##### Table of Contents



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, 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 SEPTEMBER 30, 2007
 TABLE OF CONTENTS
 PagePART I-FINANCIAL INFORMATIONItem 1: Financial Statements (unaudited)
    
    
    3Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2006
    
    
    3Consolidated Condensed Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    4Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    6Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3: Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4: Controls and Procedures
    
    
    38PART IIOTHER INFORMATION
    
    
    39Item 1: Legal Proceedings
    
    
    39Item 1A: Risk Factors
    
    
    40Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3: Defaults Upon Senior Securities
    
    
    41Item 4: Submission of Matters to a Vote of Security Holders
    
    
    41Item 5: Other Information
    
    
    41Item 6: Exhibits
    
    
    42
  2




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##### Table of Contents



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 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue
    
    $
    861,897
    
    
    $
    843,248
    
    
    $
    2,603,495
    
    
    $
    2,569,672Costs of service:Professional compensation
    
    
    438,935
    
    
    
    411,130
    
    
    
    1,378,224
    
    
    
    1,264,072Other direct contract expenses
    
    
    204,717
    
    
    
    214,282
    
    
    
    596,785
    
    
    
    670,685Lease and facilities restructuring charges
    
    
    3,866
    
    
    
    961
    
    
    
    308
    
    
    
    6,249Other costs of service
    
    
    81,759
    
    
    
    57,906
    
    
    
    220,967
    
    
    
    179,662Total costs of service
    
    
    729,277
    
    
    
    684,279
    
    
    
    2,196,284
    
    
    
    2,120,668Gross profit
    
    
    132,620
    
    
    
    158,969
    
    
    
    407,211
    
    
    
    449,004Amortization of purchased intangible assets
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    1,545Selling, general and administrative expenses
    
    
    160,324
    
    
    
    173,323
    
    
    
    512,275
    
    
    
    538,620Operating loss
    
    
    (27,704
    )
    
    
    (14,869
    )
    
    
    (105,064
    )
    
    
    (91,161
    )Interest income
    
    
    3,087
    
    
    
    1,554
    
    
    
    7,475
    
    
    
    6,118Interest expense
    
    
    (17,532
    )
    
    
    (8,625
    )
    
    
    (44,198
    )
    
    
    (26,569
    )Insurance settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,000Other (expense) income, net
    
    
    (5,377
    )
    
    
    1,165
    
    
    
    (5,747
    )
    
    
    2,857Loss before taxes
    
    
    (47,526
    )
    
    
    (20,775
    )
    
    
    (147,534
    )
    
    
    (70,755
    )Income tax expense
    
    
    20,480
    
    
    
    8,858
    
    
    
    46,205
    
    
    
    34,444Net loss
    
    $
    (68,006
    )
    
    $
    (29,633
    )
    
    $
    (193,739
    )
    
    $
    (105,199
    )Loss per share  basic and diluted
    
    $
    (0.32
    )
    
    $
    (0.14
    )
    
    $
    (0.90
    )
    
    $
    (0.50
    )Weighted average shares  basic and diluted
    
    
    215,247,757
    
    
    
    212,195,647
    
    
    
    214,677,985
    
    
    
    211,934,766
  3




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##### Table of Contents



BEARINGPOINT, INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
 (unaudited)
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    428,131
    
    
    $
    389,571Restricted cash
    
    
    3,110
    
    
    
    3,097Accounts receivable, net of allowances of $4,305 at
September 30, 2007 and $5,927 at December 31, 2006
    
    
    350,452
    
    
    
    361,638Unbilled revenue
    
    
    415,383
    
    
    
    341,357Income tax receivable
    
    
    5,560
    
    
    
    1,414Deferred income taxes
    
    
    7,927
    
    
    
    7,621Prepaid expenses
    
    
    48,317
    
    
    
    33,677Other current assets
    
    
    35,193
    
    
    
    65,611Total current assets
    
    
    1,294,073
    
    
    
    1,203,986Property and equipment, net
    
    
    126,795
    
    
    
    146,392Goodwill
    
    
    486,914
    
    
    
    463,446Deferred income taxes, less current portion
    
    
    52,661
    
    
    
    41,663Other assets
    
    
    116,010
    
    
    
    83,753Total assets
    
    $
    2,076,453
    
    
    $
    1,939,240LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of notes payable
    
    $
    5,271
    
    
    $
    360Accounts payable
    
    
    217,842
    
    
    
    295,109Accrued payroll and employee benefits
    
    
    369,616
    
    
    
