##### Table of Contents



UNITED
    STATES 
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  FORM 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED
    JUNE 30, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
    FROM          TO   Commission File Number:
    000-51748
  AVANADE INC.
 (Exact name of registrant as
    specified in its charter)
   Washington

91-2032865(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   2211 Elliott Avenue, Suite 200
 Seattle, Washington 98121
 (Address of principal executive
    offices)
  (206) 239-5600
 (Registrants telephone
    number, including area code)
   þ o
  Rule 12b-2
  o o þ
  Rule 12b-2 o þ




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##### 



AVANADE
    INC.
  INDEX
  
  PagePart I.


Financial
    Information


3Item 1.


Financial
    Statements


3Consolidated
    Balance Sheets as of June 30, 2007 (Unaudited) and
    September 30, 2006


3Consolidated Income
    Statements (Unaudited) for the three and nine months ended
    June 30, 2007 and 2006


4Consolidated
    Stockholders Equity and Comprehensive Income Statements
    (Unaudited) for the nine months ended June 30,
    2007


5Consolidated Cash
    Flows Statements (Unaudited) for the nine months ended
    June 30, 2007 and 2006


6Notes to
    Consolidated Financial Statements (Unaudited)


7Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


13Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


24Item 4.


Controls and
    Procedures


24Part II.


Other
    Information


25Item 1.


Legal
    Proceedings


25Item 1A.


Risk
    Factors


25Item 2.


Unregistered Sales
    of Equity Securities and Use of Proceeds


25Item 3.


Defaults upon
    Senior Securities


26Item 4.


Submission of
    Matters to a Vote of Security Holders


26Item 5.


Other
    Information


26Item 6.


Exhibits


26Signatures


27Certification of CEOCertification of CFOSection 906 Certifications   2




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION ITEM 1.  FINANCIAL
    STATEMENTS  AVANADE
    INC.CONSOLIDATED BALANCE SHEETSJune 30, 2007 and September 30, 2006
    (In thousands of U.S. dollars, except share and per share
    amounts)
  June 30,


September 30,2007


2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
99,328


$
72,898Receivables from clients, net of
    allowances of $695 and $1,303, respectively


27,304



21,253Due from related parties


96,360



55,426Unbilled services to clients


21,781



21,256Unbilled services to related parties


41,128



32,101Deferred income taxes, net


17,620



1,394Other current assets


4,242



6,116Total current assets


307,763



210,444NON-CURRENT ASSETS:Restricted cash equivalents


606



222Property and equipment, net of
    accumulated depreciation of $40,196 and $36,487, respectively


10,682



10,004Goodwill


10,444



11,975Other intangible assets, net of
    accumulated amortization of $4,916 and $4,250, respectively


615



1,281Deferred income taxes, net


36,422



5,556Other non-current assets


3,486



1,375Total non-current assets


62,255



30,413TOTAL ASSETS

$
370,018


$
240,857LIABILITIES AND
    SHAREHOLDERS EQUITYCURRENT LIABILITIES:Due to related parties

$
18,758


$
9,999Accounts payable


18,549



14,204Deferred revenues


3,892



3,009Accrued payroll and related benefits


56,124



39,890Accrued expenses


15,838



12,747Income taxes payable


11,206



8,251Other current liabilities


7,529



1,282Total current liabilities


131,896



89,382NON-CURRENT
    LIABILITIES


4,246



1,884COMMITMENTS AND
    CONTINGENCIESREDEEMABLE COMMON STOCK AND
    EMPLOYEE STOCK OPTIONS


144,077



123,964SHAREHOLDERS
    EQUITY:Convertible Series A preferred
    stock, par value of $0.0001 per share (aggregate liquidation
    preference of $587,329 as of June 30, 2007 and
    September 30, 2006, respectively), 105,000,000 shares
    authorized,74,750,903 shares issued and outstanding as of
    June 30, 2007 and September 30, 2006, respectively


