##### 



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 June 30, 2007.
 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)
 
  þ o
  þ o o
 o þ




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##### 



BEARINGPOINT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2007
 EXPLANATORY NOTE
   2




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##### 



BEARINGPOINT, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2007
 TABLE OF CONTENTS
 PagePART IFINANCIAL INFORMATIONItem 1: Financial Statements (unaudited)Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006
    
    
    4Consolidated Condensed Balance Sheets as of June 30, 2007 and December 31, 2006
    
    
    5Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006
    
    
    6Notes to Consolidated Condensed Financial Statements
    
    
    7Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3: Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 4: Controls and Procedures
    
    
    39PART IIOTHER INFORMATIONItem 1: Legal Proceedings
    
    
    40Item 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
    
    
    42Item 6: Exhibits
    
    
    43
 3




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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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue
    
    $
    875,346
    
    
    $
    892,680
    
    
    $
    1,741,598
    
    
    $
    1,726,424Costs of service:Professional compensation
    
    
    467,574
    
    
    
    423,693
    
    
    
    939,289
    
    
    
    852,942Other direct contract expenses
    
    
    193,297
    
    
    
    214,009
    
    
    
    392,068
    
    
    
    456,403Lease and facilities restructuring charges (credits)
    
    
    1,329
    
    
    
    2,488
    
    
    
    (3,558
    )
    
    
    5,288Other costs of service
    
    
    70,615
    
    
    
    60,929
    
    
    
    139,208
    
    
    
    121,756Total costs of service
    
    
    732,815
    
    
    
    701,119
    
    
    
    1,467,007
    
    
    
    1,436,389Gross profit
    
    
    142,531
    
    
    
    191,561
    
    
    
    274,591
    
    
    
    290,035Amortization of purchased intangible assets
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    1,030Selling, general and administrative expenses
    
    
    174,707
    
    
    
    176,384
    
    
    
    351,951
    
    
    
    365,297Operating (loss) income
    
    
    (32,176
    )
    
    
    14,662
    
    
    
    (77,360
    )
    
    
    (76,292
    )Interest income
    
    
    2,636
    
    
    
    2,313
    
    
    
    4,388
    
    
    
    4,564Interest expense
    
    
    (15,797
    )
    
    
    (8,978
    )
    
    
    (26,666
    )
    
    
    (17,944
    )Insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,000Other (expense) income, net
    
    
    (465
    )
    
    
    1,314
    
    
    
    (370
    )
    
    
    1,692(Loss) income before taxes
    
    
    (45,802
    )
    
    
    9,311
    
    
    
    (100,008
    )
    
    
    (49,980
    )Income tax expense
    
    
    18,225
    
    
    
    12,164
    
    
    
    25,725
    
    
    
    25,586Net loss
    
    $
    (64,027
    )
    
    $
    (2,853
    )
    
    $
    (125,733
    )
    
    $
    (75,566
    )Loss per share  basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.01
    )
    
    $
    (0.59
    )
    
    $
    (0.36
    )Weighted average shares  basic and diluted
    
    
    214,653,553
    
    
    
    211,899,862
    
    
    
    214,601,330
    
    
    
    211,802,616
  4




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##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    348,818
    
    
    $
    389,571Restricted cash
    
    
    4,040
    
    
    
    3,097Accounts receivable, net of allowances of $5,649 at
June 30, 2007 and $5,927 at December 31, 2006
    
    
    382,616
    
    
    
    361,638Unbilled revenue
    
    
    424,963
    
    
    
    341,357Income tax receivable
    
    
    10,964
    
    
    
    1,414Deferred income taxes
    
    
    5,050
    
    
    
    7,621Prepaid expenses
    
    
    54,249
    
    
    
    33,677Other current assets
    
    
    29,965
    
    
    
    65,611Total current assets
    
    
    1,260,665
    
    
    
    1,203,986Property and equipment, net
    
    
    136,606
    
    
    
    146,392Goodwill
    
    
    465,940
    
    
    
    463,446Deferred income taxes, less current portion
    
    
    45,347
    
    
    
    41,663Other assets
    
    
    112,168
    
    
    
    83,753Total assets
    
    $
    2,020,726
    
    
    $
    1,939,240LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of notes payable
    
    $
    3,000
    
    
    $
    360Accounts payable
    
    
    192,887
    
    
    
    295,109Accrued payroll and employee benefits
    
    
    359,472
    
    
    
    344,715Deferred revenue
    
    
    121,273
    
    
    
    131,313Income tax payable
    
    
    36,199
    
    
    
    33,324Current portion of accrued lease and facilities charges
    
    
    15,095
    
    
    
    17,126Deferred income taxes
    
    
    27,741
    
    
    
    20,109Accrued legal settlements
    
    
    7,608
    
    
    
    59,718Other current liabilities
    
    
    113,109
    
    
    
    135,837Total current liabilities
    
    
    876,384
    
    
    
    1,037,611Notes payable, less current portion
    
    
    969,710
    
    
    
    671,490Accrued employee benefits
    
    
    124,325
    
    
    
    116,087Accrued lease and facilities charges, less current portion
    
    
    39,408
    
    
    
    49,792Deferred income taxes, less current portion
    
    
    10,343
    
    
    
    7,984Income tax reserve
    
    
    230,188
    
    
    
    108,499Other liabilities
    
    
    135,743
    
    
    
    125,078Total liabilities
    
    
    2,386,101
    
    
    
    2,116,541Commitments 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,
205,454,249 shares issued and 201,641,999 shares outstanding
on June 30, 2007 and 205,406,249 shares issued and
201,593,999 shares outstanding on December 31, 2006
    
    
    2,045
    
    
    
    2,044Additional paid-in capital
    
    
    1,362,289
    
    
    
    1,315,190Accumulated deficit
    
    
    (1,943,588
    )
    
    
    (1,697,639
    )Notes receivable from stockholders
    
    
    (7,465
    )
    
    
    (7,466
    )Accumulated other comprehensive income
    
    
    257,071
    
    
    
    246,297Treasury stock, at cost (3,812,250 shares)
    
    
    (35,727
    )
    
    
    (35,727
    )Total stockholders deficit
    
    
    (365,375
    )
    
    
    (177,301
    )Total liabilities and stockholders deficit
    
    $
    2,020,726
    
    
    $
    1,939,240
  5




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##### 



BEARINGPOINT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months EndedJune 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (125,733
    )
    
    $
    (75,566
    )Adjustments to reconcile net loss to net cash used in
operating activities:Deferred income taxes
    
    
    9,023
    
    
    
    4,101Allowance (benefit) for doubtful accounts
    
    
    1,648
    
    
    
    (2,250
    )Stock-based compensation
    
    
    47,100
    
    
    
    21,515Depreciation and amortization of property and equipment
    
    
    33,300
    
    
    
    36,703Amortization of purchased intangible assets
    
    
    
    
    
    
    1,030Lease and facilities restructuring (credits) charges
    
    
    (3,558
    )
    
    
    5,288Amortization of debt issuance costs and debt accretion
    
    
    8,112
    
    
    
    4,358Other
    
    
    (2,653
    )
    
    
    (37
    )Changes in assets and liabilities:Accounts receivable
    
    
    (18,545
    )
    
