (100.0 | )  |  |      |   |  | 0.2   |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total revenues before reimbursements (net revenues)                              |  |                                 | 5,709  |   |                     |   | 481,449 |                                                  |  |   | (475,740 | ) |  | (98.8  | )  |  | 100.0 |   |  | 100.0 |  
|Reimbursements                                                                   |  |                                 |       |   |                     |   | 13,606  |                                                  |  |   | (13,606  | ) |  | (100.0 | )  |  |      |   |  | 2.8   |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total revenues                                                                   |  |                                 | 5,709  |   |                     |   | 495,055 |                                                  |  |   | (489,346 | ) |  | (98.8  | )  |  | 100.0 |   |  | 102.8 |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Operating expenses:                                                              |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                                 |       |   |                     |   | 312,318 |                                                  |  |   | (312,318 | ) |  | (100.0 | )  |  |      |   |  | 64.9  |  
|Restricted stock award compensation                                              |  |                                 |       |   |                     |   | 24,885  |                                                  |  |   | (24,885  | ) |  | (100.0 | )  |  |      |   |  | 5.2   |  
|Reimbursable expenses                                                            |  |                                 |       |   |                     |   | 13,606  |                                                  |  |   | (13,606  | ) |  | (100.0 | )  |  |      |   |  | 2.8   |  
|Other operating expenses                                                         |  |                                 | 1,941  |   |                     |   | 91,848  |                                                  |  |   | (89,907  | ) |  | (97.9  | )  |  | 34.0  |   |  | 19.1  |  
|Selling, general and administrative expenses                                     |  |                                 | 354    |   |                     |   | 19,856  |                                                  |  |   | (19,502  | ) |  | (98.2  | )  |  | 6.2   |   |  | 4.1   |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total operating expenses                                                         |  |                                 | 2,295  |   |                     |   | 462,513 |                                                  |  |   | (460,218 | ) |  | (99.5  | )  |  | 40.2  |   |  | 96.1  |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Operating income                                                                 |  |                                 | 3,414  |   |                     |   | 32,542  |                                                  |  |   | (29,128  | ) |  | (89.5  | )  |  | 59.8  |   |  | 6.7   |  
|Other expenses, net                                                              |  |                                 | (1,940 | ) |                     |   | (7,446  | )                                                |  |   | 5,506    |   |  | (73.9  | )  |  | (34.0 | ) |  | (1.5  | )
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income before owner distributions                                                |  | $                               | 1,474  |   |                     |   |         |                                                  |  | $ | 1,474    |   |  | 100.0  |    |  | 25.8  | % |  |       |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income before taxes, minority interest and owner distributions                   |  |                                 |        |   |                     |   | 25,096  |                                                  |  |   | (25,096  | ) |  | (100.0 | )  |  |       |   |  | 5.2   |  
|Provision for income taxes                                                       |  |                                 |        |   |                     |   | 10,337  |                                                  |  |   | (10,337  | ) |  | (100.0 | )  |  |       |   |  | 2.1   |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income after taxes and before minority interest and owner distributions          |  |                                 |        |   |                     |   | 14,759  |                                                  |  |   | (14,759  | ) |  | (100.0 | )  |  |       |   |  | 3.1   |  
|Minority interest                                                                |  |                                 |        |   |                     |   | 4,185   |                                                  |  |   | (4,185   | ) |  | (100.0 | )  |  |       |   |  | 0.9   |  
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income after taxes, minority interest and before owner distributions             |  |                                 |        |   |                     | $ | 10,574  |                                                  |  | $ | (10,574  | ) |  | (100.0 | )% |  |       |   |  | 2.2   | %
|                                                                                 |  |                                 |        |   |                     |   |         |                                                  |  |   |          |   |  |        |    |  |       |   |  |       |  



As a result of the Distribution and
subsequent de-consolidation of Hewitt Associates, the results of operations for the three months ended December 31, 2003 and 2002 are not comparable. The results for the three months ended December 31, 2003 do not include the operating results of
Hewitt Associates. The results for the three months ended December 31, 2002 include the operating results of Hewitt Associates. For a more meaningful comparison, the following table presents historical operations for the three months ended December
31, 2003 to the pro forma results



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for the three months ended December 31, 2002. The information for each of the three-month periods is derived from unaudited consolidated financial
statements, which were prepared on the same basis as the annual consolidated financial statements. In our opinion, information for the three months ended December 31, 2003 and the pro forma results for the three months ended December 31, 2002
contains all adjustments, consisting only of normal recurring adjustments necessary to fairly present this information. Operating results for any period are not necessarily indicative of results for any future periods. We refer you to Note 3 in the
consolidated financial statements for more information on the pro forma results from operations.