7



7Common stock, par value $0.0001 per
    share, 150,000,000 shares authorized, 4,279,767 and
    4,244,536 shares issued and outstanding as of June 30,
    2007 and September 30, 2006, respectively






Additional
    paid-in-capital


145,407



178,128Notes receivable from exercise of
    stock options






(653
)Accumulated deficit


(55,613
)


(154,363
)Accumulated other comprehensive
    (loss) income


(2
)


2,508Total shareholders equity


89,799



25,627TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
370,018


$
240,857    3




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AVANADE
    INC.CONSOLIDATED INCOME STATEMENTSFor the Three and Nine Months Ended June 30, 2007 and
    2006
    (In thousands of U.S. dollars)
    (Unaudited)
  Three Months Ended June 30,


Nine Months Ended June 30,2007


2006


2007


2006REVENUES:Revenues before reimbursements:Related parties

$
130,199


$
95,207


$
349,389


$
257,811Other


41,552



31,639



121,747



90,448171,751



126,846



471,136



348,259Reimbursements:Related parties


7,094



5,353



17,595



14,219Other


4,885



3,430



13,777



9,97311,979



8,783



31,372



24,192Revenues


183,730



135,629



502,508



372,451OPERATING EXPENSES:Cost of services:Cost of services before
    reimbursable expenses


116,999



86,642



316,992



246,385Reimbursable expenses


11,979



8,783



31,372



24,192Cost of services


128,978



95,425



348,364



270,577Selling, general and
    administrative costs


32,438



25,403



91,445



73,627Total operating expenses


161,416



120,828



439,809



344,204OPERATING INCOME


22,314



14,801



62,699



28,247Interest income


1,090



584



2,692



1,385Interest expense


(1
)


(17
)


(9
)


(21
)Other (expense) income


(47
)


451



293



323INCOME BEFORE INCOME
    TAXES


23,356



15,819



65,675



29,934Provision (benefit) for income
    taxes


669



4,756



(33,075
)


8,745NET INCOME

$
22,687


$
11,063


$
98,750


$
21,189    4




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##### Table of Contents



AVANADE
    INC.CONSOLIDATED STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
    STATEMENTSFor the Nine Months Ended June 30, 2007
    (In thousands of U.S. dollars, except share amounts)
    (Unaudited)
  NotesReceivableConvertible











from





AccumulatedSeries A








Additional


Exercise of





Other


TotalPreferred Stock


Common Stock


Paid-In


Stock


Accumulated


Comprehensive


ShareholdersAmount


No. Shares


Amount


No. Shares


Capital


Options


Deficit


(Loss) Income


EquityBalance as of September 30,
    2006

$
7



74,750,903


$




4,244,536


$
178,128


$
(653
)

$
(154,363
)

$
2,508


$
25,627Comprehensive income:Net income


























98,750







98,750Foreign currency translation
    adjustments






























(2,510
)


(2,510
)Comprehensive income


































96,240Income tax benefit on share-based
    compensation plans


















326















326Accenture contributions


















90















90Change in redeemable common stock


















(20,113
)














(20,113
)Share-based compensation expense


















1,725















1,725Issuances of common stock related
    to employee share programs














2,593,870



6,528















6,528Purchases of common stock














(2,558,639
)


(21,277
)


662











(20,615
)Repayment of employee notes
    receivable






















1











1Interest on notes received from
    exercise of stock options






















(10
)










(10
)Balance as of June 30, 2007

$
7



74,750,903


$




4,279,767


$
145,407


$



$
(55,613
)

$
(2
)

$
89,799    5




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AVANADE
    INC.CONSOLIDATED CASH FLOWS STATEMENTSFor the Nine Months Ended June 30, 2007 and 2006
    (In thousands of U.S. dollars)
    (Unaudited)
  2007


2006CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income

$
98,750


$
21,189Adjustments to reconcile Net income
    to Net cash provided by (used in) operating
    activities  
    Depreciation and amortization


5,046



5,794Unrealized foreign currency (gain)
    on intercompany notes


(7,877
)