    
    39,530Unbilled revenue
    
    
    (79,501
    )
    
    
    (70,922
    )Income tax receivable, prepaid expenses and other
current assets
    
    
    6,851
    
    
    
    (41,670
    )Other assets
    
    
    (15,351
    )
    
    
    (639
    )Accounts payable
    
    
    (102,287
    )
    
    
    (29,671
    )Accrued legal settlements and other current liabilities
    
    
    (65,332
    )
    
    
    17,233Accrued payroll and employee benefits
    
    
    10,529
    
    
    
    (12,663
    )Deferred revenue
    
    
    (10,685
    )
    
    
    (34,335
    )Income tax reserve and other liabilities
    
    
    8,647
    
    
    
    35,632Net cash used in operating activities
    
    
    (298,435
    )
    
    
    (102,363
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (22,590
    )
    
    
    (22,197
    )(Increase) decrease in restricted cash
    
    
    (943
    )
    
    
    90,915Net cash (used in) provided by investing activities
    
    
    (23,533
    )
    
    
    68,718Cash flows from financing activities:Net proceeds from issuance of notes payable
    
    
    281,199
    
    
    
    Repayments of notes payable
    
    
    (1,110
    )
    
    
    (5,130
    )Increase in book overdrafts
    
    
    
    
    
    
    (756
    )Net cash provided by (used in) financing activities
    
    
    280,089
    
    
    
    (5,886
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,126
    
    
    
    7,385Net decrease in cash and cash equivalents
    
    
    (40,753
    )
    
    
    (32,146
    )Cash and cash equivalents  beginning of period
    
    
    389,571
    
    
    
    255,340Cash and cash equivalents  end of period
    
    $
    348,818
    
    
    $
    223,194
  6




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 Note 1. Basis of Presentation
   Note 2. Stock-Based Compensation
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock options
    
    $
    2,215
    
    
    $
    6,283
    
    
    $
    4,633
    
    
    $
    12,752RSUs
    
    
    5,550
    
    
    
    3,638
    
    
    
    10,966
    
    
    
    5,525PSUs
    
    
    21,584
    
    
    
    
    
    
    
    28,803
    
    
    
    ESPP and BE an Owner
    
    
    1,178
    
    
    
    1,610
    
    
    
    2,355
    
    
    
    3,238Restricted stock awards
    
    
    343
    
    
    
    
    
    
    
    343
    
    
    
    Total
    
    $
    30,870
    
    
    $
    11,531
    
    
    $
    47,100
    
    
    $
    21,515
  7




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Restricted Stock Units
  WeightedAverageGrantDate FairNumber of RSUs
    
    ValueOutstanding at December 31, 2006
    
    
    20,416,520
    
    
    $
    7.93Granted
    
    
    1,652,525
    
    
    
    7.83Settled
    
    
    
    
    
    
    Forfeited
    
    
    (389,670
    )
    
    
    8.20Outstanding at June 30, 2007 (1)
    
    
    21,679,375
    
    
    $
    7.92
 
 (1)
    
    Excludes approximately 128,847 RSUs (net of forfeitures) awarded to recipients in China where
local laws require a cash settlement.   Performance Share Units
  WeightedAverageGrantDate FairNumber of PSUs
    
    ValueOutstanding at December 31, 2006
    
    
    
    
    
    $
    Granted
    
    
    22,381,132
    
    
    
    12.46Settled
    
    
    
    
    
    
    Forfeited
    
    
    (281,829
    )
    
    
    12.80Outstanding at June 30, 2007 (1)
    
    
    22,099,303
    
    
    $
    12.46
 
 (1)
    
    Excludes approximately 40,921 PSUs awarded to recipients in China where local laws require a
cash settlement.  (i)
    
    the Company must first achieve a compounded average annual growth target in consolidated
business unit contribution; and
 8




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 (ii)
    
    total shareholder return (TSR) for shares of the Companys common stock must be at
least equal to the 25th percentile of TSR of the Standard & Poors 500 (the S&P 500) in
order for any portion of the award to vest. Depending on the Companys TSR performance
relative to those companies that comprise the S&P 500, the PSU awards will vest on December
31, 2009 at percentages varying from 0% to 250% of the number of PSU awards originally
awarded.
   
    
    a performance period of February 2, 2007 to December 31, 2009;
    
    a grant date closing stock price equal to the closing price of a share of the Companys
common stock as reported on the New York Stock Exchange;
    
    a risk free rate using a term structure over the performance period; and
    
    a volatility assumption using a term structure over the performance period incorporating
an average blended rate of the Companys historical volatility and implied volatility from
the Companys peer group within the S&P 500.
 Note 3. Notes Payable
  June 30,
    
    
    December 31,2007
    
    
    2006Current portion:Term Loans under the 2007 Credit Facility
    
    $
    3,000
    
    
    $
    Other
    
    
    
    
    
    
    360Total current portion
    
    
    3,000
    
    
    
    360Long-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
$16,540 and $18,510, respectively)
    
    
    23,460
    
    
    
    21,490Term Loans under the 2007 Credit Facility
    
    
    296,250
    
    
    
    Total long-term portion
    
    
    969,710
    
    
    
    671,490Total notes payable
    
    $
    972,710
    
    
    $
    671,850
  9




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
  2007 Credit Facility
     
    
    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, reasonable
efforts to maintain credit ratings; and maintenance of books and records (subject to the
material weaknesses previously disclosed in the Companys Annual Report on Form 10-K for the
year ended December 31, 2005).
 10




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 
    
    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
  Japanese Credit Facility
  Note 4. Earnings (Loss) Per Share
  11




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 5. Comprehensive Income/(Loss)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (64,027
    )
    
    $
    (2,853
    )
    
    $
    (125,733
    )
    
    $
    (75,566
    )Foreign currency translation adjustment
    
    
    6,026
    
    
    
    15,273
    
    
    
    10,774
    
    
    
    20,009Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,329Comprehensive (loss) income
    
    $
    (58,001
    )
    
    $
    12,420
    
    
    $
    (114,959
    )
    
    $
    (50,228
    )
 Note 6. Segment Reporting
  12




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Three Months Ended June 30,2007
    
    
    2006Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    359,494
    
    
    $
    67,782
    
    
    $
    341,081
    
    
    $
    70,652Commercial Services
    
    
    133,973
    
    
    
    19,187
    
    
    
    159,323
    
    
    
    40,380Financial Services
    
    
    70,761
    
    
    
    6,536
    
    
    
    112,170
    
    
    
    32,984EMEA
    
    
    196,988
    
    
    
    32,691
    
    
    
    170,427
    
    
    
    26,687Asia Pacific
    
    
    89,925
    
    
    
    19,761
    
    
    
    89,627
    
    
    
    18,858Latin America
    
    
    23,281
    
    
    
    (1,021
    )
    
    
    18,660
    
    
    
    1,070Corporate/Other
    
    
    924
    
    
    
    (177,112
    )
    
    
    1,392
    
    
    
    (175,969
    )Total
    
    $
    875,346
    
    
    $
    (32,176
    )
    
    $
    892,680
    
    
    $
    14,662
 Six Months Ended June 30,2007
    
    
    2006Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    721,187
    
    
    $
    132,742
    
    
    $
    672,197
    
    
    $
    122,805Commercial Services
    
    
    270,255
    
    
    