    344,715Deferred revenue
    
    
    114,305
    
    
    
    131,313Income tax payable
    
    
    48,652
    
    
    
    33,324Current portion of accrued lease and facilities charges
    
    
    14,167
    
    
    
    17,126Deferred income taxes
    
    
    32,875
    
    
    
    20,109Accrued legal settlements
    
    
    6,396
    
    
    
    59,718Other current liabilities
    
    
    98,883
    
    
    
    135,837Total current liabilities
    
    
    908,007
    
    
    
    1,037,611Notes payable, less current portion
    
    
    970,558
    
    
    
    671,490Accrued employee benefits
    
    
    131,696
    
    
    
    116,087Accrued lease and facilities charges, less current portion
    
    
    40,616
    
    
    
    49,792Deferred income taxes, less current portion
    
    
    9,683
    
    
    
    7,984Income tax reserve
    
    
    236,142
    
    
    
    108,499Other liabilities
    
    
    142,258
    
    
    
    125,078Total liabilities
    
    
    2,438,960
    
    
    
    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, 206,017,723 shares issued and 202,205,473 shares
outstanding on September 30, 2007 and 205,406,249 shares
issued and 201,593,999 shares outstanding on
December 31, 2006
    
    
    2,051
    
    
    
    2,044Additional paid-in capital
    
    
    1,402,087
    
    
    
    1,315,190Accumulated deficit
    
    
    (2,011,594
    )
    
    
    (1,697,639
    )Notes receivable from stockholders
    
    
    (7,465
    )
    
    
    (7,466
    )Accumulated other comprehensive income
    
    
    288,141
    
    
    
    246,297Treasury stock, at cost (3,812,250 shares)
    
    
    (35,727
    )
    
    
    (35,727
    )Total stockholders deficit
    
    
    (362,507
    )
    
    
    (177,301
    )Total liabilities and stockholders deficit
    
    $
    2,076,453
    
    
    $
    1,939,240
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##### Table of Contents



BEARINGPOINT, INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months EndedSeptember 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (193,739
    )
    
    $
    (105,199
    )Adjustments to reconcile net loss to net cash used in
operating activities:Deferred income taxes
    
    
    3,525
    
    
    
    3,999Allowance (benefit) for doubtful accounts
    
    
    1,056
    
    
    
    (2,414
    )Stock-based compensation
    
    
    76,516
    
    
    
    33,944Depreciation and amortization of property and equipment
    
    
    48,307
    
    
    
    52,445Amortization of purchased intangible assets
    
    
    
    
    
    
    1,545Lease and facilities restructuring charges
    
    
    309
    
    
    
    6,249Loss on disposal and impairment of assets
    
    
    5,685
    
    
    
    3,822Amortization of debt issuance costs and debt accretion
    
    
    11,428
    
    
    
    6,420Other
    
    
    9,148
    
    
    
    (4,092
    )Changes in assets and liabilities:Accounts receivable
    
    
    21,066
    
    
    
    72,738Unbilled revenue
    
    
    (67,035
    )
    
    
    (41,087
    )Income tax receivable, prepaid expenses and other
current assets
    
    
    13,953
    
    
    
    (39,406
    )Other assets
    
    
    (20,610
    )
    
    
    (3,674
    )Accounts payable
    
    
    (79,544
    )
    
    
    (46,883
    )Accrued legal settlements and other current liabilities
    
    
    (63,602
    )
    
    
    (12,265
    )Accrued payroll and employee benefits
    
    
    13,424
    
    
    
    (414
    )Deferred revenue
    
    
    (19,137
    )
    
    
    (48,191
    )Income tax reserve and other liabilities
    
    
    17,299
    
    
    
    47,939Net cash used in operating activities
    
    
    (221,951
    )
    
    
    (74,524
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (31,834
    )
    
    
    (30,259
    )(Increase) decrease in restricted cash
    
    
    (14
    )
    
    
    118,058Net cash (used in) provided by investing activities
    
    
    (31,848
    )
    
    
    87,799Cash flows from financing activities:Net proceeds from issuance of notes payable
    
    
    284,016
    
    
    
    Repayments of notes payable
    
    
    (1,860
    )
    
    
    (6,506
    )Increase in book overdrafts
    
    
    
    
    
    
    (810
    )Net cash provided by (used in) financing activities
    
    
    282,156
    
    
    
    (7,316
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    10,203
    
    
    
    7,600Net increase in cash and cash equivalents
    
    
    38,560
    
    
    
