##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005.
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 Commission File Number 001-31451
 
 BEARINGPOINT, INC.
 (Exact name of Registrant as specified in its charter)
 
 DELAWARE(State or other jurisdiction of
incorporation or organization)
    
    22-3680505(IRS Employer
Identification No.)1676 International Drive, McLean, VA
    
    22102(Address of principal executive offices)
    
    (Zip Code)
 (703) 747-3000
 (Registrants telephone number, including area code)
 
  o þ
  Large accelerated filer þ
    Accelerated filer o
    Non-accelerated filer o
  o þ




---



##### 



BEARINGPOINT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2005
 EXPLANATORY NOTE
    i




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##### 



BEARINGPOINT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2005
 TABLE OF CONTENTS
 PagePART IFINANCIAL INFORMATIONItem 1:     Financial Statements (unaudited)
    
    
    1Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    1Consolidated Condensed Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    2Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    3Notes to Consolidated Condensed Financial Statements
    
    
    4Item 2:     Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 3:     Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4:     Controls and Procedures
    
    
    38PART IIOTHER INFORMATIONItem 1:     Legal Proceedings
    
    
    41Item 1A: Risk Factors
    
    
    41Item 2:     Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3:     Defaults Upon Senior Securities
    
    
    41Item 4.     Submission of Matters to a Vote of Security Holders
    
    
    41Item 5:     Other Information
    
    
    41Item 6:     Exhibits
    
    
    41SIGNATURES
    
    
    44
 ii




---



##### 



PART I, ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
 BEARINGPOINT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 Three Months EndedMarch 31,2005
    
    
    2004Revenue
    
    $
    871,333
    
    
    $
    888,603Costs of service:Professional compensation
    
    
    476,574
    
    
    
    378,440Other direct contract expenses
    
    
    283,842
    
    
    
    294,242Lease and facilities restructuring charge
    
    
    19,605
    
    
    
    3,335Other costs of service
    
    
    66,362
    
    
    
    69,732Total costs of service
    
    
    846,383
    
    
    
    745,749Gross profit
    
    
    24,950
    
    
    
    142,854Amortization of purchased intangible assets
    
    
    566
    
    
    
    1,095Selling, general and administrative expenses
    
    
    163,441
    
    
    
    150,637Operating loss
    
    
    (139,057
    )
    
    
    (8,878
    )Interest income
    
    
    1,351
    
    
    
    205Interest expense
    
    
    (8,056
    )
    
    
    (4,409
    )Other expense, net
    
    
    (5,083
    )
    
    
    (2,026
    )Loss before taxes
    
    
    (150,845
    )
    
    
    (15,108
    )Income tax expense
    
    
    81,713
    
    
    
    1,902Net loss
    
    $
    (232,558
    )
    
    $
    (17,010
    )Loss per share  basic and diluted
    
    $
    (1.16
    )
    
    $
    (0.09
    )Weighted average shares  basic
    
    
    200,358,531
    
    
    
    195,258,684Weighted average shares  diluted
    
    
    200,358,531
    
    
    
    195,258,684
  1




---



##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
 March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    210,671
    
    
    $
    244,810Restricted cash
    
    
    
    
    
    
    21,053Accounts receivable, net of allowances of $7,855 at
March 31, 2005 and $11,296 at December 31, 2004
    
    
    420,301
    
    
    
    400,285Unbilled revenue
    
    
    418,994
    
    
    
    381,681Income tax receivable
    
    
    49,257
    
    
    
    50,518Deferred income taxes
    
    
    19,950
    
    
    
    59,566Prepaid expenses
    
    
    37,660
    
    
    
    31,196Other current assets
    
    
    23,056
    
    
    
    33,038Total current assets
    
    
    1,179,889
    
    
    
    1,222,147Property and equipment, net
    
    
    190,059
    
    
    
    203,403Goodwill
    
    
    635,493
    
    
    
    656,877Other intangible assets, net
    
    
    3,243
    
    
    
    3,810Deferred income taxes, less current portion
    
    
    13,554
    
    
    
    20,522Other assets
    
    
    70,702
    
    
    
    75,948Total assets
    
    $
    2,092,940
    
    
    $
    2,182,707LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of notes payable
    
    $
    18,394
    
    
    $
    17,558Accounts payable
    
    
    270,531
    
    
    
    306,325Accrued payroll and employee benefits
    
    
    257,906
    
    
    
    269,876Deferred revenue
    
    
    109,732
    
    
    
    107,308Income tax payable
    
    
    18,241
    
    
    
    33,927Current portion of accrued lease and facilities charge
    
    
    18,570
    
    
    
    22,956Deferred income taxes
    
    
    13,639
    
    
    
    16,750Other current liabilities
    
    
    290,567
    
    
    
    134,744Total current liabilities
    
    
    997,580
    
    
    
    909,444Notes payable, less current portion
    
    
    453,695
    
    
    
    405,668Accrued employee benefits
    
    
    83,155
    
    
    
    84,631Accrued lease and facilities charge, less current portion
    
    
    38,457
    
    
    
    27,386Deferred income taxes, less current portion
    
    
    28,211
    
    
    
    6,810Other liabilities
    
    
    103,213
    
    
    
    124,070Total liabilities
    
    
    1,704,311
    
    
    
    1,558,009Commitments and contingencies (note 10)Stockholders equity:Preferred stock, $.01 par value 10,000,000 shares authorized
    
    
    
    
    
    
    Common stock, $.01 par value 1,000,000,000 shares authorized,
205,308,311 shares issued and 201,496,061 shares outstanding
on March 31, 2005 and 203,132,716 shares issued and
199,320,466 shares outstanding on December 31, 2004
    
    
    2,043
    
    
    
    2,022Additional paid-in capital
    
    
    1,159,728
    
    
    
    1,143,059Accumulated deficit
    
    
    (995,114
    )
    
    
    (762,556
    )Notes receivable from stockholders
    
    
    (7,575
    )
    
    
    (8,055
    )Accumulated other comprehensive income
    
    
    265,274
    
    
    
    285,955Treasury stock, at cost (3,812,250 shares)
    
    
    (35,727
    )
    
    
    (35,727
    )Total stockholders equity
    
    
    388,629
    
    
    
    624,698Total liabilities and stockholders equity
    
    $
    2,092,940
    
    
    $
    2,182,707
  2




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##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months EndedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (232,558
    )
    
    $
    (17,010
    )Adjustments to reconcile net loss to net cash used in
operating activities:Deferred income taxes
    
    
    64,810
    
    
    
    (12,538
    )Provision (benefit) for doubtful accounts
    
    
    (1,629
    )
    
    
    1,477Stock-based compensation
    
    
    1,720
    
    
    
    2,336Depreciation and amortization of property and equipment
    
    
    17,774
    
    
    
    19,019Amortization of purchased intangible assets
    
    
    566
    
    
    
    1,095Lease and facilities restructuring charge
    
    
    19,605
    
    
    
    3,335Amortization of debt issuance costs
    
    
    4,682
    
    
    
