##### 



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 September 30, 2006.
 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
    
    22-3680505(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    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 SEPTEMBER 30, 2006
 EXPLANATORY NOTE




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##### 



BEARINGPOINT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2006
 TABLE OF CONTENTS
 PagePART IFINANCIAL INFORMATIONItem 1: Financial Statements (unaudited)
    
    
    1Consolidated Condensed Statements of Operations for the Three and Nine Months Ended
September 30, 2006 and 2005
    
    
    1Consolidated Condensed Balance Sheets as of September 30, 2006 and December 31, 2005
    
    
    2Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30,
2006 and 2005
    
    
    3Notes to Consolidated Condensed Financial Statements
    
    
    4Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3: Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4: Controls and Procedures
    
    
    40PART IIOTHER INFORMATIONItem 1: Legal Proceedings
    
    
    40Item 1A: Risk Factors
    
    
    40Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3: Defaults Upon Senior Securities
    
    
    40Item 4: Submission of Matters to a Vote of Security Holders
    
    
    40Item 5: Other Information
    
    
    40Item 6: Exhibits
    
    
    40SIGNATURES
    
    
    41




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##### 



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 Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    843,248
    
    
    $
    831,401
    
    
    $
    2,569,672
    
    
    $
    2,597,979Costs of service:Professional compensation
    
    
    411,130
    
    
    
    412,261
    
    
    
    1,264,072
    
    
    
    1,295,179Other direct contract expenses
    
    
    214,282
    
    
    
    215,511
    
    
    
    670,685
    
    
    
    746,492Lease and facilities restructuring charges
    
    
    961
    
    
    
    882
    
    
    
    6,249
    
    
    
    20,487Other costs of service
    
    
    57,906
    
    
    
    66,686
    
    
    
    179,662
    
    
    
    197,507Total costs of service
    
    
    684,279
    
    
    
    695,340
    
    
    
    2,120,668
    
    
    
    2,259,665Gross profit
    
    
    158,969
    
    
    
    136,061
    
    
    
    449,004
    
    
    
    338,314Amortization of purchased intangible assets
    
    
    515
    
    
    
    567
    
    
    
    1,545
    
    
    
    1,699Selling, general and administrative expenses
    
    
    173,323
    
    
    
    200,379
    
    
    
    538,620
    
    
    
    528,180Operating loss
    
    
    (14,869
    )
    
    
    (64,885
    )
    
    
    (91,161
    )
    
    
    (191,565
    )Interest income
    
    
    1,554
    
    
    
    2,759
    
    
    
    6,118
    
    
    
    5,792Interest expense
    
    
    (8,625
    )
    
    
    (8,119
    )
    
    
    (26,569
    )
    
    
    (25,009
    )Insurance settlement
    
    
    
    
    
    
    
    
    
    
    38,000
    
    
    
    Other income (expense), net
    
    
    1,165
    
    
    
    (1,193
    )
    
    
    2,857
    
    
    
    (11,546
    )Loss before taxes
    
    
    (20,775
    )
    
    
    (71,438
    )
    
    
    (70,755
    )
    
    
    (222,328
    )Income tax expense (benefit)
    
    
    8,858
    
    
    
    (1,014
    )
    
    
    34,444
    
    
    
    85,540Net loss
    
    $
    (29,633
    )
    
    $
    (70,424
    )
    
    $
    (105,199
    )
    
    $
    (307,868
    )Loss per share  basic and diluted
    
    $
    (0.14
    )
    
    $
    (0.35
    )
    
    $
    (0.50
    )
    
    $
    (1.53
    )Weighted average shares  basic and diluted
    
    
    212,195,647
    
    
    
    201,237,326
    
    
    
    211,934,766
    
    
    
    200,945,176
  1




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##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    268,899
    
    
    $
    255,340Restricted cash
    
    
    3,190
    
    
    
    121,247Accounts receivable, net of allowances of $5,441 at
September 30, 2006 and $9,326 at December 31, 2005
    
    
    369,125
    
    
    
    432,415Unbilled revenue
    
    
    400,466
    
    
    
    355,137Income tax receivable
    
    
    8,313
    
    
    
    10,867Deferred income taxes
    
    
    6,653
    
    
    
    18,991Prepaid expenses
    
    
    49,701
    
    
    
    35,875Other current assets
    
    
    70,005
    
    
    
    40,345Total current assets
    
    
    1,176,352
    
    
    
    1,270,217Property and equipment, net
    
    
    146,500
    
    
    
    170,133Goodwill
    
    
    448,791
    
    
    
    427,688Other intangible assets, net
    
    
    
    
    
    
    1,545Deferred income taxes, less current portion
    
    
    28,152
    
    
    
    20,915Other assets
    
    
    82,728
    
    
    
    81,928Total assets
    
    $
    1,882,523
    
    
    $
    1,972,426LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of notes payable
    
    $
    355
    
    
    $
    6,393Accounts payable
    
    
    242,000
    
    
    
    286,273Accrued payroll and employee benefits
    
    
    316,584
    
    
    
    309,510Deferred revenue
    
    
    120,655
    
    
    
    166,647Income tax payable
    
    
    44,290
    
    
    
    41,839Current portion of accrued lease and facilities charges
    
    
    12,019
    
    
    
    12,515Deferred income taxes
    
    
    16,515
    
    
    
    10,095Accrued legal settlements
    
    
    59,863
    
    
    
    38,601Other current liabilities
    
    
    140,448
    
    
    
    169,624Total current liabilities
    
    
    952,729
    
    
    
    1,041,497Notes payable, less current portion
    
    
    670,568
    
    
    
    668,367Accrued employee benefits
    
    
    107,639
    
    
    
    92,338Accrued lease and facilities charges, less current portion
    
    
    35,530
    
    
    
    38,082Deferred income taxes, less current portion
    
    
    9,630
    
    
    
    22,876Income tax reserve
    
    
    104,233
    
    
    
    89,530Other liabilities
    
    
    100,240
    
    
    
    65,308Total liabilities
    
    
    1,980,569
    
    
    
    2,017,998Commitments and contingencies (note 9)Stockholders deficit:Preferred stock, $.01 par value 10,000,000 shares authorized
    
    
    
    
    
    
    Common stock, $.01 par value 1,000,000,000 shares authorized,
205,350,249 shares issued and 201,537,999 shares outstanding
on September 30, 2006 and December 31, 2005
    
    
    2,044
    
    
    
    2,044Additional paid-in capital
    
    
    1,295,741
    
    
    
    1,261,797Accumulated deficit
    
    
    (1,589,398
    )
    
    
    (1,484,199
    )Notes receivable from stockholders
    
    
    (7,581
    )
    
    
    (7,578
    )Accumulated other comprehensive income
    
    
    236,875
    
    
    
    218,091Treasury stock, at cost (3,812,250 shares)
    
    
    (35,727
    )
    
    
    (35,727
    )Total stockholders deficit
    
    
    (98,046
    )
    
    
    (45,572
    )Total liabilities and stockholders deficit
    
    $
    1,882,523
    
    
    $
    1,972,426
  2




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##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (105,199
    )
    
    $
    (307,868
    )Adjustments to reconcile net loss to net cash used in
operating activities:Deferred income taxes
    
    
    3,999
    
    
    