(5,574
)Loss on disposal of property and
    equipment, net


78



55Deferred income tax (benefit)
    expense


(45,236
)


375Share-based compensation expense


1,725



5,190Change in assets and
    liabilities Receivables from clients, net


(3,825
)


458Due from related parties


(38,007
)


(1,910
)Unbilled services to clients


450



(4,294
)Unbilled services to related parties


(7,283
)


(17,277
)Other current assets


2,009



65Due to related parties


8,610



2,339Accounts payable


760



(2,944
)Deferred revenues


747



1,012Accrued payroll and related benefits


12,556



5,479Accrued expenses


2,104



(1,090
)Income taxes payable


2,465



(2,907
)Other current liabilities


9,401



4,246Net cash provided by operating
    activities


42,473



10,206CASH FLOWS FROM INVESTING
    ACTIVITIES:Proceeds from sales of property and
    equipment


12



1Purchases of property and equipment


(4,805
)


(4,209
)Deferred technology infrastructure
    costs


(1,697
)


Transfer from restricted cash
    equivalents


(362
)


50Net cash used in investing
    activities


(6,852
)


(4,158
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Purchases of common shares


(19,479
)


(1,966
)Proceeds from exercise of stock
    options


5,393



3,810Repayments of employee notes
    receivable


1



8Payment of capital lease obligations






(1
)Capital contribution from Accenture


90



5Excess tax benefits from
    share-based payment arrangements


211



130Net cash (used in) provided by
    financing activities


(13,784
)


1,986Effect of exchange rate changes on
    cash and cash equivalents


4,593



2,451NET INCREASE IN CASH AND CASH
    EQUIVALENTS


26,430



10,485CASH AND CASH EQUIVALENTS,beginning of period


72,898



55,256CASH AND CASH EQUIVALENTS,end of period

$
99,328


$
65,741    6




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AVANADE,
    INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Basis of
    Presentation
  Form 10-Q Form 10-K Form 10-K).
  Form 10-K
  2.
    ACCUMULATED
    OTHER COMPREHENSIVE (LOSS) INCOME      June 30,2007


2006Three months ended

$
22,229


$
7,775Nine months ended


96,240



18,981   3.
    MATERIAL
    TRANSACTIONS AFFECTING SHAREHOLDERS EQUITY     7




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AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
  30-day
      June 30,


September 30,2007


2006Vested common stock subject to put
    rights

$
40,827


$
33,785Intrinsic value of stock options


103,250



90,179$
144,077


$
123,964     Shares


AmountShares acquired pursuant to
    exercise of put/call rights(1)(2)


2,100,373


$
17,637Other purchases(3)(4)


458,266



3,6402,558,639



21,277Less:Amounts withheld for employee loan
    repayments(5)






662Non-cash amounts related to
    stock-swaps(4)






1,136Net cash out-lay





$
19,479     (1)
    
    During the 30 day period
    following the semi-annual valuation approved by the Board
    effective May 23, 2007, the Company exercised its call
    rights to purchase shares and certain employee holders of the
    Companys common stock exercised their put rights. This
    resulted in the repurchase, effective June 25, 2007, of an
    aggregate of 1,043,789 shares of the Companys common
    stock at a price of $8.84 per share.(2)
    
    During the 30 day period
    following the semi-annual valuation approved by the Board
    effective November 8, 2006, the Company exercised its call
    rights to purchase shares and certain employee holders of the
    Companys common stock exercised their put rights. This
    resulted in the repurchase, effective December 13, 2006, of
    an aggregate of 1,056,584 shares of the Companys
    common stock at a price of $7.96 per share.(3)
    
    During the nine months ended
    June 30, 2007, as authorized under its option plans, the
    Company acquired 317,392 shares of its common stock via
    share withholdings for payroll tax obligations due from
    employees in connection with the delivery of the Companys
    common shares under the option plans.(4)
    
    During the nine months ended
    June 30, 2007, as authorized under its option plans, the
    Company acquired 140,874 shares of its common stock as a
    result of shares surrendered to the Company to pay the exercise
    price in connection with so-called stock-swap
    exercises of employee stock options. 8