    13,559Cash and cash equivalents  beginning of period
    
    
    389,571
    
    
    
    255,340Cash and cash equivalents  end of period
    
    $
    428,131
    
    
    $
    268,899
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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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock options
    
    $
    1,877
    
    
    $
    5,425
    
    
    $
    6,510
    
    
    $
    18,177RSUs
    
    
    4,675
    
    
    
    5,394
    
    
    
    15,641
    
    
    
    10,919PSUs
    
    
    21,686
    
    
    
    
    
    
    
    50,489
    
    
    
    ESPP and BE an Owner
    
    
    1,178
    
    
    
    1,610
    
    
    
    3,533
    
    
    
    4,848Restricted stock awards
    
    
    
    
    
    
    
    
    
    
    343
    
    
    
    Total
    
    $
    29,416
    
    
    $
    12,429
    
    
    $
    76,516
    
    
    $
    33,944
  6




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Restricted Stock Units
  WeightedAverageGrantDate FairNumber of RSUs
    
    ValueOutstanding at December 31, 2006 (1)
    
    
    20,416,520
    
    
    $
    7.93Granted
    
    
    1,652,525
    
    
    
    7.83Forfeited
    
    
    (786,073
    )
    
    
    8.18Outstanding at September 30, 2007 (1)
    
    
    21,282,972
    
    
    $
    7.91
 
 (1)
    
    Approximately 140,934 RSUs (net of forfeitures) and 123,223
RSUs (net of forfeitures) have been excluded from the December 31, 2006 and September 30, 2007 outstanding balances, respectively, because they were 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
    
    
    
    12.46Forfeited
    
    
    (1,114,955
    )
    
    
    12.80Outstanding at September 30, 2007 (1)
    
    
    21,266,177
    
    
    $
    12.44
 
 (1)
    
    Excludes approximately 40,921 PSUs awarded to recipients in China where local laws require a
cash settlement.  7




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 (i)
    
    the Company must first achieve a compounded average annual growth target in
consolidated business unit contribution; and(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.
 ESPP and BE an Owner
  8




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 3. Notes Payable
  September 30,
    
    
    December 31,2007
    
    
    2006Current portion:Term Loans under the 2007 Credit Facility
    
    $
    3,000
    
    
    $
    Japan Mitsubishi Loan Facility
    
    
    871
    
    
    
    Other
    
    
    1,400
    
    
    
    360Total current portion
    
    
    5,271
    
    
    
    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
$15,488 and $18,510, respectively)
    
    
    24,512
    
    
    
    21,490Term Loans under the 2007 Credit Facility
    
    
    295,500
    
    
    
    Other
    
    
    546
    
    
    
    Total long-term portion
    
    
    970,558
    
    
    
    671,490Total notes payable
    
    $
    975,829
    
    
    $
    671,850
  2007 Credit Facility
  9




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##### Table of Contents



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, 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).
    
    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.
    10




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Japanese Credit Facility
  April 2005 and July 2005 Convertible Debentures
  Note 4. Loss per Share
  Note 5. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (68,006
    )
    
    $
    (29,633
    )
    
    $
    (193,739
    )
    
    $
    (105,199
    )Foreign currency translation adjustment
    
    
    31,070
    
    
    
    (6,555
    )
    
    
    41,844
    
    
    
    13,454Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,329Comprehensive loss
    
    $
    (36,936
    )
    
    $
    (36,188
    )
    
    $
    (151,895
    )
    
    $
    (86,416
    )
 11




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 6. Segment Reporting
  Three Months Ended September 30,2007
    
    
    2006Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    362,893
    
    
    $
    64,593
    
    
    $
    333,825
    
    
    $
    61,565Commercial Services
    
    
    131,383
    
    
    
    21,135
    
    
    
    133,253
    
    
    
    20,572Financial Services
    
    
    66,412
    
    
    
    8,207
    
    
    
    97,161
    
    
    
    26,184EMEA
    
    
    184,318
    
    
    
    24,132
    
    
    
    167,089
    
    
    
    28,420Asia Pacific
    
    
    94,081
    
    
    
    20,575
    
    
    
    91,609
    
    
    
    20,841Latin America
    
    
    22,240
    
    
    
    (3,338
    )
    
    
    18,758
    
    
    
    (125
    )Corporate/Other
    
    
    570
    
    
    
    (163,008
    )
    
    
    1,553
    
    
    