    59,402(Benefit) provision for doubtful accounts
    
    
    (2,414
    )
    
    
    2,202Stock-based compensation
    
    
    33,944
    
    
    
    25,203Depreciation and amortization of property and equipment
    
    
    52,445
    
    
    
    52,457Amortization of purchased intangible assets
    
    
    1,545
    
    
    
    1,699Lease and facilities restructuring charges
    
    
    6,249
    
    
    
    20,487Amortization of debt issuance costs and debt accretion
    
    
    6,420
    
    
    
    10,400Other
    
    
    (270
    )
    
    
    9,335Changes in assets and liabilities:Accounts receivable
    
    
    72,738
    
    
    
    (13,535
    )Unbilled revenue
    
    
    (41,087
    )
    
    
    (65,229
    )Income tax receivable, prepaid expenses and other
current assets
    
    
    (39,406
    )
    
    
    (2,565
    )Other assets
    
    
    (3,674
    )
    
    
    (8,892
    )Accounts payable, accrued legal settlements and other current liabilities
    
    
    (59,148
    )
    
    
    84,305Accrued payroll and employee benefits
    
    
    (414
    )
    
    
    14,620Deferred revenue
    
    
    (48,191
    )
    
    
    23,006Income tax reserve and other liabilities
    
    
    47,939
    
    
    
    (15,230
    )Net cash used in operating activities
    
    
    (74,524
    )
    
    
    (110,203
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (30,259
    )
    
    
    (32,373
    )Decrease (increase) in restricted cash
    
    
    118,058
    
    
    
    (19,140
    )Net cash provided by (used in) investing activities
    
    
    87,799
    
    
    
    (51,513
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    
    
    
    
    14,897Proceeds from issuance of notes payable
    
    
    
    
    
    
    282,153Repayments of notes payable
    
    
    (6,506
    )
    
    
    (8,787
    )(Decrease) increase in book overdrafts
    
    
    (810
    )
    
    
    5,083Payments made in lieu of stock issuance
    
    
    
    
    
    
    (4,929
    )Net cash (used in) provided by financing activities
    
    
    (7,316
    )
    
    
    288,417Effect of exchange rate changes on cash and cash equivalents
    
    
    7,600
    
    
    
    (9,658
    )Net increase in cash and cash equivalents
    
    
    13,559
    
    
    
    117,043Cash and cash equivalents  beginning of period
    
    
    255,340
    
    
    
    244,810Cash and cash equivalents  end of period
    
    $
    268,899
    
    
    $
    361,853
  3




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##### 



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 September 30, 2006,
the Company had an accumulated deficit of $1,589,398 and a total stockholders deficit of
$98,046.
    
    The Companys business has not generated positive cash from operating activities in
certain quarters during fiscal years 2006 and 2005.
    
    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.
 4




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 
    
    Through December 31, 2006, the Company incurred cumulative losses of $139,882 under a
significant contract and a final settlement in 2007 with Hawaiian Telcom Communications,
Inc. (HT), which consequently resulted in significantly less cash from operating
activities in 2006 and, management believes, 2007.
    
    The Company currently is a party to a number of disputes
that involve or may involve litigation or other regulatory
proceedings. See Note 9, Commitments and
Contingencies.
   Note 2. Stock-Based Compensation and Employee Stock Purchase Plan
 Long-Term Incentive Plan
    5




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Options OutstandingOptions/Shares
    
    
    
    
    
    Weighted AverageAvailable
    
    
    
    
    
    Exercisefor Grant
    
    Number
    
    Price per ShareBalance at December 31, 2005
    
    
    7,609,567
    
    
    
    45,676,141
    
    
    $
    11.33Additional shares authorized
    
    
    
    
    
    
    
    
    
    
    Options granted
    
    
    (600,400
    )
    
    
    600,400
    
    
    
    8.70Options exercised
    
    
    
    
    
    
    
    
    
    
    Options forfeited/canceled
    
    
    9,152,650
    
    
    
    (9,152,650
    )
    
    
    12.08Restricted stock awards, net of forfeitures
    
    
    (6,505,415
    )
    
    
    n/a
    
    
    
    8.58Balance at September 30, 2006
    
    
    9,656,402
    
    
    
    37,123,891
    
    
    $
    11.10
     Unrecognized
    
    
    Weighted-Compensation
    
    
    Average Life inCosts
    
    
    YearsStock options
    
    $
    14,658
    
    
    
    2.0Restricted stock and stock unit awards
    
    
    48,004
    
    
    
    3.5ESPP
    
    
    5,421
    
    
    
    1.3Total
    
    $
    68,083
    
    
    
    3.0
 6




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Net loss
    
    $
    (70,424
    )
    
    $
    (307,868
    )Add back:Total stock-based compensation expense recorded
under intrinsic value method for all stock
awards, net of tax effects
    
    
    20,069
    
    
    
    25,203Deduct:Total stock-based compensation expense recorded
under fair value method for all stock
awards, net of tax effects
    
    
    (36,364
    )
    
    
    (87,508
    )Pro forma net loss
    
    $
    (86,719
    )
    
    $
    (370,173
    )Loss per share:Basic and diluted  as reported
    
    $
    (0.35
    )
    
    $
    (1.53
    )Basic and diluted  pro forma
    
    $
    (0.43
    )
    
    $
    (1.84
    )
   WeightedWeighted
    
    AverageStock Price
    
    Risk-Free
    
    
    
    
    
    Expected
    
    Average
    
    Grant DateExpected
    
    Interest
    
    Expected
    
    Dividend
    
    Exercise
    
    FairVolatility
    
    Rate
    
    Life
    
    Yield
    
    Price
    
    ValueThree
months ended September 30, 2006
    
    
    50.80
    %
    
    
    4.69
    %
    
    
    6
    
    
    
    
    
    
    $
    8.70
    
    
    $
    4.70Three months ended September 30, 2005
    
    
    50.32
    %
    
    
    4.07
    %
    
    
    6
    
    
    
    
    
    
    $
    7.50
    
    
    $
    3.94Nine months ended September 30, 2006
    
    
    50.80
    %
    
    
    4.69
    %
    
    
    6
    
    
    
    
    
    
    $
    8.70
    
    
    $
    4.70Nine months ended September 30, 2005
    
    
    51.08
    %
    
    
    4.00
    %
    
    
    6
    
    
    
    
    
    
    $
    7.71
    
    
    $
    4.57
 7




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Stock Option Plans
  Outstanding Options(1)
    
    Options Exercisable(1)Weighted Average
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    Remaining
    
    Average
    
    Number
    
    AverageOutstanding
    
    Contractual
    
    Exercise
    
    Exercisable
    
    ExerciseRange of Exercise Price
    
    September 30, 2006
    
    Life (Years)
    
    Price
    
    September 30, 2006
    
    Price$0.00  -$11.10
    
    
    25,941,284
    
    
    
    7.0
    
    
    $
    8.86
    
    
    
    21,215,905
    
    
    $
    9.05$11.11-$16.64
    
    
    5,243,211
    
    
    
    5.0
    
    
    $
    13.25
    
    
    
    5,243,211
    
    
    $
    13.25$16.65-$27.75
    
    
    5,788,899
    
    
    
    4.2
    
    
    $
    18.03
    
    
    