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AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
   (5)
    
    The Company withheld $662 of the
    proceeds for repayment of loans, plus accrued interest,
    previously provided to certain employee shareholders for costs
    to exercise the underlying options of employee shares held. As
    of June 30, 2007, no amounts remained outstanding for the
    Company sponsored loans and related accrued interest.  Form 10-K.
  4.
    INCOME
    TAXES        non-U.S. tax
  5.
    COMMITMENTS
    AND CONTINGENCIES  Guarantees
  and/or
 9




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AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
  Legal
    Contingencies
    6.
    RELATED
    PARTY BALANCES AND TRANSACTIONS      Three Month Ended June 30,


Nine Month Ended June 30,2007


2006


2007


2006Related-party revenues before
    reimbursements:Accenture

$
116,472


$
85,724


$
317,708


$
235,791Microsoft


13,727



9,483



31,681



22,020Total

$
130,199


$
95,207


$
349,389


$
257,811Related-party reimbursements:Accenture

$
4,778


$
3,436


$
13,078


$
11,042Microsoft


2,316



1,917



4,517



3,177Total

$
7,094


$
5,353


$
17,595


$
14,219Related-party expenses:Accenture

$
15,878


$
8,823


$
38,571


$
22,129Microsoft


940



665



2,755



2,169Total

$
16,818


$
9,488


$
41,326


$
24,298  10




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##### Table of Contents



AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
    June 30,


September 30,2007


2006Due from related parties:Accenture

$
87,415


$
52,170Microsoft


8,945



3,256Total

$
96,360


$
55,426Unbilled services to related
    parties:Accenture

$
37,783


$
28,294Microsoft


3,345



3,807Total

$
41,128


$
32,101Due to related parties:Accenture

$
18,421


$
9,154Microsoft


337



845Total

$
18,758


$
9,999Deferred revenue:Accenture

$
1,052


$
1,036Microsoft


1,096



1,013Total

$
2,148


$
2,049       7.
    SEGMENT
    REPORTING   11




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AVANADE,
    INC.
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (In thousands of U.S. dollars, except share amounts or as
    otherwise disclosed)
    (Unaudited)
    Three Months Ended


Nine Months EndedJune 30,


June 30,2007


2006


2007


2006Revenues before reimbursements:Americas

$
91,387


$
69,613


$
239,084


$
187,367Europe


63,220



51,063



187,203



141,649Asia Pacific


16,104



7,929



42,562



22,293Corporate and eliminations


1,040



(1,759
)


2,287



(3,050
)Total

$
171,751


$
126,846


$
471,136


$
348,259Operating income (loss):Americas

$
25,692


$
16,251


$
58,221


$
34,830Europe


5,083



9,485



24,521



22,090Asia Pacific


(1,612
)


(1,012
)


229



(2,996
)Corporate and eliminations


(6,849
)


(9,923
)


(20,272
)


(25,677
)Total

$
22,314


$
14,801


$
62,699


$
28,247   8.
    NEWLY
    ISSUED ACCOUNTING STANDARDS  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
  Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements
  Fair Value Measurements
 12




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##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read in
    conjunction with our Consolidated Financial Statements and
    related Notes included elsewhere in this Quarterly Report on
    Form 10-Q
    and in our Annual Report on
    Form 10-K
    for the year ended September 30, 2006, and with the
    information under the heading Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations in our Annual Report on
    Form 10-K
    for the year ended September 30, 2006.
  We use the terms Avanade, we,
    our Company, our and us in
    this report to refer to Avanade Inc. and its subsidiaries. We
    use the term Accenture to refer to our majority
    shareholder, which is a subsidiary of Accenture Ltd, and its
    affiliates. We use the term Microsoft to refer to
    Microsoft Corporation, a minority shareholder, and its
    affiliates. All references to years, unless otherwise noted,
    refer to our fiscal year, which has historically ended on
    September 30. For example, a reference to fiscal
    2006 means the
    12-month
    period that ended on September 30, 2006. All references to
    quarters, unless otherwise noted, refer to the quarters of our
    fiscal year. All amounts expressed in dollars are in thousands
    of dollars unless otherwise indicated. For example, a reference
    to $40,800 means $40.8 million.
  Disclosure
    Regarding Forward-Looking Statements
  Form 10-Q
  