    40,014
    
    
    
    276,430
    
    
    
    11,861Financial Services
    
    
    142,966
    
    
    
    10,434
    
    
    
    222,672
    
    
    
    69,735EMEA
    
    
    385,793
    
    
    
    68,720
    
    
    
    334,607
    
    
    
    52,334Asia Pacific
    
    
    173,080
    
    
    
    31,302
    
    
    
    180,062
    
    
    
    36,213Latin America
    
    
    45,547
    
    
    
    (5,276
    )
    
    
    37,881
    
    
    
    2,109Corporate/Other
    
    
    2,770
    
    
    
    (355,296
    )
    
    
    2,575
    
    
    
    (371,349
    )Total
    
    $
    1,741,598
    
    
    $
    (77,360
    )
    
    $
    1,726,424
    
    
    $
    (76,292
    )
 13




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 7. Goodwill
  ForeignBalance
    
    
    
    
    
    
    Currency
    
    
    BalanceDecember 31,
    
    
    
    
    
    
    Translation
    
    
    June 30,2006
    
    
    Reductions
    
    
    Adjustment
    
    
    2007Public Services
    
    $
    23,581
    
    
    $
    
    
    
    $
    
    
    
    $
    23,581Financial Services
    
    
    9,210
    
    
    
    
    
    
    
    
    
    
    
    9,210EMEA
    
    
    359,133
    
    
    
    (7,495
    )(1)
    
    
    8,373
    
    
    
    360,011Asia Pacific
    
    
    70,402
    
    
    
    
    
    
    
    1,572
    
    
    
    71,974Latin America
    
    
    918
    
    
    
    
    
    
    
    44
    
    
    
    962Corporate/Other
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202Total
    
    $
    463,446
    
    
    $
    (7,495
    )
    
    $
    9,989
    
    
    $
    465,940
 
 (1)
    
    Amount represents the reversal of uncertain income tax liabilities recorded as part of the
acquisition of a consulting practice in EMEA against goodwill, whereas the statute of
limitations for the potential tax liability expired during the first quarter of 2007.  Note 8. Lease and Facilities Restructuring Activities
     TotalBalance at December 31, 2006
    
    $
    66,918Adjustment to the provision, net
    
    
    (3,558
    )Utilization
    
    
    (9,383
    )Other (1)
    
    
    526Balance at June 30, 2007
    
    $
    54,503
 
 (1)
    
    Other changes in the restructuring accrual consist primarily of foreign currency translation
adjustments. 14




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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 Tellabs
 2005 Shareholders Derivative Demand
  15




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
  SEC Investigation
   Government Contracting Matters
  Other Matters
 Telecommunications Company
  16




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
  Michael Donahue
  Transition Services Provided By KPMG LLP
   Softline Acquisition Obligation
   17




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Other Commitments
    18




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 10. Pension and Postretirement Benefits
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Components of net periodic pension cost:Service cost
    
    $
    1,589
    
    
    $
    1,792
    
    
    $
    3,178
    
    
    $
    3,584Interest cost
    
    
    1,165
    
    
    
    1,107
    
    
    
    2,330
    
    
    
    2,214Expected return on plan assets
    
    
    (243
    )
    
    
    (269
    )
    
    
    (486
    )
    
    
    (538
    )Amortization of loss
    
    
    95
    
    
    
    256
    
    
    
    190
    
    
    
    512Amortization of prior service cost
    
    
    163
    
    
    
    159
    
    
    
    326
    
    
    
    318Curtailment
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    60Settlement
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (182
    )Net periodic pension cost
    
    $
    2,769
    
    
    $
    2,984
    
    
    $
    5,538
    
    
    $
    5,968Components of net periodic postretirement medical cost:Service cost
    
    $
    618
    
    
    $
    480
    
    
    $
    1,236
    
    
    $
    960Interest cost
    
    
    217
    
    
    
    184
    
    
    
    434
    
    
    
    368Amortization of losses
    
    
    13
    
    
    
    39
    
    
    
    26
    
    
    
    78Amortization of prior service cost
    
    
    119
    
    
    
    120
    
    
    
    238
    
    
    
    240Net periodic postretirement medical cost
    
    $
    967
    
    
    $
    823
    
    
    $
    1,934
    
    
    $
    1,646
 Note 11. Income Taxes
       19




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##### 



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
   Note 12. Recently Issued Accounting Pronouncements
   20




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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 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 2004, we identified material weaknesses in our internal control over financial
reporting, the remediation of which continues to materially and adversely affect our
business and financial condition, and as of June 30, 2007, the existence and remediation of
these material weaknesses largely 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.
 21




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
    
    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 cash needs over time.
    
    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
   22




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Overview
   Economic and Industry Factors
   Revenue and Income Drivers
     23




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##### 



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; however, we do not revise previously
reported bookings. 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. We do
not record unfunded Federal contracts as new contract bookings while appropriation approvals
remain pending as there can be no assurances that these approvals will be forthcoming in the
near future, if at all. Consequently, there can be significant differences between the time
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 Executive
Compensation  Compensation Discussion and Analysis, included in our proxy statement
related to our 2007 Annual Meeting of Stockholders, filed with the SEC on September 28,
2007.
    
    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.
    
    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.
 24




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##### 




    
    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 Six Months Ended June 30, 2007 Highlights
  
    
    New contract bookings for the three months ended June 30, 2007 were $746.8 million, a
decrease of $66.4 million, or 8.2%, from new contract bookings of $813.2 million for the
three months ended June 30, 2006. New contract bookings for the six months ended June 30,
2007 were $1,456.3 million, a decrease of $161.4 million, or 10.0%, from new contract
bookings of $1,617.7 million for the six months ended June 30, 2006. Although bookings grew
in our international operations, it did not offset reductions in our North American business
units. In North America, year-over-year decreases in Public Services bookings for the three
and six months ended June 30, 2007 are substantially attributable to (a) one exceptionally
large booking in our State, Local and Education (SLED) sector in the first quarter of
2006, and (b) growth in the first half of 2007 of the total contract value of new Federal
contracts signed for which appropriations approval remained pending (unfunded Federal
contracts) at June 30, 2007, which we believe has resulted in funding only a small portion
of new Federal contracts. We do not record unfunded Federal contracts as new contract
bookings while appropriation approvals remain pending as there can be no assurances that
these approvals will be forthcoming in the near future, if at all.
    
    New contract bookings for the three months ended September 30, 2007 were $764.1 million,
a decrease of $49.2 million, or 6.0%, from new contract bookings of $813.3 million for the
three months ended September 30, 2006.  Most notably, appropriations were approved for a
significant number of the previously mentioned unfunded Federal contracts, resulting in
record quarterly bookings in our Public Services business unit.  By comparison, new bookings
in our Commercial Services and Financial Services business units were down considerably,
more than offsetting the gains achieved by Public Services.
    
    New contract bookings for the nine months ended
September 30, 2007 were $2,220.5 million,
a decrease of $210.5 million, or 8.7%, from new contract bookings of $2,431.0 million for
the nine months ended September 30, 2006.  New bookings improvements in our EMEA and Asia
Pacific business units continue to be outstripped by declining new bookings in our
Commercial Services and Financial Services business units and the lingering effects of
delays in appropriations associated with unfunded Federal contracts executed by our Public
Services business unit.
    