|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|-------------------------------------------- |  | ------------------------------- | ------ | - | ------------------- | - | ------ | ------------------------------------------------ |  | - | ------ | - |  | ------ | - |  | ----- | - |  | ----- | -
|(in thousands)                               |  | Three Months Ended December 31, |        |   | Increase/(Decrease) |   |        | % of Net Revenue Three Months Ended December 31, | 
|                                             |  | 2003                            |        |   | 2002                |   |        | Amount                                           |  |   | %      |   |  | 2003   |   |  | 2002  |  
|                                             |  | (Pro Forma)                     |        |   |                     |   |        |                                                  |  |   |        |   |  |        |  
|Revenues:                                    |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Rental revenues from Hewitt Associates       |  |                                 | 5,709  |   |                     |   | 5,709  |                                                  |  |   |       |   |  |       | % |  | 100.0 | % |  | 83.5  | %
|Other rental revenues                        |  |                                 |       |   |                     |   | 1,130  |                                                  |  |   | (1,130 | ) |  | (100.0 | ) |  |      |   |  | 16.5  |  
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Total rental revenues                        |  |                                 | 5,709  |   |                     |   | 6,839  |                                                  |  |   | (1,130 | ) |  | (16.5  | ) |  | 100.0 |   |  | 100.0 |  
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Operating expenses:                          |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Other operating expenses                     |  |                                 | 1,941  |   |                     |   | 3,543  |                                                  |  |   | (1,602 | ) |  | (45.2  | ) |  | 34.0  |   |  | 51.8  |  
|Selling, general and administrative expenses |  |                                 | 354    |   |                     |   | 420    |                                                  |  |   | (66    | ) |  | (15.7  | ) |  | 6.2   |   |  | 6.1   |  
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Total operating expenses                     |  |                                 | 2,295  |   |                     |   | 3,963  |                                                  |  |   | (1,668 | ) |  | (42.1  | ) |  | 40.2  |   |  | 57.9  |  
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Operating income                             |  |                                 | 3,414  |   |                     |   | 2,876  |                                                  |  |   | 538    |   |  | 18.7   |   |  | 59.8  |   |  | 42.1  |  
|Other expenses, net                          |  |                                 | (1,940 | ) |                     |   | (2,589 | )                                                |  |   | 649    |   |  | (25.1  | ) |  | (34.0 | ) |  | (37.9 | )
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  
|Income before owner distributions            |  | $                               | 1,474  |   |                     | $ | 287    |                                                  |  | $ | 1,187  |   |  | 413.6  | % |  | 25.8  | % |  | 4.2   | %
|                                             |  |                                 |        |   |                     |   |        |                                                  |  |   |        |   |  |        |   |  |       |   |  |       |  



Three Months Ended December 31,
2003 and 2002



Revenues



Rental revenues decreased by 17% to $5,709 in the three months ended December 31, 2003,
compared to $6,839 on a pro forma basis in the comparable prior year period. We sold the Newport Beach property in March 2003. This office building included operating leases with third parties and a capital lease with Hewitt Associates. As a result,
rental revenue from Hewitt Associates was not affected and other rental revenues decreased by 100% over the comparable pro forma prior year period.



Other Operating Expenses



Other operating expenses (which include depreciation and amortization, utilities, repairs and maintenance, property taxes, and insurance) decreased by 45% to $1,941 in
the three months ended December 31, 2003 compared to $3,543 in the comparable pro forma prior year period. The decrease is a result of the disposal of the Newport Beach property. Expenses related to the Newport Beach property are included in the pro
forma results for the three months ended December 31, 2002 and are not included in the results for the three months ended December 31, 2003.



Selling, General and Administrative Expenses



Selling, general and administrative (SG&A) expenses (which includes legal and audit fees) decreased 16% to $354 for the three months ended December 31,
2003 compared to $420 in the comparable pro forma prior year period. The decrease is primarily a result of decreased legal fees, partially offset by increased audit fees resulting from the Company becoming a reporting company under the Securities
and Exchange Act.



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Other Expenses, Net



Other expenses, net (which includes interest expense, interest income, gains on disposals of properties and income from equity investments) decreased by 25% to $1,940 in
the three months ended December 31, 2003, from $2,589 in the comparable pro forma prior year period. The decrease in other expenses, net is a result of an increase in earnings from Hewitt Holdings minority interest in Hewitt Associates, a gain on
the sale of land and a decrease in interest expense slightly offset by a decrease in interest income. The increase in the minority interest income is the result of Hewitt Associates having higher earnings for the three months ended December 31, 2003
compared to the three months ended December 31, 2002. The increase in the gain on the sale of properties was a result of a disposal of land. Interest expense decreased as a result of lower principal balances on debt due to continued payments on
outstanding debt. Interest income decreased as a result of the lower interest rates and less cash on hand for the three months ended December 31, 2003 compared to the three months ended December 31, 2002.