    388Other
    
    
    4,044
    
    
    
    854Changes in assets and liabilities:Accounts receivable
    
    
    (24,758
    )
    
    
    (40,008
    )Unbilled revenue
    
    
    (39,991
    )
    
    
    (47,820
    )Income tax receivable, prepaid expenses and other
current assets
    
    
    4,173
    
    
    
    (7,354
    )Other assets
    
    
    1,199
    
    
    
    (5,289
    )Accrued payroll and employee benefits
    
    
    (9,935
    )
    
    
    9,922Accounts payable and other current liabilities
    
    
    107,202
    
    
    
    25,970Other liabilities
    
    
    (23,100
    )
    
    
    2,888Net cash used in operating activities
    
    
    (106,196
    )
    
    
    (62,735
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (6,365
    )
    
    
    (18,249
    )Decrease in restricted cash
    
    
    21,053
    
    
    
    Net cash provided by (used in) investing activities
    
    
    14,688
    
    
    
    (18,249
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    14,593
    
    
    
    13,052Proceeds from issuance of notes payable
    
    
    51,453
    
    
    
    163,150Repayment of notes payable
    
    
    (3,166
    )
    
    
    (104,265
    )Increase (decrease) in book overdrafts
    
    
    (1,329
    )
    
    
    3,134Payments on notes receivable from stockholders
    
    
    
    
    
    
    119Net cash provided by financing activities
    
    
    61,551
    
    
    
    75,190Effect of exchange rate changes on cash and cash equivalents
    
    
    (4,182
    )
    
    
    (450
    )Net decrease in cash and cash equivalents
    
    
    (34,139
    )
    
    
    (6,244
    )Cash and cash equivalents  beginning of period
    
    
    244,810
    
    
    
    122,475Cash and cash equivalents  end of period
    
    $
    210,671
    
    
    $
    116,231
  3




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial Statements
 Note 1. Basis of Presentation and Liquidity
 Basis of Presentation
    Liquidity
  
    
    The Company has experienced significant recurring net losses. At March 31,
2005, the Company had an accumulated deficit of $995,114.
    
    The Companys business has not generated positive cash from operating
activities in some recent periods during fiscal 2005 and 2004.
    
    Due to the material weaknesses in its internal controls, the Company continues
to experience significant delays in completing its consolidated financial
statements and filing periodic reports with the SEC on a timely basis.
Accordingly, the Company continues to devote substantial additional internal and
external resources, and experience higher than expected fees for audit services.
    
    In the first quarter of fiscal 2005, the Company incurred losses of $113,257
under a significant contract with Hawaiian Telcom Communications, Inc.,
which consequently will result in significantly less cash from operating
activities in future years.
 4




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 
    
    The Company currently is a party to a number of disputes which involve or may
involve litigation or other legal or regulatory proceedings. See Note 10,
Commitments and Contingencies.
   Note 2. Stock-Based Compensation and Employee Stock Purchase Plan
   Stock Price
    
    Risk-Free
    
    
    
    
    
    ExpectedExpected
    
    Interest
    
    Expected
    
    DividendVolatility
    
    Rate
    
    Life
    
    YieldThree months ended March 31, 2005
    
    
    51.28
    %
    
    
    3.99
    %
    
    
    6
    
    
    
    Three months ended March 31, 2004
    
    
    66.31
    %
    
    
    3.26
    %
    
    
    6
    
    
    
    
  5




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
   Three Months EndedMarch 31,2005
    
    
    2004Net loss
    
    $
    (232,558
    )
    
    $
    (17,010
    )Add back:Total stock-based compensation expense recorded under intrinsic
value method for all stock awards, net of tax effects
    
    
    1,720
    
    
    
    1,990Deduct:Total stock-based compensation expense recorded under fair
value method for all stock awards, net of tax effects
    
    
    (25,115
    )
    
    
    (25,158
    )Pro forma net loss
    
    $
    (255,953
    )
    
    $
    (40,178
    )Loss per share:Basic and diluted  as reported
    
    $
    (1.16
    )
    
    $
    (0.09
    )Basic and diluted  pro forma
    
    $
    (1.28
    )
    
    $
    (0.21
    )
    6




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
     7




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 Note 3. Notes Payable
  March 31,
    
    
    December 31,2005
    
    
    2004Current portion:Yen-denominated term loan (January 31, 2003)
    
    $
    6,195
    
    
    $
    6,509Yen-denominated term loan (June 30, 2003)
    
    
    3,117
    
    
    
    3,254Yen-denominated line of credit
    
    
    7,465
    
    
    
    7,795Other
    
    
    1,617
    
    
    
    Total current portion
    
    
    18,394
    
    
    
    17,558Long-term portion:Series A and Series B Convertible Debentures
    
    
    450,000
    
    
    
    400,000Yen-denominated term loan (January 31, 2003)
    
    
    
    
    
    
    3,215Yen-denominated term loan (June 30, 2003)
    
    
    1,539
    
    
    
    1,609Other
    
    
    2,156
    
    
    
    844Total long-term portion
    
    
    453,695
    
    
    
    405,668Total notes payable
    
    $
    472,089
    
    
    $
    423,226
 Series A and Series B Convertible Subordinated Debentures
    8




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##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
        April 2005 Convertible Senior Subordinated Debentures
  9




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
        July 2005 Convertible Senior Debentures
   10




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
         11




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 2005 Credit Facility
       
    
    The financial covenants include: (i) a minimum U.S. cash collections
requirement of $125,000 monthly and $420,000 by the Company on a rolling three-month
basis, (ii) a minimum trailing twelve-month EBITDA covenant which increases quarterly
from $107,600 (for the quarter ending September 30, 2005) to $333,800 (for the quarter
ending March 31, 2009 and thereafter) as of the end of the applicable quarter, (iii) a
maximum leverage ratio which decreases from 7.7 to 1 (for the quarter ending September
30, 2005) to 2.4 to 1 (for the quarter ending March 31, 2009 and thereafter) as of the
end of the applicable quarter and (iv) a maximum trailing twelve-month capital
expenditures covenant which starts at $111,300 for the quarter ending September 30, 2005
and fluctuates thereafter, including reducing to $89,700 a year thereafter and ultimately
remaining fixed at $94,100, starting with the quarter ending December 31, 2006.
  12




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##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 
    
    The affirmative covenants include:
  
    
    the Companys 2005 Form 10-K by November 30, 2006,
which was filed on November 22, 2006;
    
    the Forms 10-Q for the quarters ended March 31, June 30, and September
30, 2005 by the earlier of two months after the date the Company files the 2005 Form
10-K and January 31, 2007, which were filed on the date hereof;
    
    the Forms 10-Q for the quarters ended March 31 and June 30, 2006 by February 28, 2007; and
    
    the Form 10-Q for the quarter ended September 30, 2006 by March 31, 2007; and
   
    
    The negative covenants restrict certain of the Companys corporate
activities, including, among other things, its ability to make acquisitions or
investments, make capital expenditures, repay other indebtedness, merge or consolidate
with other entities, dispose of assets, incur additional indebtedness, pay dividends,
create liens, make investments (including limitations on loans to its foreign
subsidiaries) settle litigation and engage in certain transactions with affiliates.
    