    Our revenue for the three months ended June 30, 2007 was $875.3 million, a decrease of
$17.3 million, or 1.9%, from revenue for the three months ended June 30, 2006 of $892.7
million. Revenue increases in EMEA, Public Services and Latin America were more than offset
by declines in Financial Services and Commercial Services while Asia Pacific was flat year
over year. Our revenue for the six months ended June 30, 2007 was $1,741.6 million, an
increase of $15.2 million, or 0.9%, over revenue for the six months ended June 30, 2006 of
$1,726.4 million. Revenue increases in EMEA, Public Services and Latin America more than
offset revenue declines in Financial Services, Asia Pacific and Commercial Services.
    
    Our gross profit for the three months ended June 30, 2007 was $142.5 million, a decrease
of $49.0 million, or 25.6%, compared with gross profit for the three months ended June 30,
2006 of $191.6 million. Gross profit as a percentage of revenue decreased to 16.3% during
the three months ended June 30, 2007 from 21.5% during the three months ended June 30, 2006.
This decline was the result of decreases in revenue and increases in professional
compensation due primarily to stockbased compensation related to our February 2007 grant
of PSUs, which more than offset a decrease in other direct contract expenses. Our gross
profit for the six months ended June 30, 2007 was $274.6 million, a decrease of $15.4
million, or 5.3%, compared with gross profit of $290.0 million for the six months ended June
30, 2006. Gross profit as a percentage of revenue decreased to 15.8% during the six months
ended June 30, 2007 from 16.8% during the six months ended June 30, 2006. This decline was
the result of increases in professional compensation which more than offset increases in
revenue and decreases in other direct contract expenses.
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
    
    We incurred SG&A expenses of $174.7 million in the second quarter of 2007, representing a
decrease of $1.7 million, or 1.0%, over SG&A expenses of $176.4 million in the second
quarter of 2006. We incurred SG&A expenses of $352.0 million in the six months ended June
30, 2007, representing a decrease of $13.3 million, or 3.7%, from SG&A expenses of $365.3
million in the six months ended June 30, 2006. The decrease in SG&A expense for the three
and six months ended June 30, 2007 was primarily due to reduced sub-contractor labor and
other costs directly related to the closing of our financial statements, as well as savings
from the reduction in the size of our sales force. Partially offsetting these savings were
increased compensation expense for additional SG&A personnel, stock-based compensation
expense related to our February 2007 grant of PSUs, RSUs, and accrued bonuses.
    
    During the three months ended June 30, 2007, we incurred external costs related to the
preparation of our financial statements, our auditors review of our financial statements
and testing of internal controls of approximately $22.8 million, compared to approximately
$35.3 million for the three months ended June 30, 2006. During the six months ended June 30,
2007, we incurred external costs related to the preparation of our financial statements, our
auditors review of our financial statements and testing of internal controls of
approximately $53.4 million, compared to approximately $67.6 million for the six months
ended June 30, 2006. We currently expect our costs for the remainder of 2007 related to
these efforts to be approximately $27.3 million compared to $60.7 million incurred in the
second half of 2006.
    
    During the second quarter of 2007, we realized a net loss of $64.0 million, or a loss of
$0.30 per share, an increase of $61.2 million over the net loss of $2.9 million, or a loss
of $0.01 per share, during the second quarter of 2006. This change in net loss was primarily
attributable to:
 
    
    a decrease in gross profit of $49.0 million;
    
    an increase in interest expense of $6.8 million in the second quarter of
2007, due to interest attributable to our 2007 Credit Facility and
the acceleration of debt issuance costs resulting from the
termination of the 2005 Credit Facility; and
    
    an increase in income tax expense of $6.1 million in the second quarter of
2007.
  
    
    During the six months ended June 30, 2007, we realized a net loss of $125.7 million, or a
loss of $0.59 per share, an increase of $50.2 million over the net loss of $75.6 million, or
a loss of $0.36 per share, during the six months ended June 30, 2006. This change in net
loss was primarily attributable to:
 
    
    a decrease in gross profit of $15.4 million;
    
    the recognition of $38.0 million in other income in the first quarter of 2006
in connection with insurance settlement payments made on behalf of the Company in
connection with the settlement of our contract with Hawaiian Telcom Communications,
Inc.; and
    
    an increase in interest expense of $8.7 million in the six months ended June
30, 2007, due to interest attributable to our 2007 Credit Facility and the acceleration of debt issuance costs resulting from the
termination of the 2005 Credit Facility.
  
    
    Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 supersedes SFAS No. 5,
Accounting for Contingencies, as it relates to income tax liabilities and changes the
standard of recognition that a tax contingency is required to meet before being recognized
in the financial statements. Upon adoption of FIN 48 and after examining our existing tax
contingencies under the standards of FIN 48, we recognized an increase of approximately
$119.8 million in our long-term liability for unrecognized tax benefits, which was reflected
as an increase to the January 1, 2007 balance of accumulated deficit.Final determination of a significant portion of the Companys tax liabilities that will
effectively be settled remains subject to ongoing examination by various taxing authorities,
including the Internal Revenue Service. We are aggressively pursuing
 26




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##### 



strategies to favorably settle or resolve these liabilities for unrecognized tax benefits. If
we are successful in mitigating these liabilities, in whole or in part, the impact will be
recorded as an adjustment to income tax expense in the period of settlement.
    
    Utilization for the three months ended June 30, 2007 was 76.3%, a decrease of 50 basis
points from the three months ended June 30, 2006. Utilization for the six months ended June
30, 2007 was 76.5%, an increase of 150 basis points over the six months ended June 30, 2006.
    
    Utilization for the three months ended September 30,
2007 was 78.5%, an increase of 130 basis
points from the three months ended September 30, 2006.
Utilization for the nine months ended September 30, 2007 was
77.2%, an increase of 140 basis points over the nine months ended
September 30, 2006.
    
    As of June 30, 2007, our DSOs stood at 95 days, representing a decrease of 9 days, or
8.7%, from our DSOs at June 30, 2006.
    
    Free cash flow for the six months ended June 30, 2007 and 2006 was ($321.0) million and
($124.6) million, respectively. Net cash used in operating activities in the six months
ended June 30, 2007 and 2006 was ($298.4) million and ($102.4) million, respectively.
Purchases of property and equipment in the six months ended June 30, 2007 and 2006 were
$22.6 million and $22.2 million, respectively. The change in free cash flow for the
six-month period was primarily attributable to the timing of our payments to vendors,
significant increases to accounts receivable and unbilled revenue balances, a decline in
operating profitability, and the settlement of the HT Contract.
    
    As of June 30, 2007, we had approximately 17,500 full-time employees, including
approximately 14,800 consulting professionals. This represented a decrease in billable
headcount of approximately 3.3% from our headcount as of December 31, 2006.
    
    As of September 30, 2007, we had approximately 17,300
full-time employees, including approximately 14,500 consulting
professionals. This represented a decrease in billable headcount of
approximately 5.2% from our headcount as of December 31, 2006.
    