    (172,326
    )Total
    
    $
    861,897
    
    
    $
    (27,704
    )
    
    $
    843,248
    
    
    $
    (14,869
    )
 Nine Months Ended September 30,2007
    
    
    2006Operating
    
    
    
    
    
    
    OperatingRevenue
    
    
    Income (Loss)
    
    
    Revenue
    
    
    Income (Loss)Public Services
    
    $
    1,084,080
    
    
    $
    197,335
    
    
    $
    1,006,022
    
    
    $
    184,370Commerical Services
    
    
    401,638
    
    
    
    61,149
    
    
    
    409,683
    
    
    
    32,433Financial Services
    
    
    209,378
    
    
    
    18,641
    
    
    
    319,833
    
    
    
    95,919EMEA
    
    
    570,111
    
    
    
    92,852
    
    
    
    501,696
    
    
    
    80,754Asia Pacific
    
    
    267,161
    
    
    
    51,877
    
    
    
    271,671
    
    
    
    57,054Latin America
    
    
    67,787
    
    
    
    (8,614
    )
    
    
    56,639
    
    
    
    1,984Corporate/Other
    
    
    3,340
    
    
    
    (518,304
    )
    
    
    4,128
    
    
    
    (543,675
    )Total
    
    $
    2,603,495
    
    
    $
    (105,064
    )
    
    $
    2,569,672
    
    
    $
    (91,161
    )
 12




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 7. Goodwill
  ForeignBalance
    
    
    
    
    
    
    Currency
    
    
    BalanceDecember 31,
    
    
    
    
    
    
    Translation
    
    
    September 30,2006
    
    
    Reductions
    
    
    Adjustment
    
    
    2007Public Services
    
    $
    23,581
    
    
    $
    
    
    
    $
    
    
    
    $
    23,581Financial Services
    
    
    9,210
    
    
    
    
    
    
    
    
    
    
    
    9,210EMEA
    
    
    359,133
    
    
    
    (7,495
    )(1)
    
    
    26,402
    
    
    
    378,040Asia Pacific
    
    
    70,402
    
    
    
    
    
    
    
    4,489
    
    
    
    74,891Latin America
    
    
    918
    
    
    
    
    
    
    
    72
    
    
    
    990Corporate/Other
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202Total
    
    $
    463,446
    
    
    $
    (7,495
    )
    
    $
    30,963
    
    
    $
    486,914
 
 (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
   13




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BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
  TotalBalance at December 31, 2006
    
    $
    66,918Adjustment to the provision, net
    
    
    308Utilization
    
    
    (13,757
    )Other (1)
    
    
    1,314Balance at September 30, 2007
    
    $
    54,783
 
 (1)
    
    Other changes in the restructuring accrual consist primarily of foreign currency translation
adjustments. 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
 14




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BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Tellabs
 2005 Shareholders Derivative Demand
  SEC Investigation
   15




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##### Table of Contents



BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Government Contracting Matters
  Other Matters
 Michael Donahue
  Softline Acquisition Obligation
   16




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BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Other Commitments
    17




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BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
 Note 10. Pension and Postretirement Benefits
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Components of net periodic pension cost:Service cost
    
    $
    1,589
    
    
    $
    1,792
    
    
    $
    4,767
    
    
    $
    5,376Interest cost
    
    
    1,165
    
    
    
    1,107
    
    
    
    3,495
    
    
    
    3,321Expected return on plan assets
    
    
    (243
    )
    
    
    (269
    )
    
    
    (729
    )
    
    
    (807
    )Amortization of loss
    
    
    95
    
    
    
    256
    
    
    
    285
    
    
    
    768Amortization of prior service cost
    
    
    163
    
    
    
    159
    
    
    
    489
    
    
    
    477Curtailment
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    90Settlement
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (273
    )Net periodic pension cost
    
    $
    2,769
    
    
    $
    2,984
    
    
    $
    8,307
    
    
    $
    8,952Components of net periodic postretirement medical cost:Service cost
    
    $
    618
    
    
    $
    480
    
    
    $
    1,854
    
    
    $
    1,440Interest cost
    
    
    217
    
    
    
    184
    
    
    
    651
    
    
    
    552Amortization of losses
    
    
    13
    
    
    
    39
    
    
    
    39
    
    
    
    117Amortization of prior service cost
    
    
    119
    
    
    
    120
    
    
    
    357
    
    
    