    Our results of operations could be negatively affected if we
    cannot expand and develop our services and solutions in response
    to changes in technology and client demand.
    The consulting and systems integration and technology markets
    are highly competitive, and we might not be able to compete
    effectively.
    Our business could be adversely affected if our clients are not
    satisfied with our services.
    Our results of operations may be affected by the rate of growth
    in the use of technology in business and the type and level of
    technology spending by our clients.
    If we are unable to attract, retain and motivate employees or
    efficiently utilize their skills, we might not be able to
    compete effectively and will not be able to grow our business.
    Our results of operations could be affected by economic and
    political conditions in the markets in which we operate and the
    effects of these conditions on our clients businesses and
    levels of business activity.
    Our profitability could suffer if we are not able to maintain
    favorable pricing rates.
    Our profitability could suffer if we are not able to maintain
    favorable utilization rates.
    Our profitability could suffer if we are not able to control our
    costs.
    Our work with government clients exposes us to additional risks
    inherent in the government contracting process.
    Our global operations are subject to complex risks, some of
    which might be beyond our control. 13




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##### Table of Contents




    If we are unable to manage the organizational challenges
    associated with the expansion of our company, we might be unable
    to achieve our business objectives.
    Our business could be negatively affected if we incur legal
    liability in connection with providing our solutions and
    services.
    If our pricing structures do not accurately anticipate the cost
    and complexity of performing our work, then our contracts could
    be unprofitable.
    Our results of operations could be adversely affected if our
    clients terminate their contracts with us on short notice.
    If we are unable to collect our receivables our results of
    operations could be adversely affected.
    We could be subject to liabilities if our subcontractors or the
    third parties with whom we partner cannot deliver their project
    contributions on time or at all.
    We have only a limited ability to protect our intellectual
    property rights, which are important to our success.
    Our services or solutions could infringe upon the intellectual
    property rights of others, which could result in legal
    liability, reduced operating income
    and/or have
    a materially adverse affect on our ability to operate in the
    future.
    There will not be a consistent pattern in our financial results
    from quarter to quarter, which may result in increased
    volatility of the value of our stock.
    Loss of our significant corporate relationships could reduce our
    revenue and growth prospects.
    Because we are controlled by Accenture, we have limited ability
    to set our own independent strategies, and our business strategy
    and direction may be dictated by Accentures overall
    business strategy.
    We rely on Accenture as a primary source of our liquidity and
    the loss of that liquidity could have a material adverse impact
    on our ability to fund our cash needs.
    We rely on Accenture for the majority of our revenue. The loss
    of that revenue would have a significant adverse impact on our
    results of operations and may affect our ability to continue to
    operate.
    Our Global Delivery Network relies on Accenture, and the loss of
    that network would increase our operating expenses.
    Microsoft has certain minority rights, and may exercise those
    rights to protect its own interests which may not align with our
    own.
    We are committed to using Microsoft-related technologies, and
    our inability to use those technologies would adversely impact
    our results of operations.
    All stock issued pursuant to awards granted under our stock
    option plans is subject to certain put rights, which, if
    exercised, could have a materially adverse impact on our
    liquidity.  Form 10-K
  Change in
    Fiscal Year
  Form 10-K
 14




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##### Table of Contents



Overview
          Three MonthsEnded


Nine Months EndedJune 30,


June 30,2007


2006


2007


2006Related-party revenues before
    reimbursements:Accenture


68
%


68
%


67
%


68
%Microsoft


8
%


7
%


7
%


6
%          15




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##### Table of Contents



Critical
    Accounting Policies and Estimates
  Form 10-K
  Revenues
    by Segment/Geographic Business Area
   16