    5,788,899
    
    
    $
    18.03$49.95-$55.50
    
    
    150,497
    
    
    
    3.3
    
    
    $
    55.50
    
    
    
    150,497
    
    
    $
    55.5037,123,891
    
    
    
    6.3
    
    
    $
    11.10
    
    
    
    32,398,512
    
    
    $
    11.55Vested or Expected to vest at September 30, 2006 (1)
    
    
    36,415,084
    
    
    
    6.2
 
 (1)
    
    The aggregate intrinsic values for stock options outstanding, exercisable and vested
or expected to vest as of September 30, 2006 of $1,891, $1,096 and $1,771, respectively, represent
the total pre-tax intrinsic values based upon our closing stock price of $7.86 as of September 30,
2006 which would have been received by the option holders had all the in-the-money options been
exercised as of that date      Restricted Stock Units
  8




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  WeightedAverageGrantDate FairNumber of RSUs
    
    ValueOutstanding at December 31, 2005
    
    
    13,268,265
    
    
    $
    7.61Granted
    
    
    6,879,594
    
    
    
    8.54Settled
    
    
    
    
    
    
    Forfeited
    
    
    (399,487
    )
    
    
    7.80Outstanding at September 30, 2006
    
    
    19,748,372
    
    
    $
    7.93
  
    
    5,412,756 RSUs generally vest 25% on each January 1 of calendar years 2007 through 2010
and settle 25% per year starting January 1, 2009;
    
    1,287,486 RSUs generally either: (i) cliff vest and settle three years from the
grant date; or (ii) vest and settle over two to four years from the grant date; and
    
    179,352 RSUs vest immediately on the grant date, and generally settle on the grant date
or settle over one to six years from the grant date.
   Employee Stock Purchase Plan
   9




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   Note 3. Notes Payable
  September 30,
    
    
    December 31,2006
    
    
    2005Current portion:Yen-denominated term loan (January 31, 2003)
    
    $
    
    
    
    $
    2,803Yen-denominated term loan (June 30, 2003)
    
    
    
    
    
    
    1,402Other
    
    
    355
    
    
    
    2,188Total current portion
    
    
    355
    
    
    
    6,393Long-term portion:Series A and Series B Convertible Debentures
    
    
    450,000
    
    
    
    450,000April 2005 Convertible Debentures
    
    
    200,000
    
    
    
    200,000July 2005 Convertible Debentures (net of discount of
$19,432 and $21,946, respectively)
    
    
    20,568
    
    
    
    18,054Other
    
    
    
    
    
    
    313Total long-term portion
    
    
    670,568
    
    
    
    668,367Total notes payable
    
    $
    670,923
    
    
    $
    674,760
 2007 Credit Facility
    10




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   
    
    The affirmative covenantsinclude, among other things: the delivery of unaudited
quarterly and audited annual financial statements, all in accordance with generally
accepted accounting principles, certain monthly operating metrics and budgets; compliance
with applicable laws and regulations (excluding, prior to October 31, 2008, compliance with
certain filing requirements under the securities laws); maintenance of existence and
insurance; after October 31, 2008, as requested by the Administrative Agent, maintenance of
credit ratings; and maintenance of books and records (subject to the material weaknesses
previously disclosed in the Companys 2005 Form 10-K).
    
    The negative covenants, which (subject to exceptions) restrict certain of the Companys
corporate activities, include, among other things, limitations on: disposition of assets;
mergers and acquisitions; payment of dividends; stock repurchases and redemptions;
incurrence of additional indebtedness; making of loans and investments; creation of liens;
prepayment of other indebtedness; and engaging in certain transactions with affiliates.
    Discontinued 2005 Credit Facility
     11




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   
    
    The financial covenants included: (i) a minimum U.S. cash collections requirement, (ii)
a minimum trailing twelve-month EBITDA covenant, (iii) a maximum leverage ratio and (iv) a
maximum trailing twelve-month capital expenditures covenant.
  
    
    The affirmative covenants included the Company becoming
current in its SEC periodic filings in
accordance to a predetermined schedule, repatriation of a $65,000 of cash from foreign
subsidiaries and the submission to its lender certain weekly and monthly reports providing
various financial information.
    
    The negative covenants significantly restricted the Companys corporate activities and
ability to dispose of assets without the lenders consent.
    
    Standard events of default for a senior secured facility were included, as well as
default for payments in respect of judgments against the Company in excess of $18,000;
termination of trading of Company stock; and certain indictments, convictions or the
commencement of criminal proceedings of or against the Company or any subsidiary.
    12




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Note 4. Earnings (Loss) Per Share
  Note 5. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss
    
    $
    (29,633
    )
    
    $
    (70,424
    )
    
    $
    (105,199
    )
    
    $
    (307,868
    )Foreign currency translation adjustment, net of tax (a)
    
    
    (6,555
    )
    
    
    1,127
    
    
    
    13,454
    
    
    
    (45,946
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    5,329
    
    
    
    Comprehensive loss
    
    $
    (36,188
    )
    
    $
    (69,297
    )
    
    $
    (86,416
    )
    
    $
    (353,814
    )
 
 (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. Note 6. Segment Reporting
  13




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Three Months EndedSeptember 30,2006
    
    
    2005Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    333,825
    
    
    $
    61,565
    
    
    $
    316,063
    
    
    $
    45,892Commercial Services
    
    
    133,253
    
    
    
    20,572
    
    
    
    160,030
    
    
    
    17,585Financial Services
    
    
    97,161
    
    
    
    26,184
    
    
    
    103,709
    
    
    
    31,108EMEA
    
    
    167,089
    
    
    
    28,420
    
    
    
    152,049
    
    
    
    9,259Asia Pacific
    
    
    91,609
    
    
    
    20,841
    
    
    
    77,811
    
    
    
    15,477Latin America
    
    
    18,758
    
    
    
    (125
    )
    
    
    21,370
    
    
    
    2,779Corporate/Other
    
    
    1,553
    
    
    
    (172,326
    )
    
    
    369
    
    
    
    (186,985
    )Total
    
    $
    843,248
    
    
    $
    (14,869
    )
    
    $
    831,401
    
    
    $
    (64,885
    )
 Nine Months EndedSeptember 30,2006
    
    
    2005Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    1,006,022
    
    
    $
    184,370
    
    
    $
    994,501
    
    
    $
    184,987Commerical Services
    
    
    409,683
    
    
    
    32,433
    
    
    
    509,994
    
    
    
    (47,034
    )Financial Services
    
    
    319,833
    
    
    
    95,919
    
    
    
    282,226
    
    
    
    72,887EMEA
    
    
    501,696
    
    
    
    80,754
    
    
    
    504,620
    
    
    
    56,550Asia Pacific
    
    
    271,671
    
    
    
    57,054
    
    
    
    241,786
    
    
    
    40,400Latin America
    
    
    56,639
    
    
    
    1,984
    
    
    
    63,548
    
    
    
    9,864Corporate/Other
    
    
    4,128
    
    
    
    (543,675
    )
    
    
    1,304
    
    
    
    (509,219
    )Total
    
    $
    2,569,672
    
    
    $
    (91,161
    )
    
    $
    2,597,979
    
    
    $
    (191,565
    )
 Note 7. Goodwill and Other Intangible Assets
  ForeignBalance
    