    360Net periodic postretirement medical cost
    
    $
    967
    
    
    $
    823
    
    
    $
    2,901
    
    
    $
    2,469
 Note 11. Income Taxes
     18




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BEARINGPOINT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS  (continued)
      Note 12. Recently Issued Accounting Pronouncements
   19




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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 September 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.
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
    
    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.
  Overview
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Economic and Industry Factors
   Revenue and Income Drivers
     Key Performance Indicators
  22




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
    
    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 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.
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Three and Nine Months Ended September 30, 2007 Highlights
  
    
    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. Increases in new bookings in our Public Services
business unit were more than offset by significant year-over-year declines in new contract
bookings in our Commercial Services and Financial Services business units. Our geographic
business units also experienced modest year-over-year new contract booking decreases which,
collectively, contributed to the decrease in new contract bookings.
    
    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. Increases in new contract bookings in our EMEA
and Asia Pacific business units were more than offset by significant declines in new
contract bookings in our other business units. Year-over-year decreases in Public Services
bookings for the nine months ended September 30, 2007 were substantially attributable to the
signing of several exceptionally large bookings in our State, Local and Education (SLED)
sector in early 2006. While we are beginning to see improvements in
Commercial Services, our telecommunications practice continues to struggle to position
itself in a contracting marketplace. Furthermore, our Financial Services business unit has
been unable to rapidly rebound from perceptions raised late last year surrounding our
financial stability. Given the current uncertainties and continuing loss write-downs in the
commercial and investment banking sector, it is unlikely that new contract bookings levels
within Financial Services will return to historical levels before mid-2008 at the earliest.
    
    Our revenue for the three months ended September 30, 2007 was $861.9 million, an increase
of $18.6 million, or 2.2%, over revenue for the three months ended September 30, 2006 of
$843.2 million. Revenue increases in Public Services, EMEA, Latin America and Asia Pacific
exceeded revenue declines in Financial Services and Commercial Services. Our revenue for the
nine months ended September 30, 2007 was $2,603.5 million, an increase of $33.8 million, or
1.3%, over revenue for the nine months ended September 30, 2006 of $2,569.7 million. Revenue
increases in Public Services, EMEA and Latin America exceeded revenue declines in Financial
Services, Commercial Services and Asia Pacific. In analyzing year-over-year revenue growth
for the nine months ended September 30, 2007, consideration must also be given to the effect
in fiscal 2006 of two previously disclosed settlements within the telecommunications
industry and the recognition of certain deferred revenue, the net combined effect of which
negatively impacted our revenue for the first nine months of fiscal 2006 by approximately
$27 million.
    
    Our gross profit for the three months ended September 30, 2007 was $132.6 million, a
decrease of $26.3 million, or 16.6%, from gross profit for the three months ended September
30, 2006 of $159.0 million. Gross profit as a percentage of revenue decreased to 15.4%
during the three months ended September 30, 2007 from 18.9% during the three months ended
September
30, 2006. This decline was primarily the result of relatively comparable increases in
professional compensation expense associated with salaries and benefits and with stockbased
compensation, the latter being primarily related to our February 2007 grant of PSUs. Our gross
profit for the nine months ended September 30, 2007 was $407.2 million, a decrease of $41.8
million, or 9.3%, from gross profit of $449.0 million for the nine months ended September 30,
2006. Gross profit as a percentage of revenue decreased to 15.6% during the nine months ended
September 30, 2007 from 17.5% during the nine months ended September 30, 2006. Revenue
improvements and significant decreases in other direct contract expenses were outstripped by
increases in professional compensation expense, with the most significant portion of these
increases attributable to expenses associated with salaries and benefits.
    
    We incurred SG&A expenses of $160.3 million in the third quarter of 2007, representing a
decrease of $13.0 million, or 7.5%, from SG&A expenses of $173.3 million in the third
quarter of 2006. We incurred SG&A expenses of $512.3 million in the nine months ended
September 30, 2007, representing a decrease of $26.3 million, or 4.9%, from SG&A expenses of
$538.6 million in the nine months ended September 30, 2006. The decreases in SG&A expense in
both periods were primarily due to reduced costs directly related to the closing of our
financial statements and subcontracted labor, as well as savings from the reduction in the
size of our sales force. Partially offsetting these savings was increased compensation
expense for additional
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##### Table of Contents



SG&A personnel, stock-based compensation expense related to our
February 2007 grant of PSUs, RSUs, and bonuses.
    