    The events of default include, among others, defaults based on: certain
bankruptcy and insolvency events; nonpayment; cross-defaults to other debt; payments in
respect of judgments against the Company in excess of $18,000; breach of specified
covenants; change of control; termination of trading of Company stock; material
inaccuracy of representations and warranties; failure to timely deliver audited financial
statements; inaccuracy of the borrowing base; the prohibition or restraint on the Company
or any loan party from conducting its business in any manner that has or could reasonably
be expected to result in a material adverse effect because of any ruling, decision or
order of a court or governmental authority; an indictment, conviction or the commencement
of criminal proceedings of or against the Company or any subsidiary pursuant to which (a)
either damages or penalties could be in excess of $5,000 or (b) such indictment could
reasonably be expected to result in a material adverse effect.
    13




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##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 Yen-Denominated Term Loans and Line of Credit
    Discontinued Credit Facilities
    Early Extinguishment of Senior Notes
  14




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
  Note 4. Earnings (Loss) Per Share
   Three Months EndedMarch 31,2005
    
    
    2004Net loss
    
    $
    (232,558
    )
    
    $
    (17,010
    )Weighted average shares outstanding  basic and diluted
    
    
    200,358,531
    
    
    
    195,258,684Loss per share  basic and diluted
    
    $
    (1.16
    )
    
    $
    (0.09
    )Note 5. Comprehensive LossThe components of comprehensive loss are as follows:Three Months EndedMarch 31,2005
    
    
    2004Net loss
    
    $
    (232,558
    )
    
    $
    (17,010
    )Foreign currency translation adjustment, net of tax (a)
    
    
    (20,681
    )
    
    
    (16,907
    )Minimum pension liability adjustment
    
    
    
    
    
    
    (63
    )Unrealized loss of derivative instruments, net of tax
    
    
    
    
    
    
    (39
    )Comprehensive loss
    
    $
    (253,239
    )
    
    $
    (34,019
    )
 
 (a)
    
    Movement in the foreign currency translation adjustment is primarily due to exchange-rate
fluctuations of the Euro and Japanese Yen against the U.S. dollar. 15




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 Note 6. Segment Reporting
  Three Months EndedMarch 31,2005
    
    
    2004Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    332,101
    
    
    $
    68,768
    
    
    $
    378,887
    
    
    $
    86,100Commercial Services
    
    
    172,787
    
    
    
    (88,497
    )
    
    
    177,767
    
    
    
    22,728Financial Services
    
    
    90,699
    
    
    
    20,320
    
    
    
    67,432
    
    
    
    9,858EMEA
    
    
    171,540
    
    
    
    20,695
    
    
    
    153,934
    
    
    
    11,400Asia Pacific
    
    
    83,711
    
    
    
    12,230
    
    
    
    87,555
    
    
    
    9,883Latin America
    
    
    20,033
    
    
    
    3,812
    
    
    
    20,815
    
    
    
    2,591Corporate/Other (1)
    
    
    462
    
    
    
    (176,385
    )
    
    
    2,213
    
    
    
    (151,438
    )Total
    
    $
    871,333
    
    
    $
    (139,057
    )
    
    $
    888,603
    
    
    $
    (8,878
    )
 
 (1)
    
    Corporate/Other operating loss is principally due to infrastructure and shared services
costs, such as facilities, information systems, finance and accounting, human resources,
legal, and marketing. Note 7. Transactions with KPMG LLP
  Infrastructure Services.
 16




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
    Three Months EndedMarch 31,2005
    
    
    2004Occupancy costs
    
    $
    2,744
    
    
    $
    6,167Other infrastructure service costs
    
    
    3,693
    
    
    
    13,911Total
    
    $
    6,437
    
    
    $
    20,078Amounts included in:Other costs of service
    
    $
    2,744
    
    
    $
    6,167Selling, general and administrative expenses
    
    
    3,693
    
    
    
    13,911Total
    
    $
    6,437
    
    
    $
    20,078
 Note 8. Goodwill and Other Intangible Assets
  Balance
    
    
    
    
    
    
    
    
    
    
    BalanceDecember 31,
    
    
    
    
    
    
    
    
    
    
    March 31,2004
    
    
    Additions
    
    
    Other (a)
    
    
    2005Public Services
    
    $
    23,581
    
    
    $
    
    
    
    $
    
    
    
    $
    23,581Commercial Services
    
    
    64,188
    
    
    
    
    
    
    
    
    
    
    
    64,188Financial Services
    
    
    9,210
    
    
    
    
    
    
    
    
    
    
    
    9,210EMEA
    
    
    485,401
    
    
    
    
    
    
    
    (20,073
    )
    
    
    465,328Asia Pacific
    
    
    73,459
    
    
    
    
    
    
    
    (1,309
    )
    
    
    72,150Latin America
    
    
    836
    
    
    
    
    
    
    
    (2
    )
    
    
    834Corporate/Other
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202Total
    
    $
    656,877
    
    
    $
    
    
    
    $
    (21,384
    )
    
    $
    635,493
 
 (a)
    
    Other changes in goodwill consist of foreign currency translation adjustments.  17




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
   March 31,
    
    
    December 31,2005
    
    
    2004Other intangible assets:Backlog, customer contracts and related customer relationships
    
    $
    1,302
    
    
    $
    1,306Market rights
    
    
    10,297
    
    
    
    10,297Total other intangibles
    
    
    11,599
    
    
    
    11,603Accumulated amortization:Backlog, customer contracts and related customer relationships
    
    
    (1,147
    )
    
    
    (1,100
    )Market rights
    
    
    (7,209
    )
    
    
    (6,693
    )Total accumulated amortization
    
    
    (8,356
    )
    
    
    (7,793
    )Other intangible assets, net
    
    $
    3,243
    
    
    $
    3,810
  Note 9. Restructuring Activities
   18




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
  Lease andSeverance
    
    
    Facilities
    
    
    TotalBalance at December 31, 2004
    
    $
    532
    
    
    $
    50,342
    
    
    $
    50,874Current period charges
    
    
    
    
    
    
    19,605
    
    
    
    19,605Payments
    
    
    
    
    
    
    (13,514
    )
    
    
    (13,514
    )Other (a)
    
    
    (182
    )
    
    
    594
    
    
    
    412Balance at March 31, 2005
    
    $
    350
    
    
    $
    57,027
    
    
    $
    57,377
 
 (a)
    
    Other changes in the restructuring accrual consist primarily of foreign currency
translation and other adjustments.  Note 10. Commitments and Contingencies
  
    
    Claims and investigations arising from its continuing inability to timely file
periodic reports under the Securities Exchange Act of 1934, as amended (the Exchange
Act), and the restatement of its financial statements for certain prior periods to
correct accounting errors and departures from generally accepted accounting principles
for those years (SEC Reporting Matters);
    