    
    
    
 
    Currency
    
    
    BalanceDecember 31,
    
    
    Impairment
    
     
    Translation
    
    
    September 30,2005
    
    

Charge
    
    

Adjustment
    
    
    2006Public Services
    
    $
    23,581
    
    
    $
    
    
    
    $
    
    
    
    $
    23,581Financial Services
    
    
    9,210
    
    
    
    
    
    
    
    
    
    
    
    9,210EMEA
    
    
    325,262
    
    
    
    
    
    
    
    20,650
    
    
    
    345,912Asia Pacific
    
    
    68,562
    
    
    
    
    
    
    
    415
    
    
    
    68,977Latin America
    
    
    871
    
    
    
    
    
    
    
    38
    
    
    
    909Corporate/Other
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202Total
    
    $
    427,688
    
    
    $
    
    
    
    $
    21,103
    
    
    $
    448,791
 14




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   September 30,
    
    
    December 31,2006
    
    
    2005Other intangible assets:Backlog, customer contracts and related customer relationships
    
    $
    1,309
    
    
    $
    1,309Market rights
    
    
    10,297
    
    
    
    10,297Total other intangibles
    
    
    11,606
    
    
    
    11,606Accumulated amortization:Backlog, customer contracts and related customer relationships
    
    
    (1,309
    )
    
    
    (1,309
    )Market rights
    
    
    (10,297
    )
    
    
    (8,752
    )Total accumulated amortization
    
    
    (11,606
    )
    
    
    (10,061
    )Other intangible assets, net
    
    $
    
    
    
    $
    1,545
  Note 8. Restructuring Activities
   TotalBalance at December 31, 2005
    
    $
    50,597Charges to operations
    
    
    6,249Payments
    
    
    (9,876
    )Other (a)
    
    
    579Balance at September 30, 2006
    
    $
    47,549
 
 (a)
    
    Other changes in the restructuring accrual consist primarily of foreign currency
translation adjustments. 15




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Note 9. Commitments and Contingencies
  
    
    Claims and investigations arising from its continuing inability to timely file periodic
reports under the Exchange Act (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, by current or former employees seeking
damages for alleged acts of wrongful termination or discrimination, and by creditors or
other vendors alleging defaults in payment or performance (Other Matters).
  SEC Reporting Matters
 2005
Class Action Suits
 Makor Issues & Rights, Ltd v. Tellabs, Tellabs
 2005 Shareholders Derivative Demand
  16




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Series B Debenture Suit
      SEC Investigation
   Government Contracting Matters
 Government Contracts
  17




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  California Subpoena
  Travel Rebate Investigation
  Department of Interior
  United States Agency for International Development Contract
 United States Agency for International
Development
 18




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
  Core Financial Logistics System
  General Services Administration Audit
   Other Matters
 Peregrine Litigation
  In re Peregrine Systems, Inc. Securities Litigation
  19




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Hawaiian Telcom Communications, Inc.
  Telecommunications Company
  Michael Donahue
  Canon Australia
  Transition Services Provided By KPMG LLP
  20




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
   Other Commitments
   21




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Note 10. Pension and Postretirement Benefits
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Components of net periodic pension cost:Service cost
    
    $
    1,792
    
    
    $
    1,591
    
    
    $
    5,376
    
    
    $
    4,773Interest cost
    
    
    1,107
    
    
    
    1,042
    
    
    
    3,321
    
    
    
    3,126Expected return on plan assets
    
    
    (269
    )
    
    
    (293
    )
    
    
    (807
    )
    
    
    (879
    )Amortization of loss
    
    
    256
    
    
    
    4
    
    
    
    768
    
    
    
    12Amortization of prior service cost
    
    
    159
    
    
    
    194
    
    
    
    477
    
    
    
    582Curtailment
    
    
    30
    
    
    
    (208
    )
    
    
    90
    
    
    
    (624
    )Settlement
    
    
    (91
    )
    
    
    (58
    )
    
    
    (273
    )
    
    
    (174
    )Net periodic pension cost
    
    $
    2,984
    
    
    $
    2,272
    
    
    $
    8,952
    
    
    $
    6,816Components of net periodic postretirement medical cost:Service cost
    
    $
    480
    
    
    $
    314
    
    
    $
    1,440
    
    
    $
    942Interest cost
    
    
    184
    
    
    
    143
    
    
    
    552
    
    
    
    429Amortization of
losses
    
    
    39
    
    
    
    18
    
    
    
    117
    
    
    
    54Amortization of prior service cost
    
    
    120
    
    
    
    120
    
    
    
    360
    
    
    
    360Net periodic postretirement medical cost
    
    $
    823
    
    
    $
    595
    
    
    $
    2,469
    
    
    $
    1,785
 Note 11. Income Taxes
    22




---



##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (Continued)
 Note 12. Recently Issued Accounting Pronouncements
       23




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##### 



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 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 2004, we identified material weaknesses in our internal control over financial
reporting, the remediation of which has materially and adversely affected our business and
financial condition, and as of December 31, 2006, 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 our 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.
    
    We continue to incur selling, general and administrative (SG&A) expenses at levels
significantly higher than those of our competitors. If we are unable to significantly
reduce SG&A expenses over the near term, our ability to achieve, and make significant
improvements in, net income and profitability will remain in jeopardy.
    
    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 related to these engagements.
    
    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.
 24




---



##### 




    
    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 cash needs over time.
    
    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.
    
    Our 2007 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 2007
Credit Facility, which may cross-default to our other indebtedness.
    
    If we cannot generate positive cash flow from our operations, we eventually may not be
able to service our indebtedness.
    
    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.
  Explanatory Note
   Overview
   Economic and Industry Factors
  25




---



##### 



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.
Comparing the amount of new contract bookings and revenue provides us with an additional
measure of the short-term sustainability of revenue growth. 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
 26




---



##### 



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. In addition, government contracts or work orders are not included in bookings until
related appropriations spending has been properly approved and, then, only to the extent of the
amount of spending approved. Consequently, there can be significant differences between the times
of contract signing and new contract booking recognition. Although our
level of bookings provides an 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.
    
    Gross Margin (gross profit as a percentage of revenue).Gross margin is a meaningful
tool for monitoring our ability to control our costs of services. Analysis of the various
cost elements, including professional compensation expense, effects of foreign exchange
rate changes 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 our business. 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. We also
utilize certain adjusted gross margin metrics in connection with the vesting and
settlement of certain employee incentive awards. For a discussion of these metrics, see
Item 11, Executive Compensation
 Compensation Discussion and Analysis, included in our 2006 Form 10-K.
    
    Utilization.Utilization represents the percentage of time our consultants are
performing work, and is defined as total hours charged to client engagement or to
non-chargeable client-relationship projects, divided by total available hours for any
specific time period, net of holiday and paid vacation hours. In 2006, we changed how we
define utilization to make this metric more consistent with how we believe our industry
peer group measures this metric. Utilization percentages for fiscal 2005 set forth herein
have been adjusted to conform to this new definition.
    