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##### Table of Contents



Percent ofTotal RevenuesBeforeReimbursementsPercent


for the ThreeThree Months Ended


Percent


Increase


Months EndedJune 30,


Increase


Local


June 30,2007


2006


US$


Currency


2007


2006SEGMENTAmericas

$
91,387


$
69,613



31
%


31
%


53
%


55
%Europe


63,220



51,063



24



15



37



40Asia Pacific


16,104



7,929



103



89



9



6Corporate and eliminations(1)


1,040



(1,759
)


n/m



n/m



1



(1
)TOTAL Revenues Before
    Reimbursements


171,751



126,846



35



31



100
%


100
%Reimbursements


11,979



8,783



36



33TOTAL Revenues

$
183,730


$
135,629



35
%


31
%       (1)
    
    Corporate and eliminations include
    inter-company eliminations and other revenues not directly
    attributable to the segments.  Three
    Months Ended June 30, 2007 Compared to Three Months Ended
    June 30, 2006
  Revenues
         17




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##### Table of Contents



Operating
    Expenses
    Cost
    of Services
    Selling,
    General and Administrative Costs
    Operating
    Income
      Three Months Ended June 30,Increase2007


2006


(Decrease)Americas

$
25,692


$
16,251


$
9,441Europe


5,083



9,485



(4,402
)Asia Pacific


(1,612
)


(1,012
)


(600
)Corporate and eliminations


(6,849
)


(9,923
)


3,074$
22,314


$
14,801


$
7,513     
    Americas operating income increased primarily due to lower
    compensation costs as a percentage of revenues before
    reimbursements and improved contract margins from our Global
    Delivery Network resources.
    Europe operating income decreased primarily due to lower
    contract margins in the United Kingdom and higher royalty and
    management fees.
    Asia Pacific operating income decreased primarily due to higher
    royalty and management fees and compensation costs, partially
    offset by strong revenue growth and improved contract margins in
    Australia. 18




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##### Table of Contents




    Corporate and eliminations operating loss decreased primarily
    due to increased intercompany royalty and management fees, and
    improved contract margins from Global Delivery Network resources
    in our business with Accenture, partially offset by higher
    compensation costs and technology infrastructure costs.  Interest
    Income
    Other
    (Expense) Income
    Provision
    (Benefit) for Income Taxes
      non-U.S. deferred
  Nine
    Months Ended June 30, 2007 Compared to Nine Months Ended
    June 30, 2006
    Percent ofTotal RevenuesBeforeReimbursementsPercent


for the NineNine Months Ended


Percent


Increase


Months EndedJune 30,


Increase


Local


June 30,2007


2006


US$


Currency


2007


2006SEGMENTAmericas

$
239,084


$
187,367



28
%


27
%


51
%


54
%Europe


187,203



141,649



32



21



40



41Asia Pacific


42,562



22,293



91



70



9



6Corporate and eliminations(1)


2,287



(3,050
)


n/m



n/m







(1
)TOTAL Revenues Before
    Reimbursements


471,136



348,259



35



29



100
%


100
%Reimbursements


31,372



24,192



30



25TOTAL Revenues

$
502,508


$
372,451



35
%


29
%       (1)
    
    Corporate and eliminations include
    inter-company eliminations and other revenues not directly
    attributable to the segments. 19




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##### Table of Contents



Revenues
          Operating
    Expenses
    Cost
    of Services
    Selling,
    General and Administrative Costs
   20




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##### Table of Contents



Operating
    Income
      Nine Months Ended June 30,2007


2006


IncreaseAmericas

$
58,221


$
34,830


$
23,391Europe


24,521



22,090



2,431Asia Pacific


229



(2,996
)


3,225Corporate and eliminations


(20,272
)


(25,677
)