    Claims and investigations being conducted by agencies or officers of the U.S.
Federal Government and arising in connection with its provision of services under
contracts with agencies of the U.S. Federal Government (Government Contracting
Matters); and
    
    Claims made in the ordinary course of business by clients seeking damages for
alleged breaches of contract or failure of performance and by current or former
employees seeking damages for alleged acts of wrongful termination or discrimination
(Other Matters).
   SEC Reporting Matters
 2003 Class Action Suits
  19




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
  2005 Class Action Suits
  2005 Shareholders Derivative Demand
  Series B Debenture Suit
    20




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
   SEC Investigation
   Government Contracting Matters
 Government Contracts
  Grand Jury Subpoena  California
  21




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
  Travel Rebate Investigation
  Department of Interior
  USAID Contract
  Core Financial Logistics System
  General Services Administration Audit
  22




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
   Other Matters
 Peregrine Litigation
 Ariko v. Moores Allocco v. Gardner Bains v. Moores Peregrine Litigation Trust v. KPMG LLP In re Peregrine Systems, Inc. Securities Litigation
 Allocco, Ariko, Bains Peregrine Litigation Trust Allocco, Ariko, Bains the Peregrine Litigation Trust Allocco Peregrine Litigation Trust
 In re Peregrine Systems, Inc. Securities Litigation In re Peregrine Systems, Inc. Securities Litigation
  Hawaiian Telcom Communications, Inc.
  23




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
  Telecommunication Company
  Michael Donahue
  Canon Australia
  Transition Services Provided By KPMG LLP
   24




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
   Other Commitments
   25




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
 Note 11. Pension and Postretirement Benefits
  Three Months EndedMarch 31,2005
    
    
    2004Components of net periodic pension cost:Service cost
    
    $
    1,591
    
    
    $
    1,422Interest cost
    
    
    1,042
    
    
    
    1,056Expected return on plan assets
    
    
    (293
    )
    
    
    (240
    )Amortization of loss
    
    
    4
    
    
    
    3Amortization of prior service cost
    
    
    194
    
    
    
    191Curtailment
    
    
    (208
    )
    
    
    Settlement
    
    
    (58
    )
    
    
    Net periodic pension cost
    
    $
    2,272
    
    
    $
    2,432Components of net periodic postretirement medical cost:Service cost
    
    $
    314
    
    
    $
    254Interest cost
    
    
    143
    
    
    
    101Amortization of losses
    
    
    18
    
    
    
    Amortization of prior service cost
    
    
    120
    
    
    
    115Net periodic postretirement medical cost
    
    $
    595
    
    
    $
    470
 Note 12. Income Taxes
   Note 13. Recently Issued Accounting Pronouncements
   26




---



##### 



BearingPoint, Inc.
Notes to Consolidated Condensed Financial
Statements  (Continued)
      * * * * *
 27




---



##### 



PART I, ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
          OPERATIONS
 The following Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) should be read in conjunction with the interim Consolidated Condensed Financial
Statements and the Notes to the Consolidated Condensed Financial Statements included elsewhere in
this Quarterly Report on Form 10-Q .
 Disclosure Regarding Forward-Looking Statements
  
    
    Our continuing failure to timely file certain periodic reports with the SEC poses
significant risks to our business, each of which could materially and adversely affect our
financial condition and results of operations.
    
    In fiscal 2004, we identified material weaknesses in our internal control over financial
reporting, which could materially and adversely affect our business and financial
condition, and as of December 31, 2005, these material weaknesses remain.
    
    We face risks related to securities litigation and regulatory actions that could
adversely affect our financial condition and business.
    
    Our business may be adversely impacted as a result of changes in demand, both globally
and in individual market segments, for consulting and systems integration services.
    
    Our operating results will suffer if we are not able to maintain our billing and
utilization rates or control our costs.
    
    The systems integration consulting markets are highly competitive, and we may not be
able to compete effectively if we are not able to maintain our billing rates or control our
costs.
    
    We have incurred significant operating losses under our contract with Hawaiian Telcom
Communications, Inc. and could incur significant additional losses and cash outflows in
fiscal 2006.
    
    Contracting with the Federal government is inherently risky and exposes us to risks that
may materially and adversely affect our business.
    
    Our ability to attract, retain and motivate our managing directors and other key
employees is critical to the success of our business. We continue to experience sustained,
higher-than-industry average levels of voluntary turnover among our workforce, which has
impacted our ability to grow our business.
    
    Our contracts can be terminated by our clients with short notice, or our clients may
cancel or delay projects.
    
    If we are not able to keep up with rapid changes in technology or maintain strong
relationships with software providers, our business could suffer.
    
    Loss of our joint marketing relationships could reduce our
revenue and growth prospects.
    
    We are not likely to be able to significantly grow our business through mergers and
acquisitions in the near term.
    
    There will not be a consistent pattern in our financial results from quarter to quarter,
which may result in increased volatility of our stock price.
    
    Our profitability may decline due to financial, regulatory and operational risks
inherent in worldwide operations.
    
    We may bear the risk of cost overruns relating to our services, thereby adversely affecting our profitability.
    
    We may face legal liabilities and damage to our professional reputation from claims made against our work.
    
    Our services may infringe upon the intellectual property rights of others.
    
    We have only a limited ability to protect our intellectual property rights, which are important to our success.
    
    Our current cash resources might not be sufficient to meet our expected near-term cash
needs, especially to fund intra-quarter operating cash requirements and non-recurring cash
requirements (e.g., to settle lawsuits).
 28




---



##### 




    
    We have been unable to issue shares of our common stock under our ESPP since February 1,
2005. The longer we are unable to issue shares of our common stock, the more likely our
ESPP participants may elect to withdraw their accumulated cash contributions from the ESPP
at rates higher than those we have historically experienced.
    
    We have limited availability under our 2005 Credit Facility to borrow additional amounts
or issue additional letters of credit, and we may not be able to refinance our debt or to
do so on favorable terms.
    
    Our 2005 Credit Facility imposes a number of restrictions on the way in which we operate
our business and may negatively affect our ability to finance future needs, or do so on
favorable terms. If we violate these restrictions, we will be in default under the 2005
Credit Facility, which may cross-default to our other indebtedness.
    
    If our operating performance is materially and adversely affected, we may not be able to
service our indebtedness.
    
    We may be required to post collateral to support our obligations under our surety bonds,
and we may be unable to obtain new surety bonds, letters of credit or bank guarantees in
support of client engagements on acceptable terms.
    
    Downgrades of our credit ratings may increase our borrowing costs and materially and
adversely affect our financial condition.
    
    Our leverage may adversely affect our business and financial performance and may
restrict our operating flexibility.
    
    The holders of our debentures have the right, at their option, to require us to purchase
some or all of their debentures upon certain dates or upon the occurrence of certain
designated events, which could have a material adverse effect on our liquidity.
    
    The price of our common stock may decline due to the number of shares that may be
available for sale in the future.
    