    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 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 our 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 generally accepted accounting principles in the
United States of America (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. Our attrition
statistic covers all of our employees, which we believe provides metrics that are more
compatible with, and comparable to, those of our competitors.
  Three and Nine Months Ended September 30, 2006 Highlights
  27




---



##### 




    
    New contract bookings for the three months ended September 30, 2006 were $813.3 million,
an increase of $42.3 million, or 5.5%, over new contract bookings of $771.0 million for the
three months ended September 30, 2005. New contract bookings for the nine months ended
September 30, 2006 were $2,431.0 million, an increase of $2.7 million over new contract
bookings of $2,428.3 million for the nine months ended September 30, 2005. During the
three months ended September 30, 2006, new contract bookings increased in our EMEA and
Commercial Services industry groups, which were offset by decreased bookings in our
Financial Services industry group. For the nine months ended September 30, 2006, new
contract bookings in our EMEA, Latin American and Asia Pacific regions increased
significantly, while bookings in our Commercial Services and
Financial Services industry groups had decreased in the nine months ended September 30, 2005. Bookings in our Public
Services industry group were also significantly higher in 2006.
    
    Our revenue for the three months ended September 30, 2006 was $843.2 million, an
increase of $11.8 million, or 1.4%, over revenue of $831.4 million for the three months
ended September 30, 2005. Our revenue for the nine months ended September 30, 2006 was
$2,569.7 million, a decrease of $28.3 million, or 1.1%, from revenue for the nine months
ended September 30, 2005 of $2,598.0 million. For the three months ended September 30,
2006, revenue increased in our Public Services industry group and our EMEA and Asia Pacific
regions, and was partially offset by a significant revenue decline in our Commercial
Services industry group. For the nine months ended September 30, 2006, revenue decreased in
our Commercial Services industry group due to revenue declines associated with the
settlement of disputes with two significant telecommunications industry clients. These
decreases were partially offset by increased revenue in our Financial
Services industry group as well as revenue growth in Asia Pacific.
    
    Our gross profit for the three months ended September 30, 2006 was $159.0 million,
compared with $136.1 million for the three months ended September 30, 2005. Gross profit as
a percentage of revenue increased to 18.9% during the three months ended September 30, 2006
from 16.4% during the three months ended September 30, 2005. Increased revenue as well as
reductions in professional compensation expense and other direct contract expenses
contributed to this improvement. Our gross profit for the nine months ended September 30,
2006 was $449.0 million, compared with $338.3 million for the nine months ended September
30, 2005. Gross profit as a percentage of revenue increased to 17.5% during the nine months
ended September 30, 2006 from 13.0% during the nine months ended September 30, 2005. The
increase was primarily due to significant reductions in professional compensation expense
and other direct contract expenses.
    
    We incurred SG&A expenses of $173.3 million
in the third quarter of 2006, representing a decrease of $27.1 million or 13.5%, from SG&A
expenses of $200.4 million in the third quarter of 2005. We incurred SG&A expenses of
$538.6 million in the nine months ended September 30, 2006, representing an increase of
$10.4 million or 2.0%, over SG&A expenses of $528.2 million in the nine months ended
September 30, 2005. While we achieved cost savings by reducing the size of our sales force
and other business development expenses during the nine months ended September 30, 2006,
continuing increases in our finance and accounting costs, primarily for sub-contracted
labor and other costs related to the closing of our 2005 financial statements,
significantly offset these cost savings.
    
    During the nine months ended September 30, 2006, we realized a net loss of $105.2
million, or a loss of $0.50 per share, compared to a net loss of $307.9 million, or a loss
of $1.53 per share, during the nine months ended September 30, 2005. The decline in net
loss in the nine months ended September 30, 2006 as compared to the nine months ended
September 30, 2005 was attributable to several factors, including:
 28




---



##### 




    
    Our gross profit for the nine months ended September 30, 2006 improved
Company-wide, compared to our gross profit for the nine months ended September
30, 2005, representing an increase of $110.7 million;
    
    We recorded $38.0 million in the nine months ended September 30, 2006 for an
insurance settlement in connection with our settlement with Hawaiian Telcom
Communications, Inc. (the HT Contract); and
    
    Our income tax provision for the nine months ended September 30, 2006 was
lower than our income tax provision for the nine months ended September 30,
2005, as the 2005 amount included a $57.3 million increase to valuation
allowance primarily against our U.S. deferred tax assets.
 Contributing to the net loss for the nine months ended September 30, 2006 were $43.1 million of
losses related to the previously mentioned settlements with telecommunication clients, $39.3 million
accrued for bonuses payable to our employees, $33.9 million of
stock-based compensation expense and $6.2 million of lease and
facilities restructuring charges.
    
    Utilization for the three months ended September 30, 2006 was 77.2%, an increase of 250
basis points over the three months ended September 30, 2005. Utilization for the nine
months ended September 30, 2006 remained flat at 75.8%, compared to the nine months ended
September 30, 2005. Utilization for the three months ended March 31, 2007 was 76.6%.
    
    Free cash flow for nine months ended September 30, 2006
and 2005 was ($104.8) million
and ($142.6) million, respectively. Net cash used in operating activities in the nine
months ended September 30, 2006 and 2005 was ($74.5) million and ($110.2) million,
respectively. Purchases of property and equipment in the nine months ended September 30,
2006 and 2005 were $30.3 million and $32.4 million, respectively. We use free cash flow as
a measure of recurring operating cash flow. The change in free cash flow for the nine-month
period resulted primarily due to the following:
 
    
    We experienced higher operating profitability in our business, as evidenced by
the sharp decline in operating loss for 2006 as compared 2005. We also lowered
our DSOs through enhancements in our cash collections efforts. At September 30,
2006, our DSOs stood at 96 days, representing a decrease of 12 days, or 11%, from
our DSOs at September 30, 2005. Our continued focus on this metric during 2006
improved our free cash flow by $86.3 million for the nine months ended September
30, 2006 as compared to the nine months ended September 30, 2005.
    
    We experienced greater cash outflows in 2006 due to payments made for
professional services and related expenses accrued under the HT Contract during
2005, and in connection with our settlement with Peregrine Systems, Inc.
 
    
    As of September 30, 2006, we had approximately 17,400 full-time employees, including
approximately 15,300 consulting professionals. This represented a decrease in billable
headcount of approximately 0.6% from our headcount at September 30, 2005 of 17,600 and
15,400 respectively. As of March 31, 2007, we had approximately 17,500 full-time
employees, including approximately 15,200 consulting professionals.
    