    During the three months ended September 30, 2007, we incurred external costs of
approximately $14.0 million related to the preparation of our financial statements, our
auditors review of our financial statements and the testing of internal controls, compared
with approximately $32.1 million for the three months ended September 30, 2006. During the
nine months ended September 30, 2007, these external costs were approximately $67.4 million,
compared with approximately $99.6 million for the nine months ended September 30, 2006. We
currently expect our costs for the remainder of 2007 related to these efforts to be
approximately $12.8 million, compared with $28.6 million incurred in the fourth quarter of
2006.
    
    During the third quarter of 2007, we realized a net loss of $68.0 million, or a loss of
$0.32 per share, representing an increase of $38.4 million over a net loss of $29.6 million,
or a loss of $0.14 per share, during the third quarter of 2006. This change in net loss was
primarily attributable to:
 
    
    a decrease in gross profit of $26.3 million;
    
    an increase in interest expense of $8.9 million in the third quarter of 2007,
due to interest attributable to our 2007 Credit Facility; and
    
    an increase in income tax expense of $11.6 million in the third quarter of
2007.
  
    
    During the nine months ended September 30, 2007, we realized a net loss of $193.7
million, or a loss of $0.90 per share, representing an increase of $88.5 million over a net
loss of $105.2 million, or a loss of $0.50 per share, during the nine months ended September
30, 2006. This change in net loss was primarily attributable to:
 
    
    a decrease in gross profit of $41.8 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. (HT);
    
    an increase in interest expense of $17.6 million in the nine months ended
September 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; and
    
    an increase in income tax expense of $11.8 million in the nine months ended
September 30, 2007.
  
    
    Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes. 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 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 majority of the impact will be recorded
as an adjustment to income tax expense in the period of settlement.
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##### Table of Contents




    
    Utilization for the three months ended September 30, 2007 was 78.5%, an increase of 130
basis points over 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 September 30, 2007, our DSOs stood at 90 days, representing a decrease of 6 days,
or 6.3%, from our DSOs at September 30, 2006.
    
    Free cash flow for the three months ended September 30, 2007 and 2006 was $67.2 million
and $19.8 million, respectively. Net cash provided from operating activities in the three
months ended September 30, 2007 and 2006 was $76.5 million and $27.8 million, respectively.
Purchases of property and equipment in the three months ended September 30, 2007 and 2006
were $9.2 million and $8.1 million, respectively. The year-over-year change in free cash flow for the
three-month period ended September 30, 2007 is primarily attributable to increases in
accrued liabilities primarily associated with accounts payable and an increase
in accrued taxes greater than cash taxes paid.
    
    Free cash flow for the nine months ended September 30, 2007 and 2006 was ($253.8) million
and ($104.8) million, respectively. Net cash used in operating activities in the nine months
ended September 30, 2007 and 2006 was ($222.0) million and ($74.5) million, respectively.
Purchases of property and equipment in the nine months ended September 30, 2007 and 2006
were $31.8 million and $30.3 million, respectively. The decrease in free cash flow for the
nine-month period was primarily attributable to significant increases to our combined
accounts receivable and unbilled revenue, which resulted in an increase in DSOs since
December 31, 2006, significant reductions in our accounts payable due to timing of vendor
payments, settlement of certain legal matters, and to a lesser extent, an increase in net
loss, net of non-cash items.
    
    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, due in part to
the redeployment of existing employees to practice support roles.
    
    Our voluntary, annualized attrition rate for the third quarter of 2007 was 26.6%,
compared with 28.3% for the third quarter of 2006. The highly competitive industry in which
we operate and our financial position continues to make 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.
    
    We have initiated our plans to deliver shares to our employees under our various employee
share plans over the coming quarters. For additional information see Item 1A, Risk
Factors, of this Quarterly Report.
 Principal Business Priorities and Strategies for 2007 and Beyond
   
    
    Enhance Shareholder Value.
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##### Table of Contents




    
    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.
    
    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.



    Our EMEA segment will continue to be a key part of our
strategy. After extensive analysis and discussion, we have concluded
that over the long term, we can create more value for our
shareholders, our customers and our people by further integrating our
businesses and operating model, not distancing them. Consequently, we
have decided to continue to own and operate our EMEA segment as part
of our consolidated business.


|
|
|


    
    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 Quarterly Report, we are current and up to date in our SEC periodic
reports.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 possible that certain material weaknesses disclosed in our 2006 Form 10-K,
including those with respect to processes and controls related to facilities management, property
and equipment, costs associated with cross-border travelers, and income taxes can be remediated
in 2007. We do not expect material weaknesses related to revenue recognition and accounts payable
disclosures to be completely 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. 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.We have seen some improvement in our voluntary employee attrition
rate during the third quarter of 2007. 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 continue to improve our attrition rates.
    