Liquidity and Capital Resources



We have historically funded our growth and working capital requirements with funds from
operations, capital contributions from owners, credit facilities, credit tenant notes and term notes.



Summary of Cash Flows

(in thousands)



|                                                 |  |                                 |        |   |      |   |         |  
|------------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ------- | -
|                                                 |  | Three Months Ended December 31, |       
|                                                 |  | 2003                            |        |   | 2002 |  
|                                                 |  | (unaudited)                     |       
|Cash provided by:                                |  |                                 |        |   |      |   |         |  
|Operating activities                             |  | $                               | 597    |   |      | $ | 72,178  |  
|Cash provided by (used in):                      |  |                                 |        |   |      |   |         |  
|Investing activities                             |  |                                 | 1,069  |   |      |   | (27,060 | )
|Cash used in:                                    |  |                                 |        |   |      |   |         |  
|Financing activities                             |  |                                 | (2,667 | ) |      |   | (49,000 | )
|Effect of exchange rates on cash                 |  |                                 |       |   |      |   | 396     |  
|                                                 |  |                                 |        |   |      |   |         |  
|Net decrease in cash and cash equivalents        |  |                                 | (1,001 | ) |      |   | (3,486  | )
|Cash and cash equivalents at beginning of period |  |                                 | 5,937  |   |      |   | 173,736 |  
|                                                 |  |                                 |        |   |      |   |         |  
|Cash and cash equivalents at end of period       |  | $                               | 4,936  |   |      | $ | 170,250 |  
|                                                 |  |                                 |        |   |      |   |         |  



For the three months ended December
31, 2003 and 2002, cash provided by operating activities was $597 and $72,178, respectively. The decrease in cash flows provided by operating activities between the three months ended December 31, 2003 and 2002 is a result of the Distribution and
subsequent de-consolidation of Hewitt Associates. Cash flows from rental income in the first quarter of 2004 was offset by cash payments made on accrued expenses.



For the three months ended December 31, 2003, cash provided by investing activities was $1,069 and cash used in investing activities for the
three months ended December 31, 2002 was $27,060. The increase in cash provided by investing activities is a result of the Distribution and subsequent de-consolidation of Hewitt Associates and related to cash received from the sale of property and a
distribution from an equity investment.



For the three months ended December
31, 2003 and 2002, cash used in financing activities was $2,667 and $49,000, respectively. The decrease in cash used in financing activities is a result of the Distribution and subsequent de-consolidation of Hewitt Associates. Cash used in financing
activities in the first quarter of 2004 related primarily to the repayment of long-term debt.



At December 31, 2003, our cash and cash equivalents were $4,936, as compared to $170,250 at December 31, 2002, a decrease of $165,314 or 97%. Cash and cash equivalents decreased in 2003 primarily due to the
de-consolidation of Hewitt Associates, which resulted in a distribution of $162,885. The disposal of the Newport Beach property also caused cash and cash flows to be higher at December 31, 2002.



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##### Table of Contents

Significant ongoing commitments consist primarily of leases and debt.



Prior to fiscal year 2003, the Company entered into real estate operating leases with Hewitt
Associates and its subsidiaries on terms comparable to those that would have been obtained in an arms length transaction. The investments in the properties were funded through capital contributions by Hewitt Holdings owners and
third-party debt. The properties and debt are reflected on the Companys balance sheets and is not an obligation of, nor guaranteed by, Hewitt Associates.



We issued secured credit tenant notes to various noteholders on several dates between October 1997 through May 1999, which totaled $211,918 as of December 31, 2003,
and bear interest ranging from 6.52% to 7.13%. The principal on each note is amortized monthly between 15 and 20 years from November 1998 through February 2020.



A number of our debt agreements contain financial and other covenants including, among others, covenants restricting our ability to incur indebtedness and create
liens, to sell the assets or stock of a collateralized subsidiary, and to pay dividends or make distributions to Hewitt Holdings owners which would result in a default. At December 31, 2003, we were in compliance with our debt agreement
covenants.



We believe that funds from operations, cash and other current
assets, and existing credit facilities will satisfy our expected working capital, contractual obligations, capital expenditures, and investment requirements for at least the next 12 months.



New Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46),
Consolidation of Variable Interest Entities,to expand upon existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the
FASB revised FIN No. 46 to provide more clarification. Until now, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN No. 46 changes that by
requiring a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys
residual returns or both. FIN No. 46, as revised, is not expected to have a material impact on the Companys consolidated financial statements.