    Our voluntary, annualized attrition rate for the three months ended September 30, 2006
was 28.3%, compared to 27.2% for the three months ended September 30, 2005. The highly
competitive industry in which we operate, and our continuing issues related to our North
American financial reporting systems and internal controls, have made it particularly
critical and challenging for us to attract and retain experienced personnel. Our
voluntary, annualized attrition rate for the three months ended March 31, 2007 was 23.9%.
 Principal Business Priorities for 2007 and Beyond
  Segments
  29




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##### 



Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Revenue.
 Three Months EndedSeptember 30,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    333,825
    
    
    $
    316,063
    
    
    $
    17,762
    
    
    
    5.6
    %Commercial Services
    
    
    133,253
    
    
    
    160,030
    
    
    
    (26,777
    )
    
    
    (16.7
    %)Financial Services
    
    
    97,161
    
    
    
    103,709
    
    
    
    (6,548
    )
    
    
    (6.3
    %)EMEA
    
    
    167,089
    
    
    
    152,049
    
    
    
    15,040
    
    
    
    9.9
    %Asia Pacific
    
    
    91,609
    
    
    
    77,811
    
    
    
    13,798
    
    
    
    17.7
    %Latin America
    
    
    18,758
    
    
    
    21,370
    
    
    
    (2,612
    )
    
    
    (12.2
    %)Corporate/Other
    
    
    1,553
    
    
    
    369
    
    
    
    1,184
    
    
    
    n/mTotal
    
    $
    843,248
    
    
    $
    831,401
    
    
    $
    11,847
    
    
    
    1.4
    %
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    5.6
    %
    
    
    5.6
    %Commercial Services
    
    
    0.0
    %
    
    
    (16.7
    %)
    
    
    (16.7
    %)Financial Services
    
    
    0.0
    %
    
    
    (6.3
    %)
    
    
    (6.3
    %)EMEA
    
    
    4.7
    %
    
    
    5.2
    %
    
    
    9.9
    %Asia Pacific
    
    
    (2.1
    %)
    
    
    19.8
    %
    
    
    17.7
    %Latin America
    
    
    5.4
    %
    
    
    (17.6
    %)
    
    
    (12.2
    %)Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    0.8
    %
    
    
    0.6
    %
    
    
    1.4
    %
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the third quarter of 2006,
with strong revenue growth in certain sectors, particularly in our State, Local and
Education (SLED) and Healthcare sectors. This increase was partially offset by revenue
decline in our Civilian business sector.
 30




---



##### 




    
    Commercial Servicesrevenue decreased during the third quarter of 2006, primarily due
to reduced customer demand for our services, particularly within the telecommunications
industry.
    
    Financial Servicesrevenue decreased during the third quarter of 2006, primarily due
to revenue declines in the Global Markets and Banking sectors, partially offset by
revenue growth in the Insurance sector. Global Markets sector revenue declined as we
increased the proportion of work derived from lower rate per hour offshore resources in
response to client demand, which affected our revenue. The revenue decline in our Banking
sector was attributable to a decline in activities in our existing client base, while the
revenue increase in our Insurance sector was in response to industry-wide demand for
major technology updates and upgrades to operational systems.
    
    EMEArevenue increased during the third quarter of 2006, primarily as a result of the
favorable impact of the strengthening of foreign currencies (primarily the Euro) against
the U.S. dollar and revenue growth in France, partially offset by significant revenue
decline in Germany. Revenue growth in France was driven by an expanding systems
integration practice and additional penetration into the French public sector market in
2006. Revenue in Germany declined significantly due to a combination of the impact of
reductions in billable headcount precipitated by the restructuring of our business in
Germany, increased pressure on pricing and a reduction in the spending levels of German
public sector clients.
    
    Asia Pacificrevenue increased during the third quarter of 2006, primarily due to
significant revenue growth in Australia and Japan. The revenue growth in Australia was
primarily due to a significant new client engagement in the telecommunications industry.
The revenue increase in Japan was due to revenue growth from system implementation
contracts and projects involving compliance with Japans Financial Instruments and
Exchange Law, although a substantial portion of this revenue growth was derived from the
use of subcontractors.
    
    Latin Americarevenue decreased during the third quarter of 2006, due to decreases in
local revenue growth in Mexico and Brazil, partially offset by the strengthening of
foreign currencies in Latin America against the U.S. Dollar (particularly the Brazilian
Real). Revenue in Mexico declined as they continue to restructure the business to
position itself for future growth, while revenue in Brazil declined due to the
significantly reduced activity of a large client engagement.
    
    Corporate/Other: Our Corporate/Other segment does not contribute significantly to our
revenue.
 Gross Profit .
 
    
    Professional compensation expense decreased as a percentage of revenue to 48.8%
for the third quarter 2006, compared to 49.6% for the three months ended September 30,
2005. We experienced a net decrease in professional compensation expense of $1.1 million,
or 0.3%, to $411.1 million for the three months ended September 30, 2006 from $412.3
million for the three months ended September 30, 2005. The decrease in professional
compensation expense from 2005 was primarily related to the vesting of Retention RSUs
during the third quarter of 2005.
    
    Other direct contract expenses decreased slightly as a percentage of revenue to
25.4% for the three months ended September 30, 2006 compared to 25.9% for the three months
ended September 30, 2005. We experienced a net decrease in other direct contract expenses
of $1.2 million, or 0.6%, to $214.3 million for the three months ended September 30, 2006
from $215.5 million for the three months ended September 30, 2005. The increase was
driven primarily by increased subcontractor usage during the third quarter of 2006.
    
    Other costs of service as a percentage of revenue decreased to 6.9% for the third
quarter of 2006 from 8.0% for the third quarter of 2005. We experienced a net decrease in
other costs of service of $8.8 million, or 13.2%, to $57.9 million for the third quarter
of 2006 from $66.7 million for the third quarter of 2005. The change was driven primarily
by decreases in recruiting charges and bad debt expense.
    
    During the third quarter of 2006 we recorded, within the Corporate/Other operating
segment, a charge of $1.0 million related to lease, facilities and other exit activities,
compared with a $0.9 charge related to lease, facilities and other exit activities in the
third quarter of 2005. These charges related primarily to the fair value of future lease
obligations associated with office space, primarily within the EMEA and North America
regions, which we will no longer be using.
 31




---



##### 



Gross Profit by Segment.
 Three Months EndedSeptember 30,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    69,190
    
    
    $
    58,699
    
    
    $
    10,491
    
    
    
    17.9
    %Commercial Services
    
    
    26,735
    
    
    
    26,679
    
    
    
    56
    
    
    
    0.2
    %Financial Services
    
    
    32,403
    
    
    
    37,741
    
    
    
    (5,338
    )
    
    
    (14.1
    %)EMEA
    
    
    35,005
    
    
    
    16,979
    
    
    
    18,026
    
    
    
    106.2
    %Asia Pacific
    
    
    23,823
    
    
    
    19,019
    
    
    
    4,804
    
    
    
    25.3
    %Latin America
    
    
    1,071
    
    
    
    3,649
    
    
    
    (2,578
    )
    
    
    (70.6
    %)Corporate/Other
    
    
    (29,258
    )
    
    
    (26,705
    )
    
    
    (2,553
    )
    
    
    n/mTotal
    
    $
    158,969
    
    
    $
    136,061
    
    
    $
    22,908
    
    
    
    16.8
    %
 Three Months EndedSeptember 30,2006
    
    2005Gross Profit as a % of revenuePublic Services
    
    
    20.7
    %
    
    
    18.6
    %Commercial Services
    
    
    20.1
    %
    
    
    16.7
    %Financial Services
    
    
    33.3
    %
    
    
    36.4
    %EMEA
    
    
    20.9
    %
    
    
    11.2
    %Asia Pacific
    
    
    26.0
    %
    
    
    24.4
    %Latin America
    
    
    5.7
    %
    
    
    17.1
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    18.9
    %
    
    
    16.4
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit increased in the third quarter of 2006, as higher revenue
more than offset significant incremental increases in professional compensation expense
related to hiring needs related to demand for our services.
    
    Commercial Servicesgross profit increased slightly in the third quarter of 2006
despite lower revenue, primarily due to cost savings realized from 2005 workforce
realignments and reduced subcontractor expenses as a result of the increased use of
internal resources.
    