    Our voluntary, annualized attrition rate for the second quarter of 2007 was 26.4%,
compared to 28.6% for the second quarter of 2006. Our voluntary,
annualized attrition rate for the third quarter of 2007 was 25.8%,
compared to 28.3% for the third quarter of 2006. The highly competitive industry in which
we operate and our financial position have made it particularly critical and challenging for
us to attract and retain experienced personnel.
    
    Effective as of October 22, 2007, our Board of Directors approved an amendment to our
existing shareholder rights agreement. As amended, a shareholders right under the
agreement to acquire additional shares of stock will not trigger unless (a) a shareholder
who is a passive investor acquires 20% or more of our common stock or (b) a shareholder
who is not a passive investor acquires 15% or more of our common stock. Prior to the
amendment, these rights were triggered upon a shareholder acquiring 15% or more of our
common stock in all instances. For additional information, see Item 5, Other Information,
of this Quarterly Report.
    
    With the filing of this Form 10-Q, we will become current but not timely, in our SEC
periodic filings. As a result, we intend to begin to deliver shares to our employees under
our various employee share plans over the coming quarters. For additional information see
Liquidity and Capital Resources and Item 1A, Risk Factors, of this Quarterly Report.
 Principal Business Priorities and Strategies for 2007 and Beyond
   
    
    Enhance Shareholder Value.
  
    
    Focus We will continue to selectively target and focus on clients, markets and
offerings where we can be a market leader. We will strategically leverage our
industry and solution expertise along with our business partners and other core
channels to market to effectively deliver our firms capabilities in these areas.
 27




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
    
    Differentiated Solutions We will continue to target and invest in solutions
which are highly relevant to our clients needs and which we can provide in a
compelling, differentiated manner. Our offerings and capabilities in Risk,
Compliance and Security illustrate the outcomes of this priority.
    
    Global Model Our clients operate globally and so do we. We are very committed
to our global delivery model, and we will maintain world class on-shore and
off-shore capabilities to meet the ever changing needs of our clients.
    
    People Our professionals are the lifeblood of our company. We continue to
invest in our ability to attract, develop and retain the best and the brightest.
Our investments in training and our partnership with the prestigious Yale University
are examples of our commitment. In addition, in October 2007, we hired Rick Martino as our new global head of human
resources. Mr. Martino has more than 25 years of experience leading and transforming
human resource programs, including the past seven years with the March of Dimes
Foundation where he led all aspects of human resources, successfully redesigned their
compensation plan and benefit programs, reduced overall employee attrition and
enhanced their training and development programs, and 18 years with IBM, where he
was responsible for various aspects of global staffing, learning and development,
diversity, human resources information technology, global mobility and knowledge
management strategy.
 
    
    Become Timely in our Financial and SEC Periodic Reporting. We continue to target timely
filing with the SEC of our Annual Report on Form 10-K for the year ending December 31, 2007.
With the filing of this report, we are current and up to date in our SEC periodic reports;
however, we expect that this is temporary, as we do not expect to file our quarterly report
for the third fiscal quarter of 2007 by the date it is due under the SECs reporting rules.To date in 2007, substantial progress continues to be made in remediating material weaknesses
in our internal control over financial reporting. Based on our management teams most recent
review, we believe it is likely that three of the nine material
weaknesses disclosed in our 2006 Form 10-K can be
remediated in 2007 and it is possible that an additional three may be remediated by year end. We do
not expect material weaknesses related to the remaining three, and
possibly six, material weakness disclosures previously reported to be remediated before 2008. Full remediation can only be
achieved after appropriate internal assessment, including testing and auditing procedures have been completed,
therefore, the exact date of full remediation of each material weakness remains subject to
change.
    
    Replace Our North American Financial Reporting Systems.We are still planning to begin
our transition to new North American financial reporting systems in the second half of 2008.
The strategy, design and build phases for the project are proceeding as
planned. In the interim, it is critical that we continue to make incremental improvements
on our existing North American financial reporting systems to be able to support and achieve
our goal of remaining timely in our SEC periodic reporting in fiscal 2008.
    
    Reduce Employee Attrition.While attrition has not worsened significantly, we have seen
virtually no improvement in our voluntary employee attrition rate. We are optimistic that
becoming timely in our financial and SEC periodic reporting and again being able to focus
singularly on our business strategy will help improve our attrition rates.
    
    Increase Client Awareness, Confidence and Satisfaction.To date in 2007, we were named as
a leader providing of risk consulting by Forrester in its 2007 vendor summary and as 2007
Global System Integrator of the Year by Cognos for the second year in a row. In addition,
we ranked 24th in Washington Technology Magazines 2007 ranking of Top 100 government
contractors.
    
    Strengthen Our Balance Sheet.
 
    
    EMEA Working with our financial and legal advisors, we have completed a
preliminary feasibility study and legal analysis relating to our previously announced
exploration of a sale of a significant portion of our EMEA segment to our European
managing directors. Financial advisors have now been engaged to identify potential
financing sources to support a proposed transaction structure. We are also near
completion of a financial due diligence review of the EMEA business unit that could
be used in discussions with financing parties, should our Board of Directors decide
to move forward with this transaction with our European managing directors. We do not
expect our Board of Directors to make a final decision regarding whether or not to
proceed with this transaction before late 2007.
    
    Continued SG&A Reductions We are also moving on plans to aggressively reduce our
ongoing SG&A expenditures by the end of fiscal 2007. We hope to be able to reduce
fiscal 2007 corporate infrastructure costs by approximately $60 million
year-over-year. A significant portion of these savings are expected to come from
year-over-year savings in the external costs associated with completing our
consolidated financial statements and filing our SEC periodic reports and, based on
our activities through September 30, 2007, we continue to believe these external cost
savings are achievable. To achieve further reductions in 2008 and beyond, we must
continue to reduce the relatively high SG&A costs that we continue to experience in a
number of areas of our corporate infrastructure and business segments. We also
continue to strive to improve our cash collections through a program recently
 28




---



##### 



initiated by our Office of the Chief Executive Officer. At June 30, 2007, our DSOs
stood at 95 days. If we are to generate significant amounts of cash from operations in
the latter part of 2007, by the fourth fiscal quarter of 2007 we must again meet or
exceed our cash collections for the fourth quarter of fiscal 2006 when our DSOs stood
at 82 days.
    