    There are significant limitations on the ability of any person or company to acquire the
Company without the approval of our Board of Directors.
    
    The termination of services provided under the transition services agreement with KPMG
LLP could involve significant expense, which could adversely affect our financial results.
  Overview
   Economic and Industry Factors
   29




---



##### 



Revenue and Income Drivers
     Key Performance Indicators
  
    
    Bookings. We believe that information regarding our new contract bookings provides
useful trend information regarding how the volume of our new business changes over time.
Information regarding our new bookings should not be compared to, or substituted for, an
analysis of our revenue over time. There are no third-party standards or requirements
governing the calculation of bookings. New contract bookings are recorded using then
existing currency exchange rates and are not subsequently adjusted for currency
fluctuations. These amounts represent our estimate at contract signing of the
net revenue expected over the term of that contract and involve estimates and judgments
regarding new contracts as well as renewals, extensions and additions to existing
contracts. Subsequent cancellations, extensions and other matters may affect the amount of
bookings previously reported. Bookings do not include potential revenue that could be
earned from a client relationship as a result of future expansion of service offerings to
that client, nor does it reflect option years under contracts that are subject to client
discretion. Although our level of bookings provides some indication of how our business is
performing, we do not characterize our bookings, or our engagement contracts associated
with new bookings, as backlog because our engagements generally can be cancelled or
terminated on short notice or without notice.
    
    Revenue Growth. Unlike bookings, which provide only a general sense of future
expectations, period-over-period comparisons of revenue provide a meaningful depiction of
how successful we have been in growing our business over time.
 30




---



##### 




    
    Gross Margin (gross profit as a percentage of revenue). Gross margin is a
meaningful tool for monitoring our ability to control costs. Analysis of the various cost
elements, including foreign currency translation adjustments and the use of subcontractors,
as a percentage of revenue over time can provide additional information as to the key
challenges we are facing in executing our business model. The cost of subcontractors is
generally more expensive than the cost of our own workforce and can negatively impact our
gross profit. While the use of subcontractors can help us to win larger, more complex
deals, and also may be mandated by our clients, we focus on limiting the use of
subcontractors whenever possible in order to minimize our costs.
    
    Utilization. Utilization represents the percentage of time our consultants are
performing work that is chargeable to a client, and is defined as total hours charged to
client engagements divided by total available hours for any specific time period. In 2006,
we modified the calculation to include the available hours of employees working on
non-chargeable internal projects that had a general relationship to client matters, which
will have the effect of lowering our reported utilization figure by an insignificant
amount. We also further modified this calculation in 2006 by excluding the holiday and
paid vacation time for our employees from the available hours figure. This will have the
effect of raising the utilization rate but will make our reporting of this metric more
consistent with how we believe our industry peer group measures utilization.
    
    Days Sales Outstanding (DSO). DSO is an operational metric that
approximates the amount of earned revenue that remains unpaid by clients at a given time.
DSOs are derived by dividing the sum of our outstanding accounts receivable and unbilled
revenue, less deferred revenue, by our average net revenue per day. Average net revenue
per day is determined by dividing total net revenue for the most recently ended trailing
twelve-month period divided by 365.
    
    Free Cash Flow.Free cash flow is calculated by subtracting purchases of property and
equipment from cash provided by operating activities. We believe free cash flow is a
useful measure because it allows better understanding and assessment of our ability to meet
debt service requirements and the amount of recurring cash generated from operations after
expenditures for fixed assets. Free cash flow does not represent the Companys residual
cash flow available for discretionary expenditures as it excludes certain mandatory
expenditures such as repayment of maturing debt. We use free cash flow as a measure of
recurring operating cash flow. Free cash flow is a non-GAAP financial measure. The most
directly comparable financial measure calculated in accordance with GAAP is net cash
provided by operating activities.
    
    Attrition.Attrition, or voluntary total employee turnover, is calculated by dividing
the number of our employees who have chosen to leave the Company within a certain period by
the total average number of all employees during that same period. Previously, we had
provided attrition figures for our billable employees and did not take into account our
non-consultant employees. Starting in 2006, we intend to provide attrition figures for all
of our employees, which we believe provides metrics that are more compatible with, and
comparable to, those of our competitors.
  First Quarter of 2005 Highlights
  
    
    New contract bookings for first quarter of 2005 were $694.2 million, a slight decrease
compared to new contract bookings of $706.1 million for the first quarter of 2004. New
contract bookings increased in two of the three industry groups in North America, driven
primarily by strong bookings in our Financial Services industry group, which offset
decreased bookings in the Commercial Services business unit, EMEA, Asia Pacific and Latin
America regions.
    
    Our revenue for the first quarter of 2005 was $871.3 million, representing a decrease of
$17.3 million, or 1.9%, from the first quarter of 2004 revenue of $888.6 million.
 31




---



##### 




    
    Our gross profit for the first quarter of 2005 was $25.0 million compared with $142.9
million for the first quarter of 2004. Gross profit as a percentage of revenue decreased to
2.9% during fiscal 2005 from 16.1% during the first quarter of 2004. This decrease was
primarily attributable to a $113.3 million loss recognized on the HT Contract, which is
described below.
    
    We have a significant contract (the HT Contract) with Hawaiian Telcom Communications,
Inc., a telecommunications industry client, under which we were engaged to design, build
and operate various information technology systems for the client. We incurred losses of
$113.3 million under this contract in the first quarter of 2005. The HT Contract has
experienced delays in its build and deployment phases and contractual milestones have been
missed. The client has alleged that we are responsible under the HT Contract to compensate
it for certain costs and other damages incurred as a result of these delays and other
alleged failures. We believe the clients nonperformance of its responsibilities under the
HT Contract caused delays in the project and impacted our ability to perform, thereby
causing us to incur significant damages. We also believe the terms of the HT Contract limit
the clients ability to recover certain of their claimed damages. We are negotiating with
the client to resolve these issues, apportion financial responsibility for these costs and
alleged damages, and transition remaining work under the HT Contract to others, as
requested by the client. During these negotiations, we are maintaining all of our options,
including disputing the clients claims and asserting our own claims in litigation. At this
time we cannot predict the likelihood that we will be able to resolve this dispute or the
outcome of any litigation that might ensue if we are unable to resolve the dispute. Even if
resolved, we could incur substantial additional losses under the HT Contract or agree to
pay additional amounts to facilitate termination of the HT Contract. The incurrence of
additional losses or the payment of additional amounts to the client could materially and
adversely affect our profitability, results of operations or cash flow over the near term.
    
    For the first quarter of 2005, all of the material weaknesses in our internal control
over financial reporting cited for fiscal 2004 remain. For information on the developments
and progress made in fiscal 2005, please see Item 4, Controls and Procedures  Remediation
of Material Weaknesses in Internal Control over Financial Reporting.
    