5,405$
62,699


$
28,247


$
34,452     
    Americas operating income increased primarily due to improved
    contract margins from our Global Delivery Network resources and
    lower compensation costs as a percentage of revenues before
    reimbursements.
    Europe operating income increased primarily due to strong
    revenue growth and improved contract margins in Spain and Italy,
    partially offset by higher compensation costs and royalty and
    management fees.
    Asia Pacific operating income increased primarily due to strong
    revenue growth and improved contract margins in Australia and
    Japan, partially offset by higher royalty and management fees
    and compensation costs.
    Corporate and eliminations operating loss decreased primarily
    due to increased intercompany royalty and management fees, and
    improved contract margins from Global Delivery Network resources
    in our business with Accenture, partially offset by higher
    compensation costs.  Interest
    Income
    Other
    Income
    Provision
    (Benefit) for Income Taxes
     21




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##### Table of Contents



non-U.S. deferred
  Liquidity
    and Capital Resources
      Nine Months Ended June 30,Increase2007


2006


(Decrease)Net cash provided by (used in):Operating activities

$
42,473


$
10,206


$
32,267Investing activities


(6,852
)


(4,158
)


(2,694
)Financing activities


(13,784
)


1,986



(15,770
)Effect of exchange rate changes on
    cash and cash equivalents


4,593



2,451



2,142Net increase in cash and cash
    equivalents

$
26,430


$
10,485


$
15,945   Operating activities:
  Investing activities:
  Financing activities:
  Foreign
    Exchange Instruments
  Accounting for Derivative Instruments and Hedging Activities.
  Redeemable
    Common Stock and Employee Put Rights
   22




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##### Table of Contents



30-day
  30-day
  30-day
  30-day
  Off-Balance
    Sheet Arrangements
  and/or
  Newly
    Issued Accounting Standards
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
 23




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##### Table of Contents



Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements
  Fair Value Measurements
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign
    Currency Risk
  and/or
    Interest
    Rate Risk
    ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Form 10-Q, Rule 13a-15(e) 15d-15(e)
 24




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##### Table of Contents



Changes
    in Internal Control Over Financial Reporting
   PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS     ITEM 1A.  RISK
    FACTORS  Form 10-K Form 10-K
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    Purchases
    of Common Shares
    ApproximateTotal Number of


Dollar Value ofShares


Shares that MayPurchased as


Yet BePart of Publicly


Purchased UnderTotal Number


Average


Announced


Publiclyof Shares


Price Paid


Plans or


Announced PlansPeriod

Purchased(1)


per Share


Programs


or ProgramsApril 1, 2007 
    April 30, 2007


46,459


$
8.08







May 1, 2007 
    May 31, 2007


30,461



8.08







June 1, 2007 
    June 30, 2007


1,068,366



8.84







Total


1,145,286


$
8.79







     (1)
    
    During the third quarter of fiscal
    2007, the Company purchased 1,145,286 of its common shares in
    transactions unrelated to publicly announced share plans or
    programs. These transactions included the acquisition of
    96,190 shares of the Companys common stock via share
    withholding for payroll obligations due from employees in
    connection with the delivery of shares of the Companys
    common stock under the Companys various equity share
    plans, in addition to 5,307 shares surrendered to the
    Company to pay the exercise price in connection with so-called
    stock-swap exercises of employee stock options.
    1,043,789 of these shares were purchased by the Company as a
    result of the Company exercising its right to call shares, or
    the shareholder exercising their right to put shares, under the
    Companys equity share plans. 25




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##### Table of Contents



ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 5.
    OTHER
    INFORMATION      ITEM 6.
    EXHIBITS    ExhibitNumber

Description of Document3
.1

Restated Articles of Incorporation
    of the Company, dated as of December 3, 2003 (incorporated
    by reference to Exhibit 3.1 to the Companys
    Form 10, filed January 20, 2006)3
.2

Amended and Restated By-laws of
    the Company, dated as of February 29, 2003 (incorporated by
    reference to Exhibit 3.2 to the Companys
    Form 10, filed January 20, 2006)31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as adopted
    pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of the Chief
    Executive Officer and the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002  26




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##### Table of Contents



SIGNATURES       By:
    /s/  Dennis
    K. Knapp   Title:
    Chief Financial Officer  27