    Reactivating our Employee Share Purchase Plan With the filing of this Quarterly
Report, we are once again able to sell shares to our employees under our ESPP. In
addition to providing our employees with regular opportunities to acquire greater
ownership in our company, we are now able to more freely utilize the
approximately $14 million in
cash we have been holding on behalf of our employees.
 Segments
   Three Months ended June 30, 2007 Compared to Three Months ended June 30, 2006
 Revenue.
 29




---



##### 



Three Months EndedJune 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    359,494
    
    
    $
    341,081
    
    
    $
    18,413
    
    
    
    5.4
    %Commercial Services
    
    
    133,973
    
    
    
    159,323
    
    
    
    (25,350
    )
    
    
    (15.9
    %)Financial Services
    
    
    70,761
    
    
    
    112,170
    
    
    
    (41,409
    )
    
    
    (36.9
    %)EMEA
    
    
    196,988
    
    
    
    170,427
    
    
    
    26,561
    
    
    
    15.6
    %Asia Pacific
    
    
    89,925
    
    
    
    89,627
    
    
    
    298
    
    
    
    0.3
    %Latin America
    
    
    23,281
    
    
    
    18,660
    
    
    
    4,621
    
    
    
    24.8
    %Corporate/Other
    
    
    924
    
    
    
    1,392
    
    
    
    (468
    )
    
    
    n/mTotal
    
    $
    875,346
    
    
    $
    892,680
    
    
    $
    (17,334
    )
    
    
    (1.9
    %)
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    5.4
    %
    
    
    5.4
    %Commercial Services
    
    
    0.0
    %
    
    
    (15.9
    %)
    
    
    (15.9
    %)Financial Services
    
    
    0.0
    %
    
    
    (36.9
    %)
    
    
    (36.9
    %)EMEA
    
    
    7.9
    %
    
    
    7.7
    %
    
    
    15.6
    %Asia Pacific
    
    
    (0.1
    %)
    
    
    0.4
    %
    
    
    0.3
    %Latin America
    
    
    9.9
    %
    
    
    14.9
    %
    
    
    24.8
    %Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    1.7
    %
    
    
    (3.6
    %)
    
    
    (1.9
    %)
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the second quarter of 2007, led by significant
revenue growth in our Emerging Markets and SLED sectors, primarily due to increased activity
at both new and existing clients. Partially offsetting these increases was a revenue
decline in our Defense sector, due to the winding down of several large contracts during
2007.
    
    Commercial Servicesrevenue decreased during the second quarter of 2007, primarily due to
reduced customer demand for our services within the telecommunications and high technology
industries. Revenue also declined in our Life Sciences sector due to the completion of a
significant long-term client project in 2007.
    
    Financial Servicesrevenue decreased during the second quarter of 2007, due to
significant revenue declines across all business sectors. Revenue decreases were
attributable to several factors, including the winding down of a large client engagement
during 2007, the loss of senior staff in certain of our higher rate business sectors and
difficulties in securing long-term client commitments, due in part to client concerns and
perceptions regarding our financial position.
    
    EMEArevenue increased during the second quarter of 2007, as a result of the favorable
impact of the strengthening of foreign currencies (primarily the Euro) against the U.S.
dollar as well as significant revenue increases in Russia, Ireland and the United Kingdom,
partially offset by revenue declines in Spain. Revenue growth in Russia was attributable to
increased activity from several new client engagements, while Ireland and the United Kingdom
revenue growth was driven by our continued expansion in those markets and strong regional
economies. Revenue declined in Spain due to a declining market share resulting in a reduced
volume of engagement hours and lower utilization.
 30




---



##### 




    
    Asia Pacificrevenue slightly increased during the second quarter of 2007, primarily due
to revenue growth in China resulting from our increased operational focus in that region.
Partially offsetting this increase was a revenue decline in Korea due to the completion of
several large contracts.
    
    Latin Americarevenue increased during the second quarter of 2007, partly as a result of
the favorable impact of the
strengthening of foreign currencies (primarily the Brazilian Real) against the U.S. dollar as
well as revenue growth in Brazil and strengthening our relationships with existing clients.
    
    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 53.4% for the
second quarter of 2007, compared to 47.5% for the second quarter of 2006. We experienced a
net increase in professional compensation expense of $43.9 million, or 10.4%, to $467.6
million for the second quarter of 2007 over $423.7 million for the second quarter of 2006.
The increase in professional compensation expense over the second quarter of 2006 was
primarily due to stock-based compensation expense relating to PSUs, RSUs, cash bonuses, as
well as merit-based annual salary increases to our billable staff.
    
    Other direct contract expenses decreased as a percentage of revenue to 22.1% for the
second quarter of 2007, compared to 24.0% for the second quarter of 2006. We experienced a
net decrease in other direct contract expenses of $20.7 million, or 9.7%, to $193.3 million
for the second quarter of 2007 from $214.0 million for the second quarter of 2006. The
decrease was driven by reduced subcontractor expenses as a result of increased use of
internal resources.
    
    Other costs of service as a percentage of revenue increased to 8.1% for the second
quarter of 2007 from 6.8% for the second quarter of 2006. We experienced a net increase in
other costs of service of $9.7 million, or 15.9%, to $70.6 million for the second quarter of
2007 from $60.9 million for the second quarter of 2006. The increase was primarily due to
increased salaries and related expenses for the redeployment of existing employees to
practice support roles.
    
    During the second quarter of 2007 we recorded, within the Corporate/Other operating
segment, a restructuring charge of $1.3 million related to lease, facilities and other exit
activities, compared with a $2.5 million charge during the second quarter of 2006. These
charges related primarily to the fair value of future lease obligations associated with
office space, which we will no longer be using, primarily within the EMEA and North America
regions.
 Gross Profit by Segment.
 31




---



##### 



Three Months EndedJune 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    75,217
    
    
    $
    78,415
    
    
    $
    (3,198
    )
    
    
    (4.1
    %)Commercial Services
    
    
    25,094
    
    
    
    46,600
    
    
    
    (21,506
    )
    
    
    (46.2
    %)Financial Services
    
    
    11,529
    
    
    
    39,458
    
    
    
    (27,929
    )
    
    
    (70.8
    %)EMEA
    
    
    40,278
    
    
    
    35,200
    
    
    
    5,078
    
    
    
    14.4
    %Asia Pacific
    
    
    22,955
    
    
    
    21,974
    
    
    
    981
    
    
    
    4.5
    %Latin America
    
    
    575
    
    
    
    2,235
    
    
    
    (1,660
    )
    
    
    (74.3
    %)Corporate/Other
    
    
    (33,117
    )
    
    
    (32,321
    )
    
    
    (796
    )
    
    
    n/mTotal
    
    $
    142,531
    
    
    $
    191,561
    
    
    $
    (49,030
    )
    
    
    (25.6
    %)
 Three Months EndedJune 30,2007
    
    2006Gross Profit as a % of revenuePublic Services
    
    
    20.9
    %
    
    
    23.0
    %Commercial Services
    
    
    18.7
    %
    
    
    29.2
    %Financial Services
    
    
    16.3
    %
    
    
    35.2
    %EMEA
    
    
    20.4
    %
    
    
    20.7
    %Asia Pacific
    
    
    25.5
    %
    
    
    24.5
    %Latin America
    
    
    2.5
    %
    
    
    12.0
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    16.3
    %
    
    
    21.5
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit decreased in the second quarter of 2007, primarily due to
increases in professional compensation expense related to increases in stock-based
compensation expense for PSUs and RSUs, cash bonuses and additional personnel to meet the
demand for our services. These increases in expense more than offset revenue increases and a
substantial improvement in gross profit in our SLED sector.
    
    Commercial Servicesgross profit significantly decreased in the second quarter of 2007,
primarily due to lower revenue in the second quarter of 2007 compared to the second quarter
of 2006.
    
    Financial Servicesgross profit significantly decreased in the second quarter of 2007,
primarily due to significantly lower revenue in the second quarter of 2007 compared to the
second quarter of 2006 as well as a decline in the mix of higher margin engagements. Despite
a decrease in billable personnel, compensation expense declined only marginally due to
increases in stock-based compensation expense for PSUs and RSUs.
    