    Increase Client Awareness, Confidence and Satisfaction.To date in 2007, we were named as a
leading provider 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.



    
    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 SG&A 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.


27



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##### Table of Contents



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
initiated by our Office of the Chief Executive Officer. At September 30, 2007, our
DSOs stood at 90 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 exceed our cash collections for the fourth quarter of fiscal 2006 when our DSOs
stood at 82 days.
    
    In 2008, we expect to continue to improve our quarterly DSO balances and increase our operational focus on improving operating margins.
We will begin to consider exiting particular sectors and markets
where
we do not think we can achieve and sustain satisfactory operating margins.
 Segments
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Three Months ended September 30, 2007 Compared to Three Months ended September 30, 2006
 Revenue.
 Three Months EndedSeptember 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    362,893
    
    
    $
    333,825
    
    
    $
    29,068
    
    
    
    8.7
    %Commercial Services
    
    
    131,383
    
    
    
    133,253
    
    
    
    (1,870
    )
    
    
    (1.4
    %)Financial Services
    
    
    66,412
    
    
    
    97,161
    
    
    
    (30,749
    )
    
    
    (31.6
    %)EMEA
    
    
    184,318
    
    
    
    167,089
    
    
    
    17,229
    
    
    
    10.3
    %Asia Pacific
    
    
    94,081
    
    
    
    91,609
    
    
    
    2,472
    
    
    
    2.7
    %Latin America
    
    
    22,240
    
    
    
    18,758
    
    
    
    3,482
    
    
    
    18.6
    %Corporate/Other
    
    
    570
    
    
    
    1,553
    
    
    
    (983
    )
    
    
    n/mTotal
    
    $
    861,897
    
    
    $
    843,248
    
    
    $
    18,649
    
    
    
    2.2
    %
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    8.7
    %
    
    
    8.7
    %Commercial Services
    
    
    0.0
    %
    
    
    (1.4
    %)
    
    
    (1.4
    %)Financial Services
    
    
    0.0
    %
    
    
    (31.6
    %)
    
    
    (31.6
    %)EMEA
    
    
    7.9
    %
    
    
    2.4
    %
    
    
    10.3
    %Asia Pacific
    
    
    2.0
    %
    
    
    0.7
    %
    
    
    2.7
    %Latin America
    
    
    11.0
    %
    
    
    7.6
    %
    
    
    18.6
    %Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    2.0
    %
    
    
    0.2
    %
    
    
    2.2
    %
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the third quarter of 2007, led by significant
revenue growth in our Emerging Markets, SLED and Civilian sectors. Partially offsetting
these increases was a revenue decline in our Healthcare sector, which, based on improved new
contract bookings for the third fiscal quarter of 2007, appears to be a function of ordinary
contracting and booking cycles.
    
    Commercial Servicesrevenue slightly decreased during the third quarter of 2007,
primarily due to reduced customer demand for our services within the high technology and
telecommunications industries. This decrease was partially offset by increases in the energy
and life sciences industries.
    
    Financial Servicesrevenue decreased during the third quarter of 2007, due to significant
revenue declines across all business sectors. Revenue decreases were attributable to several
factors, including the winding down of the business units largest client engagement during
2007, the continuing effects of losses of senior staff in certain of our higher rate
business sectors and early termination of some engagements by banking
sector clients in response to recently reported losses related to asset write-downs.
 29




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
    
    EMEArevenue increased during the third quarter of 2007, primarily as a result of the
favorable impact of the strengthening of foreign currencies (primarily the Euro) against the
U.S. dollar but also due to significant revenue increases in Switzerland and Russia. These
increases were partially offset by revenue declines in the Netherlands and United Kingdom.
    
    Asia Pacificrevenue increased during the third quarter of 2007, primarily as a result of
the favorable impact of the strengthening of foreign currencies against the U.S. dollar.
Significant revenue growth was achieved in Japan resulting from increased demand for our
services related to system implementation contracts and projects involving compliance with
Japans Financial Instruments and Exchange Law, however, this growth was substantially
offset by revenue declines in other countries.
    