    During the first quarter of 2005, we realized a net loss of $232.6 million, or a loss of
$1.16 per share, compared to a net loss of $17.0 million, or a loss of $0.09 per share,
during the first quarter of 2004. Included in our results for the
first quarter of 2005 were $113.3
million of operating losses related to the HT Contract, a $57.3 million increase in the
valuation allowance primarily against our U.S. deferred tax assets, and $19.6 million of
lease and facilities restructuring charges.
    
    Utilization for the first quarter of 2005 was 70.2%, an increase of 360 basis points
over the first quarter of 2004.
    
    At March 31, 2005, our DSOs stood at 112 days, representing an increase of 2 days, or
2%, over our DSOs at March 31, 2004. Given our ongoing systems issues related to
financial accounting for our North American operations, we are currently unable to
calculate DSOs for dates later than December 31, 2005. We continue to focus on
this metric during 2006 as we believe we are at a level that is higher than the industry
average, resulting in a suboptimal use of our cash.
    
    Free cash flow for the first quarter of 2005 was ($112.6) million. Net cash used in
operating activities during the first quarter of 2005 was ($106.2) million. Purchases of
property and equipment during the first quarter of 2005 were ($6.4) million. When this
amount is subtracted from net cash used in operating activities, the result is ($112.6)
million, which is free cash flow. We use free cash flow as a measure of recurring operating
cash flow. Free cash flow is a non GAAP financial measure. The most directly comparable
financial measure calculated in accordance with GAAP is net cash provided by (used in)
operating activities.
    
    On March 25, 2005, the Compensation Committee of our Board of Directors approved the
issuance of up to an aggregate of $165 million in restricted stock units (RSUs) under our
Long-Term Incentive Plan (the LTIP) to our current managing directors and a limited
number of key employees (the Retention RSUs), and delegated to our officers the authority
to grant these awards. During the first quarter of 2005, we recorded non-cash stock
compensation expense of $0.03 million related to the vesting of Retention RSUs, which
significantly impacted both our gross profit and operating income for the quarter.
    
    During fiscal 2005, we completed a number of private securities offerings in an effort
to improve our overall liquidity. We issued an additional $25.0 million aggregate principal
amount of our Series A Debentures and $25.0 million aggregate principal amount of our
Series B Debentures. We also issued an aggregate principal amount of $200.0 million of our
April 2005 Senior Debentures and an aggregate principal amount of $40.0 million of our July
2005 Senior Debentures. In total, we received approximately $280.3 million in net proceeds
from all of these
 32




---



##### 



offerings. For additional information regarding our debt restructuring, see Liquidity and
Capital Resources and Note 3, Notes Payable, of the Notes to Consolidated Condensed
Financial Statements.
 Segments
   Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004
 Revenue.
 Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    332,101
    
    
    $
    378,887
    
    
    $
    (46,786
    )
    
    
    (12.3
    %)Commercial Services
    
    
    172,787
    
    
    
    177,767
    
    
    
    (4,980
    )
    
    
    (2.8
    %)Financial Services
    
    
    90,699
    
    
    
    67,432
    
    
    
    23,267
    
    
    
    34.5
    %EMEA
    
    
    171,540
    
    
    
    153,934
    
    
    
    17,606
    
    
    
    11.4
    %Asia Pacific
    
    
    83,711
    
    
    
    87,555
    
    
    
    (3,844
    )
    
    
    (4.4
    %)Latin America
    
    
    20,033
    
    
    
    20,815
    
    
    
    (782
    )
    
    
    (3.8
    %)Corporate/Other
    
    
    462
    
    
    
    2,213
    
    
    
    (1,751
    )
    
    
    n/mTotal
    
    $
    871,333
    
    
    $
    888,603
    
    
    $
    (17,270
    )
    
    
    (1.9
    %)
 Revenue growthImpact of currency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    (12.3
    %)
    
    
    (12.3
    %)Commercial Services
    
    
    0.0
    %
    
    
    (2.8
    %)
    
    
    (2.8
    %)Financial Services
    
    
    0.0
    %
    
    
    34.5
    %
    
    
    34.5
    %EMEA
    
    
    5.4
    %
    
    
    6.0
    %
    
    
    11.4
    %Asia Pacific
    
    
    2.9
    %
    
    
    (7.3
    %)
    
    
    (4.4
    %)Latin America
    
    
    5.2
    %
    
    
    (9.0
    %)
    
    
    (3.8
    %)Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    1.3
    %
    
    
    (3.2
    %)
    
    
    (1.9
    %)
 
 n/m = not meaningful 33




---



##### 




    
    Public Servicesrevenue decreased during the first quarter of 2005, primarily
attributable to our expanding use of employees at lower average bill rates (despite
overall headcount and engagement hours increasing) and an expected reduction of $8.4
million in revenue derived from our subcontractors and resale of procured materials
(which we must bill our clients, thereby increasing our revenue).
    
    Commercial Servicesrevenue decreased during the first quarter of 2005, primarily
driven by revenue declines in the Communications & Content and Energy sectors, which was
partially offset by revenue growth in the Transportation sector.
    
    Financial Servicesrevenue increased during the first quarter of 2005, primarily due
to revenue growth in all sectors, with especially strong growth in the Insurance and
Global Market sectors. Revenue growth was principally due to an increase in demand for
our services. Our average billing rates declined year-over-year, as we increased our use
of lower-priced offshore personnel as a component of our overall pricing model.
    
    EMEArevenue increased during the first quarter of 2005, primarily due to combined
revenue growth in France and the United Kingdom of $12.3 million. Our business in France
experienced a significant shift into systems integration work, while revenue growth in
the United Kingdom was driven by our continued expansion in that region.
    
    Asia Pacificrevenue decreased during the first
quarter of 2005, driven primarily by the
planned elimination of subcontractor
usage in the region, which more than offset the improved billing rates achieved across
the region in the first quarter of 2005 due to significantly lower revenue write-offs
during the year.
    
    Latin Americarevenue decreased during the first quarter of 2005, primarily due to
reduction in subcontractor usage partially offset by the weakening of the U.S. dollar
against local currencies in Latin America (particularly the Brazilian Real).
    
    Corporate/Other: Our Corporate/Other segment does not contribute significantly to our
revenue.
 Gross Profit .
 
    
    Professional compensation expense increased as a percentage of revenue to 54.7% for the
first quarter of 2005, compared to 42.6% for the first quarter of 2004. We experienced a
net increase in professional compensation expense of $98.1 million, or 25.9%, to $476.6
million for the first quarter of 2005 from $378.4 million for the first quarter of 2004.
The increase in professional compensation expense is primarily the result of hiring
additional billable employees in response to overall market demand for our services and
additional compensation cost related to the loss accrual for the HT Contract.
    
    Other direct contract expenses decreased as a percentage of revenue to 32.6% for the
first quarter of 2005 compared to 33.1% for the first quarter of 2004. We experienced a
net decrease in other direct contract expenses of $10.4 million, or 3.5%, to $283.8
million for the first quarter of 2005 from $294.2 million for the first quarter of 2004.
The change was driven primarily by reduced subcontractor expenses as a result of the
increased use of internal resources, partially offsetting additional subcontractor expense
accruals for the HT Contract.
    