    EMEAgross profit increased in the second quarter of 2007, primarily due to overall
higher revenue in the EMEA region and improved profitability in Russia and the United
Kingdom. Also contributing to the improvement in gross profit was other direct contract
expenses decreasing as a percentage of revenue, attributable to the reduced use of
subcontractors and increased use of internal resources.
    
    Asia Pacificgross profit increased in the second quarter of 2007, primarily due to
significant improvements in profitability and staff utilization in the Companys businesses
in China and Japan. 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 business in Japan.
 32




---



##### 




    
    Latin Americagross profit decreased in the second quarter of 2007, as increases in
compensation expense, driven by higher billable personnel to meet the growth of our
business, primarily in Brazil, more than offset revenue growth in the region.
    
    Corporate/Otherconsists primarily of rent expense and other facilities related charges,
which increased in the second 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 (Expense) Income, net.
 Income Tax Expense .
 Net Loss.
 Six Months ended June 30, 2007 Compared to Six Months ended June 30, 2006
 Revenue.
 33




---



##### 



Six Months EndedJune 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    721,187
    
    
    $
    672,197
    
    
    $
    48,990
    
    
    
    7.3
    %Commercial Services
    
    
    270,255
    
    
    
    276,430
    
    
    
    (6,175
    )
    
    
    (2.2
    %)Financial Services
    
    
    142,966
    
    
    
    222,672
    
    
    
    (79,706
    )
    
    
    (35.8
    %)EMEA
    
    
    385,793
    
    
    
    334,607
    
    
    
    51,186
    
    
    
    15.3
    %Asia Pacific
    
    
    173,080
    
    
    
    180,062
    
    
    
    (6,982
    )
    
    
    (3.9
    %)Latin America
    
    
    45,547
    
    
    
    37,881
    
    
    
    7,666
    
    
    
    20.2
    %Corporate/Other
    
    
    2,770
    
    
    
    2,575
    
    
    
    195
    
    
    
    n/mTotal
    
    $
    1,741,598
    
    
    $
    1,726,424
    
    
    $
    15,174
    
    
    
    0.9
    %
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    7.3
    %
    
    
    7.3
    %Commercial Services
    
    
    0.0
    %
    
    
    (2.2
    %)
    
    
    (2.2
    %)Financial Services
    
    
    0.0
    %
    
    
    (35.8
    %)
    
    
    (35.8
    %)EMEA
    
    
    8.7
    %
    
    
    6.6
    %
    
    
    15.3
    %Asia Pacific
    
    
    (0.1
    %)
    
    
    (3.8
    %)
    
    
    (3.9
    %)Latin America
    
    
    6.1
    %
    
    
    14.1
    %
    
    
    20.2
    %Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    1.8
    %
    
    
    (0.9
    %)
    
    
    0.9
    %
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the six months ended June 30, 2007, led by
significant revenue growth in our SLED, Emerging Markets and Civilian sectors, primarily due
to increased activity at both new and existing clients. Partially offsetting these
increases was a revenue decline in our Defense sector, due to the winding down of several
large contracts during 2007.
    
    Commercial Servicesrevenue decreased during the six months ended June 30, 2007,
primarily due to reduced customer demand for our services within the telecommunications and
high technology industries. Revenue also declined in our Life Sciences sector due to the
completion of a significant long-term client project, while revenue in our Manufacturing,
Energy and Consumer Markets sector increased due to greater demand for the solutions
provided by our professionals who service these sectors.
    
    Financial Servicesrevenue decreased during the six months ended June 30, 2007, due to
significant revenue declines in most of its business sectors. Revenue decreases were
attributable to several factors, including the winding down of a large client engagement
during 2007, the loss of senior staff in certain of our higher rate business sectors and
difficulties in securing long-term client commitments, due in part to client concerns and
perceptions regarding our financial position.
    
    EMEArevenue increased during the six months ended June 30, 2007, primarily as a result
of the favorable impact of the strengthening of foreign currencies (primarily the Euro)
against the U.S. dollar and significant revenue increases in the United Kingdom, Switzerland
and France, partially offset by revenue declines in Germany and Spain. Revenue growth in the
United Kingdom was driven by our continued expansion in that market, while Switzerland and
France revenue growth were attributable to increased demand for consulting services in those
local markets. Revenue in Germany declined due to prior year
 34




---



##### 



restructuring efforts,
resulting in continued reductions in billable personnel while increasing focus on delivering
more profitable engagements. Revenue declined in Spain due to a declining market share
resulting in a reduced volume of engagement hours and lower utilization.
    
    Asia Pacificrevenue decreased during the six months ended June 30, 2007, primarily due
to a decline in revenue recognized in Australia at a significant client engagement in the
telecommunications industry and a revenue decline in Korea due to the
completion of several large contracts, partially offset by revenue growth in China and Japan.
Revenue growth in China resulted from an increased operational focus, while 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.
    
    Latin Americarevenue increased during the six months ended June 30, 2007, primarily as a
result of revenue growth in Brazil and Mexico and the strengthening of our relationships
with existing clients. Latin America revenue was also positively impacted in the first half
of 2007 by the strengthening of foreign currencies (primarily the Brazilian Real) against
the U.S. dollar.
    
    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 53.9% for the
six months ended June 30, 2007, compared to 49.4% for the six months ended June 30, 2006. We
experienced a net increase in professional compensation expense of $86.3 million, or 10.1%,
to $939.3 million for the six months ended June 30, 2007 from $852.9 million for the six
months ended June 30, 2006. The increase in professional compensation expense was primarily
due to increases in stock-based compensation expense for PSUs, RSUs, cash bonuses, as well
as merit-based annual salary increases to our billable staff.
    
    Other direct contract expenses decreased as a percentage of revenue to 22.5% for the six
months ended June 30, 2007 compared to 26.4% for the six months ended June 30, 2006. We
experienced a net decrease in other direct contract expenses of $64.3 million, or 14.1%, to
$392.1 million for the six months ended June 30, 2007 from $456.4 million for the six months
ended June 30, 2006. The decrease was driven primarily by higher other direct contract
expenses recorded in the first quarter of 2006 related to the settlement of the HT Contract.
In addition, the decline was driven by reduced subcontractor expenses as a result of
increased use of internal resources.
    
    Other costs of service as a percentage of revenue increased to 8.0% for the six months
ended June 30, 2007 from 7.1% for the six months ended June 30, 2006. We experienced a net
increase in other costs of service of $17.5 million, or 14.3%, to $139.2 million for the six
months ended June 30, 2007 from $121.8 million for the six months ended June 30, 2006. The
increase was primarily due to increased salaries and related expenses for the redeployment
of existing employees to practice support roles.
    