    Financial Servicesgross profit decreased in third quarter of 2006, as lower revenue
and slight increases in compensation expense more than offset savings in other direct
contract expenses, primarily related to a decrease in subcontractor usage.
    
    EMEAgross profit increased in the third quarter of 2006, due primarily to improved
profitability in Ireland, France, and Spain as a result of higher utilization and lower
costs. Slight declines in other direct contract expenses also contributed to the
increase in gross profit.
    
    Asia Pacificgross profit increased substantially in the third quarter of 2006,
primarily due to significant improvements in profitability and staff utilization in the
Companys business in Australia and China. Due to the
 32




---



##### 



high demand for resources in the Japanese market and limited availability of qualified
personnel, increases in subcontractor expenses served to depress the growth of gross
profit in the Companys business in Japan. Significant improvements in compensation
expense in 2006 derived from the 2005 workforce reductions in China were more than offset
by additional compensation expenses associated with the use of the Companys personnel
from outside the region in connection with a significant new telecommunications industry
engagement in Australia.
    
    Latin Americagross profit decreased in the third quarter of 2006, as lower revenue
more than offset savings in other direct contact expenses, primarily resulting from a
reduction in subcontractor usage.
    
    Corporate/Otherconsists primarily of rent expense and other facilities related
charges, which increased in the third quarter of 2006 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 Income (Expense), net.
 Income Tax Expense (Benefit) .
 Net Loss .
  33




---



##### 



Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Revenue.
 Nine Months EndedSeptember 30,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    1,006,022
    
    
    $
    994,501
    
    
    $
    11,521
    
    
    
    1.2
    %Commercial Services
    
    
    409,683
    
    
    
    509,994
    
    
    
    (100,311
    )
    
    
    (19.7
    %)Financial Services
    
    
    319,833
    
    
    
    282,226
    
    
    
    37,607
    
    
    
    13.3
    %EMEA
    
    
    501,696
    
    
    
    504,620
    
    
    
    (2,924
    )
    
    
    (0.6
    %)Asia Pacific
    
    
    271,671
    
    
    
    241,786
    
    
    
    29,885
    
    
    
    12.4
    %Latin America
    
    
    56,639
    
    
    
    63,548
    
    
    
    (6,909
    )
    
    
    (10.9
    %)Corporate/Other
    
    
    4,128
    
    
    
    1,304
    
    
    
    2,824
    
    
    
    n/mTotal
    
    $
    2,569,672
    
    
    $
    2,597,979
    
    
    $
    (28,307
    )
    
    
    (1.1
    %)
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    1.2
    %
    
    
    1.2
    %Commercial Services
    
    
    0.0
    %
    
    
    (19.7
    %)
    
    
    (19.7
    %)Financial Services
    
    
    0.0
    %
    
    
    13.3
    %
    
    
    13.3
    %EMEA
    
    
    (1.5
    %)
    
    
    0.9
    %
    
    
    (0.6
    %)Asia Pacific
    
    
    (4.5
    %)
    
    
    16.9
    %
    
    
    12.4
    %Latin America
    
    
    9.2
    %
    
    
    (20.1
    %)
    
    
    (10.9
    %)Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    (0.5
    %)
    
    
    (0.6
    %)
    
    
    (1.1
    %)
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the nine months ended September 30,
2006, with strong revenue growth in most sectors, particularly in our SLED sector. This
increase was partially offset by revenue decline in our Civilian business sector.
    
    Commercial Servicesrevenue decreased during the nine months ended September 30, 2006,
primarily due to a $45.5 million year-over-year decrease in revenue associated with the HT Contract and a reduction of $20.0 million in revenue related to the
resolution of a billings dispute with another large telecommunications client regarding
an engagement completed in 2003. Reduced customer demand for our services, particularly
within the telecommunications industry also affected our revenue. These decreases were
partially offset by the recognition in the first quarter of 2006 of approximately $11.0
million in previously deferred revenue.
    
    Financial Servicesrevenue increased during the nine months ended September 30, 2006,
primarily due to revenue growth in the Insurance and Banking sectors, partially offset by
a decline in our Global Markets sector. Insurance sector revenue increased in response
to industry-wide demand for major technology updates and upgrades to operational systems.
Banking sector revenue increases were attributable to existing client engagements and
the introduction of some new clients into our traditional client base. Global Markets
sector
 34




---



##### 



revenue declined as we increased the proportion of work derived from lower rate per hour
offshore resources in response to client demand, which affected our revenue.
    
    EMEArevenue slightly decreased during the nine months ended September 30, 2006,
primarily due to revenue decline in Germany, partially offset by revenue growth in France. Revenue
in Germany declined significantly due to a combination of the impact of reductions in
billable headcount precipitated by the restructuring of our business in Germany,
increased pressure on pricing and a reduction in the spending levels of German public
sector clients. Revenue growth in France was driven by an expanding systems integration
practice and additional penetration into the French public sector market in 2006.
    
    Asia Pacificrevenue increased during the nine months ended September 30, 2006,
primarily due to significant revenue growth in Australia and Japan. Australian revenue
increased primarily due to a significant new client engagement in the telecommunications
industry. Japanese revenue increased due to revenue growth from system implementation
contracts and projects involving compliance with Japans Financial Instruments and
Exchange Law, though a substantial portion of this revenue growth was derived from the
use of subcontractors. Asia Pacific revenue was negatively affected in 2006 by the
weakening of foreign currencies against the U.S. dollar, primarily the Japanese Yen.
    
    Latin Americarevenue decreased during the nine months ended September 30, 2006, due
to decline in local revenue growth in Mexico and Brazil, partially offset by the
strengthening of foreign currencies in Latin America against the U.S. Dollar
(particularly the Brazilian Real). Revenue in Mexico declined as the practice continues
to restructure the business to position itself for future growth, while revenue in Brazil
declined due to the significantly reduced activity of a large client engagement.
    
    Corporate/Other: Our Corporate/Other segment does not contribute significantly to our
revenue.
 Gross Profit .
 
    
    Professional compensation expense decreased as a percentage of revenue to 49.2%
for the nine months ended September 30, 2006, compared to 49.9% for the nine months ended
September 30, 2005. We experienced a net decrease in professional compensation expense of
$31.1 million, or 2.4%, to $1,264.1 million for the nine months ended September 30, 2006
from $1,295.2 million for the nine months ended September 30, 2005. The decrease from
the nine months ended September 30, 2005 was primarily due to higher professional
compensation expense recorded in 2005 (as compared to 2006) related to the loss accrual
for the HT Contract, partially offset by increasing payroll costs attributable to
additional billable employees hired in the nine months ended September 30, 2006 in
response to increased demand for our services.
    
    Other direct contract expenses decreased as a percentage of revenue to 26.1% for
the nine months ended September 30, 2006 compared to 28.7% for the nine months ended
September 30, 2005. We experienced a net decrease in other direct contract expenses of
$75.8 million, or 10.2%, to $670.7 million for the nine months ended September 30, 2006
from $746.5 million for the nine months ended September 30, 2005. The decrease was
primarily due to higher other direct contract expenses recorded in the nine months ended
September 30, 2005 related to the loss accrual for the HT Contract. In addition, the
decline was driven by reduced subcontractor expenses as a result of the increased use of
internal resources and a decrease of resales of procured materials.
    