    Other costs of service as a percentage of revenue decreased to 7.6% for the first
quarter of 2005 from 7.8% for the first quarter of 2004. We experienced a net decrease in
other costs of service of $3.4 million, or 4.8%, to $66.4 million for the first quarter of
2005 from $69.7 million for the first quarter of 2004. The change was driven primarily by
a decrease in bad debt expense and office moving costs.
    
    In the first quarter of 2005 we recorded, within the Corporate/Other operating
segment, a charge of $19.6 million for lease and facilities restructuring costs, compared
with a $3.3 million charge for lease and facilities restructuring costs in the first
quarter of 2004. These costs for the first quarter of 2005 related to our previously
announced reduction in office space primarily within the North America, EMEA and Asia
Pacific regions.
 34




---



##### 



Gross Profit by Segment.
 Three Months EndedMarch 31,2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    77,698
    
    
    $
    96,970
    
    
    $
    (19,272
    )
    
    
    (19.9
    %)Commercial Services
    
    
    (79,295
    )
    
    
    34,276
    
    
    
    (113,571
    )
    
    
    (331.3
    %)Financial Services
    
    
    26,089
    
    
    
    14,915
    
    
    
    11,174
    
    
    
    74.9
    %EMEA
    
    
    27,802
    
    
    
    15,443
    
    
    
    12,359
    
    
    
    80.0
    %Asia Pacific
    
    
    16,100
    
    
    
    14,946
    
    
    
    1,154
    
    
    
    7.7
    %Latin America
    
    
    4,697
    
    
    
    3,325
    
    
    
    1,372
    
    
    
    41.3
    %Corporate/Other
    
    
    (48,141
    )
    
    
    (37,021
    )
    
    
    (11,120
    )
    
    
    n/mTotal
    
    $
    24,950
    
    
    $
    142,854
    
    
    $
    (117,904
    )
    
    
    (82.5
    %)
 Three Months EndedMarch 31,2005
    
    2004Gross Profit as a % of revenuePublic Services
    
    
    23.4
    %
    
    
    25.6
    %Commercial Services
    
    
    (45.9
    %)
    
    
    19.3
    %Financial Services
    
    
    28.8
    %
    
    
    22.1
    %EMEA
    
    
    16.2
    %
    
    
    10.0
    %Asia Pacific
    
    
    19.2
    %
    
    
    17.1
    %Latin America
    
    
    23.4
    %
    
    
    16.0
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    2.9
    %
    
    
    16.1
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit decreased in the first quarter of 2005, in large measure
due to a $21.4 million increase in compensation expense for additional staff and a $46.8
million reduction in gross revenue, which on a combined basis, more than offset
significant reductions of $49.5 million in other direct contract expenses.
    
    Commercial Servicesgross profit decreased in the first quarter of 2005, primarily due
to significant cost overruns and loss accruals, most notably $113.3 million on the
previously described HT Contract. These costs overruns drove the increase in compensation
expense of $63.7 million along with increases in subcontractor expense accruals and
hardware and software purchases that collectively increased our other direct contract
expenses by $45.2 million, which are substantially not recoverable.
    
    Financial Servicesgross profit increased in the first quarter of 2005, as higher
revenue across all sectors more than offset significant incremental increases in
compensation expense related to a substantial increase in headcount.
    
    EMEAgross profit increased in the first quarter of 2005, as increases in revenue more
than offset incremental increases in compensation expense largely due to severance costs
associated with workforce realignments in Germany and France.
    
    Asia Pacificgross profit increased in the first quarter of 2005 despite a decrease in
revenue, due in large measure to significant demonstrated improvements in cost management
and realization of contract revenue.
 35




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##### 




    
    Latin Americagross profit increased in the first quarter of 2005 despite a decrease
in revenue, due to decreases in other direct contract expenses as subcontractor usage
was reduced.
    
    Corporate/Otherconsists primarily of rent expense and other facilities related
charges, which increased in the first quarter of 2005 primarily due to the lease and
facilities restructuring charges discussed above.
 Amortization of Purchased Intangible Assets .
 Selling, General and Administrative Expenses .
 Interest Income.
 Interest Expense.
 Other Expense, net.
 Income Tax Expense .
 Net Income (Loss) .
 Liquidity and Capital Resources
  Three Months EndedMarch 31,2005 to 20042005
    
    
    2004
    
    
    ChangeNet cash provided by (used in):Operating activities
    
    $
    (106,196
    )
    
    $
    (62,735
    )
    
    $
    (43,461
    )Investing activities
    
    
    14,688
    
    
    
    (18,249
    )
    
    
    32,937Financing activities
    
    
    61,551
    
    
    
    75,190
    
    
    
    (13,639
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (4,182
    )
    
    
    (450
    )
    
    
    (3,732
    )Net decrease in cash and cash equivalents
    
    $
    (34,139
    )
    
    $
    (6,244
    )
    
    $
    (27,895
    )
 36




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##### 



Operating Activities.
 Investing Activities.
 Financing Activities.
   Recently Issued Accounting Pronouncements
   37




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##### 



PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  PART I, ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  38




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##### 



Remediation of Material Weaknesses in Internal Control over Financial Reporting
  
 
 
 39




---



##### 




 
 
 
 
 
 
 
 
 40




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##### 



Changes in Internal Control over Financial Reporting
  PART II. OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
  ITEM 1A: RISK FACTORS
  ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Sales of Securities Not Registered Under the Securities Act
  Issuer Purchases of Equity Securities
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  ITEM 5. OTHER INFORMATION
   ITEM 6. EXHIBITS
  Exhibit No.
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation, dated as of February 7, 2001,
which is incorporated herein by reference to Exhibit 3.1 from the Companys Form
10-Q for the quarter ending March 31, 2001.
 41




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##### 



Exhibit No.
    
    Description3.2
    
    Amended and Restated Bylaws, amended and restated as of May 5, 2004, which is
incorporated herein by reference to Exhibit 3.1 from the Companys Form 10-Q for
the quarter ending March 31, 2004.3.3
    
    Certificate of Ownership and Merger merging Bones Holding into the Company,
dated October 2, 2002, which is incorporated herein by reference to Exhibit 3.3
from the Companys Form 10-Q for the quarter ended September 30, 2002.4.1
    
    Rights Agreement, dated as of October 2, 2001, between the Company and EquiServe
Trust Company, N.A., which is incorporated herein by reference to Exhibit 1.1
from the Companys Registration Statement on Form 8-A dated October 3, 2001.4.2
    
    Certificate of Designation of Series A Junior Participating Preferred Stock,
which is incorporated herein by reference to Exhibit 1.2 from the Companys
Registration Statement on Form 8-A dated October 3, 2001.4.3
    
    Amendment No. 1 to the Rights Agreement between the Company and EquiServe Trust
Company, N.A., which is incorporated herein by reference to Exhibit 99.1 from
the Companys Form 8-K filed on September 6, 2002.10.1
    