    During the six months ended June 30, 2007 we recorded, within the Corporate/Other
operating segment, a restructuring credit of $3.6 million related to lease, facilities and
other exit activities, compared with a $5.3 million charge during the six months ended June
30, 2006. These charges related primarily to the fair value of future lease obligations
associated with office space, which we will no longer be using, primarily within the EMEA
and North America regions. The restructuring credit for the six months ended June 30, 2007
represents a net reduction of accruals, primarily attributable to the change in sublease
income assumptions associated with vacated leased facilities.
 Gross Profit by Segment.
 35




---



##### 



Six Months EndedJune 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    146,222
    
    
    $
    137,795
    
    
    $
    8,427
    
    
    
    6.1
    %Commercial Services
    
    
    51,074
    
    
    
    23,434
    
    
    
    27,640
    
    
    
    117.9
    %Financial Services
    
    
    19,794
    
    
    
    81,394
    
    
    
    (61,600
    )
    
    
    (75.7
    %)EMEA
    
    
    82,147
    
    
    
    68,109
    
    
    
    14,038
    
    
    
    20.6
    %Asia Pacific
    
    
    36,951
    
    
    
    42,815
    
    
    
    (5,864
    )
    
    
    (13.7
    %)Latin America
    
    
    (2,211
    )
    
    
    4,196
    
    
    
    (6,407
    )
    
    
    n/mCorporate/Other
    
    
    (59,386
    )
    
    
    (67,708
    )
    
    
    8,322
    
    
    
    n/mTotal
    
    $
    274,591
    
    
    $
    290,035
    
    
    $
    (15,444
    )
    
    
    (5.3
    %)
 Six Months EndedJune 30,2007
    
    2006Gross Profit as a % of revenuePublic Services
    
    
    20.3
    %
    
    
    20.5
    %Commercial Services
    
    
    18.9
    %
    
    
    8.5
    %Financial Services
    
    
    13.8
    %
    
    
    36.6
    %EMEA
    
    
    21.3
    %
    
    
    20.4
    %Asia Pacific
    
    
    21.3
    %
    
    
    23.8
    %Latin America
    
    
    (4.9
    %)
    
    
    11.1
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    15.8
    %
    
    
    16.8
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit increased in the six months ended June 30, 2007, primarily
due to revenue increases in our SLED, Emerging Markets and Civilian sectors combined with
substantial improvement in gross profit in our SLED sector. This increase in revenue more
than offset increases in professional compensation expense related to stock-based
compensation expense for PSUs and RSUs, cash bonuses, as well as additional personnel to
meet the demand for our services.
    
    Commercial Servicesgross profit significantly increased in the six months ended June 30,
2007, primarily due to losses recorded in the first quarter of 2006 attributable to the
settlement of disputes with two significant telecommunications industry clients.
    
    Financial Servicesgross profit significantly decreased in the six months ended June 30,
2007, primarily due to significantly lower revenue in the first half of 2007 compared to the
first half of 2006 as well as a decline in the mix of higher margin engagements. Despite a
decrease in billable personnel, compensation expense declined only marginally due to
increases in stock-based compensation expense and bonuses.
    
    EMEAgross profit increased in the six months ended June 30, 2007, primarily due to
overall higher revenue in the EMEA region as well as improved profitability in Germany and
Switzerland as a result of higher utilization and reduced costs. Despite the increased
revenue, other direct contract expenses remained relatively flat, which is attributable to
reduced use of subcontractors and increased use of internal resources.
    
    Asia Pacificgross profit decreased in the six months ended June 30, 2007, due primarily
to lower revenue recognized in that region, estimated accruals to resolve issues related to
a previously completed client engagement, as well as a decrease in staff utilization in the
Companys business in Korea.
 36




---



##### 




    
    Latin Americagross profit decreased in the six months ended June 30, 2007, as increases
in compensation expense, driven by higher billable personnel to meet the growth of our
business, primarily in Brazil, more than offset revenue growth in the region.
    
    Corporate/Otherconsists primarily of rent expense and other facilities related charges,
which increased in the six months ended June 30, 2007 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 (Expense) Income, net.
 Income Tax Expense .
 Net Loss .
  37




---



##### 



Liquidity and Capital Resources
  Six
Months EndedJune 30,2006 to 20072007
    
    
    2006
    
    
    ChangeNet cash provided by (used in):Operating activities
    
    $
    (298,435
    )
    
    $
    (102,363
    )
    
    $
    (196,072
    )Investing activities
    
    
    (23,533
    )
    
    
    68,718
    
    
    
    (92,251
    )Financing activities
    
    
    280,089
    
    
    
    (5,886
    )
    
    
    285,975Effect of exchange rate changes on cash and cash equivalents
    
    
    1,126
    
    
    
    7,385
    
    
    
    (6,259
    )Net decrease in cash and cash equivalents
    
    $
    (40,753
    )
    
    $
    (32,146
    )
    
    $
    (8,607
    )
 Operating Activities.
 Investing Activities .
 Financing Activities .
 Additional Cash Flow Information
     38




---



##### 



Recently Issued Accounting Pronouncements
   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
  39




---



##### 



PART II. OTHER INFORMATION
 ITEM 1. LEGAL PROCEEDINGS
 Overview
  
    
    Claims and investigations arising from our continuing inability to timely file periodic
reports under the Exchange Act, and the restatement of our 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 our 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
  40




---



##### 



ITEM 1A. RISK FACTORS
  We will not file our quarterly report on Form 10-Q for the third quarter of 2007 on time and
we may be unable to file our annual report on Form 10-K for fiscal 2007 on time. 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.
  The price of our common stock may decline due to the number of shares that may be available
for sale in the future.
     ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 5. OTHER INFORMATION
 Election of Director
  Judy A. Ethell/Robert Glatz
  Amendment to Rights Agreement
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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 August 2, 2007, which is
incorporated herein by reference to Exhibit 3.1 from the Companys Form 8-K
filed with the SEC on August 8, 2007.3.3
    
    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
Computershare Trust Company, N.A. (formerly 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
    
    First Amendment to the Rights
Agreement between the Company and Computershare Trust Company, N.A. (formerly EquiServe Trust
Company, N.A.), which is incorporated herein by reference to Exhibit 99.1 from
the Companys Form 8-K filed with the SEC on September 6, 2002.4.4
    
    Second Amendment to the Rights
Agreement between the Company and Computershare Trust Company, N.A. (formerly EquiServe Trust
Company, N.A.).10.1
    
    Credit Agreement dated as of May 18, 2007, as amended and restated on June 1,
2007, among the Company, BearingPoint, LLC, the guarantors party thereto, the
lenders party thereto, UBS Securities LLC, Morgan Stanley Senior Funding, Inc.,
UBS AG, Stamford Branch and Wells Fargo Foothill, LLC., which is incorporated by
reference to Exhibit 10.6 from the Companys Form 10-K for the year ended
December 31, 2006 (the 2006 Form 10-K).10.2
    
    Security Agreement dated as of May 18, 2007, among the Company, BearingPoint,
LLC, the guarantors party thereto and UBS AG, Stamford Branch, as Collateral
Agent., which is incorporated by reference to Exhibit 10.7 from the 2006 Form
10-K.10.3
    
    Form of Term Note under the Credit Agreement dated as of May 18, 2007, which is
incorporated by reference to Exhibit 10.8 from the 2006 Form 10-K.10.4
    
    Amendment No. 7 to Amended and Restated 401(k) Plan, effective as of May 1,
2007, which is incorporated by reference to Exhibit 10.33 from the 2006 Form
10-K.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
    
    Separation and Release of Claims Agreement, dated as of October 8, 2007, by and
between the Company and Robert Glatz.
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SIGNATURES
  BearingPoint, Inc.DATE: October 22, 2007
    By:
    /s/  Judy A. EthellJudy A. EthellChief Financial Officer