Note Regarding Forward-Looking Statements



This report contains forward-looking statements relating to our operations that are based on our current expectations, estimates and projections. Words such as
anticipates, believes, continues, estimates, expects, goal, intends, may, opportunity, plans, potential,
projects, forecasts, should, will, and similar expressions are intended to identify such 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
forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made.



Our actual results may differ from the forward-looking statements for many reasons, including:



| |  | A prolonged economic downturn could have a material adverse effect on our results.
| | - | ----------------------------------------------------------------------------------



| |  | Our ability to successfully manage our significant capital investments.
| | - | -----------------------------------------------------------------------



| |  | The cyclical nature of the real estate industry and possible oversupply of, or reduced demand for, space in our core markets could have a material adverse effect on our results.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in interest rates and the availability of financing.
| | - | ------------------------------------------------------------



| |  | Competition from other properties in our core markets.
| | - | ------------------------------------------------------



| |  | Further declines in the overall economic activity in our core markets.
| | - | ----------------------------------------------------------------------



| |  | The bankruptcy, insolvency or credit deterioration of our tenant.
| | - | -----------------------------------------------------------------





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| |  | The need to periodically renovate, repair and re-lease space and the costs thereof.
| | - | -----------------------------------------------------------------------------------



| |  | Increases in maintenance, insurance and operating costs.
| | - | --------------------------------------------------------



| |  | Civil unrest, acts of terrorism, earthquakes and other natural disasters or acts of God that may result in uninsured losses.
| | - | ----------------------------------------------------------------------------------------------------------------------------



| |  | Changes in the availability and affordability of insurance on commercially reasonable terms, in levels of coverage for our real estate assets and in exclusions from insurance
policies for our real estate assets could result in increased premium costs and/ or higher self retention of risks.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in market rental rates and our ability to rent space on favorable terms could adversely impact our results.
| | - | -------------------------------------------------------------------------------------------------------------------



| |  | Changes in Hewitt Associates performance may affect our results or the value of our investment in Hewitt Associates.
| | - | ---------------------------------------------------------------------------------------------------------------------



For a more detailed discussion of our risk related to Hewitt Associates business, see
the information under the heading Risk Factors in Hewitt Associates Registration Statements on Form S-3 (File No. 333-105560) filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or for any other reason.



|Item 3. | Quantitative and Qualitative Disclosures about Market Risks
|------- | -----------------------------------------------------------



We are exposed to market risk primarily from changes in interest rates. We do not hold or issue derivative financial instruments for trading purposes. At December 31, 2003, we were not a party to any hedging
transaction or derivative financial instrument.



Interest rate risk



We are exposed to interest rate risk primarily through our portfolio of
cash and cash equivalents, which is designed for safety of principal and liquidity. We maintain a portfolio of cash equivalents in the highest rated money market investments and continuously monitor the investment ratings. The investments are
subject to inherent interest rate risk as investments mature and are reinvested at current market interest rates.



At December 31, 2003, 100% of our long-term debt was at a fixed rate. Our fixed rate debt consists of our secured credit tenant notes. At December 31, 2003, a 10 percent
decrease in the levels of interest rates with all other variables held constant would result in an increase in the fair market value of our fixed rate debt of $7.7 million. At December 31, 2003, a 10 percent increase in the levels of interest rates
with all other variables held constant would result in a decrease in the fair market value of our fixed rate debt of $7.4 million.



|Item 4. | Controls and Procedures
|------- | -----------------------



Our
Chairman and chief financial officer has concluded, based on their evaluation as of the end of the period covered by this Quarterly Report, that the Companys disclosure controls and procedures (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the
time periods specified in the Securities and Exchange Commissions rules and forms.



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##### Table of Contents

PART II. OTHER INFORMATION



|ITEM1. | Legal Proceedings
|------ | -----------------



The Company is
occasionally subject to lawsuits and claims arising out of the normal conduct of business. Management does not expect the outcome of pending claims to have a material adverse affect on the business, financial condition or results of operations.



|ITEM6. | Exhibits and Reports on Form 8-K
|------ | --------------------------------



| | a. | Exhibits.
| | -- | ---------



|     |  |                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).



| | b. | Reports on Form 8-K. None.
| | -- | --------------------------



ITEMS 2, 3, 4 And 5 Are Not Applicable And Have Been Omitted



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                       |  |  |  |                                  |  |                      |  |                       
|---------------------- |  |  |  | -------------------------------- |  | -------------------- |  | ----------------------
|                       |  |  |  | HEWITT HOLDINGS LLC (Registrant)
|                       |  |  | 
|Date: February 4, 2004 |  |  |  | By:                              |  | /s/    DAVID L. HUNT
|                       |  |  |  |                                  |  |                      | 
|                       |  |  |  |                                  |  |                      |  | David L. Hunt Chairman



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