    Form of Amendment to the Managing Director Agreement, dated as of January 31,
2005, between the Company and David W. Black and certain executive officers,
which is incorporated by reference to Exhibit 10.8 from the Companys Form 10-K
for the year ended December 31, 2004.10.2
    
    Amendment No. 1 to the Credit Agreement, dated as of March 17, 2005 by and among
the Company, each of the Guarantors, each Lender signatory thereto, and Bank of
America, N.A., as the administrative agent for the Lenders, Swing Line Lender
and an L/C Issuer, which is incorporated by reference to Exhibit 10.45 from the
Companys Form 10-K for the year ended December 31, 2004.10.3
    
    Amendment No. 2 to the Credit Agreement, dated as of March 24, 2005, by and
among the Company, each of the Guarantors, each Lender signatory thereto, and
Bank of America, N.A., as the administrative agent for the Lenders, Swing Line
Lender and an L/C Issuer, which is incorporated by reference to Exhibit 10.46
from the Companys Form 10-K for the year ended December 31, 2004.10.4
    
    Employment Letter, effective as of January 14, 2005, between the Company and
Joseph Corbett, which is incorporated by reference to
Exhibit 10.84 from the Companys Form 10-K for the year ended December 31, 2004.10.5
    
    Employment Letter, effective as of March 21, 2005, between the Company and Harry
L. You, which is incorporated by reference to Exhibit 10.86 from
the Companys Form 10-K for the year ended December 31, 2004.10.6
    
    Managing Director Agreement, dated as of March 21, 2005, between the Company and
Harry L. You, which is incorporated by reference to
Exhibit 10.87 from the Companys Form 10-K for the year ended December 31, 2004.10.7
    
    Restricted Stock Unit Agreement, dated March 21, 2005, between the Company and
Harry L. You, which is incorporated by reference to
Exhibit 10.88 from the Companys Form 10-K for the year ended December 31, 2004.10.8
    
    Special Termination Agreement, dated as of March 21, 2005, between the Company
and Harry L. You, which is incorporated by reference to
Exhibit 10.89 from the Companys Form 10-K for the year ended December 31, 2004.10.9
    
    Stock Option Agreement, between the Company and Harry L. You, which is
incorporated by reference to Exhibit 10.90 from the
Companys Form 10-K for the year ended December 31, 2004.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a).32.1
    
    Certification of Chief Executive Officer pursuant to Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 1350.
 42




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##### 



Exhibit No.
    
    Description99.1
    
    Legal Proceedings section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.99.2
    
    Risk Factors section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.99.3
    
    Market for the Registrants Common Stock, Related Stockholder Matters and
Issuer Purchases of Equity SecuritiesSales of Securities Not Registered under
the Securities Act section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.
 43




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##### 



SIGNATURES
  BearingPoint, Inc.DATE:  January 17, 2007
    By:
    /s/ Judy A. EthellJudy A. EthellChief Financial Officer 44




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##### 



Exhibit Index
 Exhibit No.
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation, dated as of February 7, 2001,
which is incorporated herein by reference to Exhibit 3.1 from the Companys Form
10-Q for the quarter ending March 31, 2001.3.2
    
    Amended and Restated Bylaws, amended and restated as of May 5, 2004, which is
incorporated herein by reference to Exhibit 3.1 from the Companys Form 10-Q for
the quarter ending March 31, 2004.3.3
    
    Certificate of Ownership and Merger merging Bones Holding into the Company,
dated October 2, 2002, which is incorporated herein by reference to Exhibit 3.3
from the Companys Form 10-Q for the quarter ended September 30, 2002.4.1
    
    Rights Agreement, dated as of October 2, 2001, between the Company and EquiServe
Trust Company, N.A., which is incorporated herein by reference to Exhibit 1.1
from the Companys Registration Statement on Form 8-A dated October 3, 2001.4.2
    
    Certificate of Designation of Series A Junior Participating Preferred Stock,
which is incorporated herein by reference to Exhibit 1.2 from the Companys
Registration Statement on Form 8-A dated October 3, 2001.4.3
    
    Amendment No. 1 to the Rights Agreement between the Company and EquiServe Trust
Company, N.A., which is incorporated herein by reference to Exhibit 99.1 from
the Companys Form 8-K filed on September 6, 2002.10.1
    
    Form of Amendment to the Managing Director Agreement, dated as of January 31,
2005, between the Company and David W. Black and certain executive officers,
which is incorporated by reference to Exhibit 10.8 from the Companys Form 10-K
for the year ended December 31, 2004.10.2
    
    Amendment No. 1 to the Credit Agreement, dated as of March 17, 2005 by and among
the Company, each of the Guarantors, each Lender signatory thereto, and Bank of
America, N.A., as the administrative agent for the Lenders, Swing Line Lender
and an L/C Issuer, which is incorporated by reference to Exhibit 10.45 from the
Companys Form 10-K for the year ended December 31, 2004.10.3
    
    Amendment No. 2 to the Credit Agreement, dated as of March 24, 2005, by and
among the Company, each of the Guarantors, each Lender signatory thereto, and
Bank of America, N.A., as the administrative agent for the Lenders, Swing Line
Lender and an L/C Issuer, which is incorporated by reference to Exhibit 10.46
from the Companys Form 10-K for the year ended December 31, 2004.10.4
    
    Employment Letter, effective as of January 14, 2005, between the Company and
Joseph Corbett, which is incorporated by reference to
Exhibit 10.84 from the Companys Form 10-K for the year ended December 31, 2004.10.5
    
    Employment Letter, effective as of March 21, 2005, between the Company and Harry
L. You, which is incorporated by reference to Exhibit 10.86 from
the Companys Form 10-K for the year ended December 31, 2004.10.6
    
    Managing Director Agreement, dated as of March 21, 2005, between the Company and
Harry L. You, which is incorporated by reference to
Exhibit 10.87 from the Companys Form 10-K for the year ended December 31, 2004.10.7
    
    Restricted Stock Unit Agreement, dated March 21, 2005, between the Company and
Harry L. You, which is incorporated by reference to
Exhibit 10.88 from the Companys Form 10-K for the year ended December 31, 2004.10.8
    
    Special Termination Agreement, dated as of March 21, 2005, between the Company
and Harry L. You, which is incorporated by reference to
Exhibit 10.89 from the Companys Form 10-K for the year ended December 31, 2004.10.9
    
    Stock Option Agreement, between the Company and Harry L. You, which is
incorporated by reference to Exhibit 10.90 from the
Companys Form 10-K for the year ended December 31, 2004.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a).
 45




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##### 



Exhibit No.
    
    Description32.1
    
    Certification of Chief Executive Officer pursuant to Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Section 1350.99.1
    
    Legal Proceedings section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.99.2
    
    Risk Factors section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.99.3
    
    Market for the Registrants Common Stock, Related Stockholder Matters and
Issuer Purchases of Equity SecuritiesSales of Securities Not Registered under
the Securities Act section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2005.
 46