    Other costs of service as a percentage of revenue decreased to 7.0% for the nine
months ended September 30, 2006 from 7.6% for the nine months ended September 30, 2005.
We experienced a net decrease in other costs of service of $17.8 million, or 9.0%, to
$179.7 million for the nine months ended September 30, 2006 from $197.5 million for the
nine months ended September 30, 2005, which was primarily attributable to cost savings
realized directly or indirectly from office space reduction efforts taken to date.
    
    During the nine months ended September 30, 2006 we recorded, within the
Corporate/Other operating segment, a charge of $6.2 million related to lease, facilities
and other exit activities, compared with a $20.5 million charge related to lease,
facilities and other exit activities in the nine months ended September 30, 2005. These
charges
 35




---



##### 



related primarily to the fair value of future lease obligations associated with office
space, primarily within the EMEA and North America regions, which we will no longer be
using.
 Gross Profit by Segment.
 Nine Months EndedSeptember 30,2006
    
    
    2005
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    206,985
    
    
    $
    216,213
    
    
    $
    (9,228
    )
    
    
    (4.3
    %)Commercial Services
    
    
    50,169
    
    
    
    (17,852
    )
    
    
    68,021
    
    
    
    381.0
    %Financial Services
    
    
    113,797
    
    
    
    90,927
    
    
    
    22,870
    
    
    
    25.2
    %EMEA
    
    
    103,114
    
    
    
    79,366
    
    
    
    23,748
    
    
    
    29.9
    %Asia Pacific
    
    
    66,638
    
    
    
    50,840
    
    
    
    15,798
    
    
    
    31.1
    %Latin America
    
    
    5,267
    
    
    
    12,854
    
    
    
    (7,587
    )
    
    
    (59.0
    %)Corporate/Other
    
    
    (96,966
    )
    
    
    (94,034
    )
    
    
    (2,932
    )
    
    
    n/mTotal
    
    $
    449,004
    
    
    $
    338,314
    
    
    $
    110,690
    
    
    
    32.7
    %
 Nine Months EndedSeptember 30,2006
    
    
    2005Gross Profit as a % of revenuePublic Services
    
    
    20.6
    %
    
    
    21.7
    %Commercial Services
    
    
    12.2
    %
    
    
    (3.5
    %)Financial Services
    
    
    35.6
    %
    
    
    32.2
    %EMEA
    
    
    20.6
    %
    
    
    15.7
    %Asia Pacific
    
    
    24.5
    %
    
    
    21.0
    %Latin America
    
    
    9.3
    %
    
    
    20.2
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    17.5
    %
    
    
    13.0
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit decreased in the nine months ended September 30, 2006,
despite higher revenue, due to increases in professional compensation expense related to
hiring needs related to demand for our services as well as somewhat higher variable
compensation payouts. This increase in compensation was partially offset by declines in
subcontractor usage.
    
    Commercial Servicesgross profit increased in the nine months ended September 30,
2006, despite significantly lower revenue, primarily due to a $50.7 million
year-over-year reduction in losses from the HT Contract. Other factors contributing to
the increase in gross profit were the cost savings realized from 2005 workforce
realignments and reduced subcontractor expenses as a result of the increased use of
internal resources.
    
    Financial Servicesgross profit increased in the nine months ended September 30, 2006,
as higher revenue more than offset increases in compensation expenses related to a
substantial increase in billable headcount. Also reducing gross profit was an increase
in other direct contract expenses due to additional subcontractor usage driven by higher
revenue.
 36




---



##### 




    
    EMEAgross profit increased in the nine months ended September 30, 2006, due primarily
to higher revenue and improved profitability in France and Ireland along with
significantly improved profitability in Spain as a result of higher utilization and lower
costs. Declines in compensation expense and other direct contract expenses also
contributed to the increase in gross profit, though compensation expense for 2006
continued to be affected by severance and other costs related to the internal
restructuring of the Companys German practice.
    
    Asia Pacificgross profit increased in the nine months ended September 30, 2006,
primarily due to significant improvements in profitability and staff utilization in the
Companys businesses in Australia and China. Due to the high demand for resources in the
Japanese market and limited availability of qualified personnel, increases in
subcontractor expenses served to depress the growth of gross profit in the Companys
Japanese operations. Significant regional improvements in compensation expense derived
from the 2005 workforce reductions in Japan and China were more than offset by additional
compensation expenses associated with the use of the Companys personnel from outside the
region in connection with a significant new telecommunications industry engagement in
Australia.
    
    Latin Americagross profit decreased in the nine months ended September 30, 2006, as
lower revenue and a slight increase in compensation expenses more than offset a decrease
in other direct contract expenses. The increase in compensation expenses was driven by
higher billable headcount to meet the growth of our business in the region, predominantly
Brazil.
    
    Corporate/Otherconsists primarily of rent expense and other facilities related
charges, which increased in the nine months ended September 30, 2006 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.
 Insurance Settlement.
 Other Income (Expense), net.
 Income Tax Expense .
 37




---



##### 



Net Loss .
  Liquidity and Capital Resources
  Nine Months EndedSeptember 30,2006 to 20052006
    
    
    2005
    
    
    ChangeNet cash provided by (used in):Operating activities
    
    $
    (74,524
    )
    
    $
    (110,203
    )
    
    $
    35,679Investing activities
    
    
    87,799
    
    
    
    (51,513
    )
    
    
    139,312Financing activities
    
    
    (7,316
    )
    
    
    288,417
    
    
    
    (295,733
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    7,600
    
    
    
    (9,658
    )
    
    
    17,258Net increase in cash and cash equivalents
    
    $
    13,559
    
    
    $
    117,043
    
    
    $
    (103,484
    )
 Operating Activities .
 Investing Activities.
 Financing Activities.
  38




---



##### 



Debt Ratings
  Recently Issued Accounting Pronouncements
       39




---



##### 



PART I, ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  PART I, ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
     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
  ExhibitNo.
    
    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
    
    Amendment No. 5 to Amended and Restated 401(k) Plan, effective as of September
14, 2006, which is incorporated by reference to Exhibit 10.31 from the Companys
Form 10-K for the year ended December 31, 2006.10.2
    
    Letter Agreement dated October 3, 2006, between the Company and Judy A. Ethell,
which is incorporated by reference to Exhibit 10.95 from the Companys Form 10-K
for the year ended December 31, 2005.10.3
    
    Restricted Stock Unit Agreement for 292,000 restricted stock units, dated
September 19, 2006, between the Company and Judy A. Ethell, which is
incorporated by reference to Exhibit 10.96 from the Companys Form 10-K for the
year ended December 31, 2005.10.4
    
    Restricted Stock Unit Agreement for 94,000 restricted stock units, dated
September 19, 2006, between the Company and Judy A. Ethell, which is
incorporated by reference to Exhibit 10.97 from the Companys Form 10-K for the
year ended December 31, 2005.31.1
    
    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 1350.99.1
    
    Legal Proceedings section of the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2006.
 40




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SIGNATURES
  BearingPoint, Inc.DATE:  June 28, 2007
    By:

/s/ Judy A. EthellJudy A. EthellChief Financial Officer 41