    Latin Americarevenue increased during the third quarter of 2007, as a result of revenue
growth derived from the strengthening of our relationships with existing clients in Mexico
and Brazil, as well as the favorable impact of 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 50.9% for the
third quarter of 2007, compared to 48.8% for the third quarter of 2006. We experienced a net
increase in professional compensation expense of $27.8 million, or 6.8%, to $438.9 million
for the third quarter of 2007 from $411.1 million for the third quarter of 2006. The
increase in professional compensation expense over the third quarter of 2006 was primarily
due to stock-based compensation expense relating to PSUs and merit-based annual salary
increases to our billable staff.
    
    Other direct contract expenses decreased as a percentage of revenue to 23.8% for the
third quarter of 2007, compared to 25.4% for the third quarter of 2006. We experienced a net
decrease in other direct contract expenses of $9.6 million, or 4.5%, to $204.7 million for
the third quarter of 2007 from $214.3 million for the third 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 9.5% for the third quarter
of 2007 from 6.9% for the third quarter of 2006. We experienced a net increase in other
costs of service of $23.9 million, or 41.2%, to $81.8 million for the third quarter of 2007
from $57.9 million for the third quarter of 2006. The increase was primarily due to
increases in the number of non-billable employees, higher recruiting costs and a software
impairment charge recorded within EMEA. The increase in the number of
non-billable employees was due in part to the redeployment of existing employees from client-facing roles to practice support roles, which results in related
salaries and expenses now being reflected in other costs of service rather than professional expense.
    
    During the third quarter of 2007 we recorded, within the Corporate/Other operating
segment, a restructuring charge of $3.9 million related to lease, facilities and other exit
activities, compared with a $1.0 million charge during the third 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.
 30




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Gross Profit by Segment.
 Three Months EndedSeptember 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    73,283
    
    
    $
    69,190
    
    
    $
    4,093
    
    
    
    5.9
    %Commercial Services
    
    
    27,235
    
    
    
    26,735
    
    
    
    500
    
    
    
    1.9
    %Financial Services
    
    
    12,873
    
    
    
    32,403
    
    
    
    (19,530
    )
    
    
    (60.3
    %)EMEA
    
    
    31,044
    
    
    
    35,005
    
    
    
    (3,961
    )
    
    
    (11.3
    %)Asia Pacific
    
    
    24,064
    
    
    
    23,823
    
    
    
    241
    
    
    
    1.0
    %Latin America
    
    
    (1,916
    )
    
    
    1,071
    
    
    
    (2,987
    )
    
    
    n/mCorporate/Other
    
    
    (33,963
    )
    
    
    (29,258
    )
    
    
    (4,705
    )
    
    
    n/mTotal
    
    $
    132,620
    
    
    $
    158,969
    
    
    $
    (26,349
    )
    
    
    (16.6
    %)
 Three Months EndedSeptember 30,2007
    
    2006Gross Profit as a % of revenuePublic Services
    
    
    20.2
    %
    
    
    20.7
    %Commercial Services
    
    
    20.7
    %
    
    
    20.1
    %Financial Services
    
    
    19.4
    %
    
    
    33.3
    %EMEA
    
    
    16.8
    %
    
    
    20.9
    %Asia Pacific
    
    
    25.6
    %
    
    
    26.0
    %Latin America
    
    
    (8.6
    %)
    
    
    5.7
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    15.4
    %
    
    
    18.9
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit increased in the third quarter of 2007, primarily due to an
increase in revenue combined with a substantial improvement in gross profit in our SLED
sector. Gross profit improvement in the SLED sector was driven by both current quarter
revenue growth and the absence of significant amounts of other direct contract expenses
recorded in the third fiscal quarter of 2006 attributable to two completed contracts. This
increase was offset by increases in professional compensation expense related to increases in
stock-based compensation expense and, to a lesser extent, additional
personnel to meet the demand for our services.
    
    Commercial Servicesgross profit slightly increased in the third quarter of 2007, as
savings in other direct contract expenses due to the reduced use of subcontractors more than
offset lower revenue.
    
    Financial Servicesgross profit significantly decreased in the third quarter of 2007,
primarily due to significantly lower revenue in the third quarter of 2007 compared with the
third quarter of 2006. Despite a decrease in billable personnel, compensation expense
decreased at a slower pace due to an increase in stock-based compensation expense primarily
attributable to PSUs.
    
    EMEAgross profit decreased in the third quarter of 2007, primarily due to an increase in
professional compensation resulting from an increase in billable personnel, and to a lesser
extent, an increase in other costs of services largely attributable to an asset impairment
charge. This increase was partially offset by overall higher revenue in the EMEA region and
improved profitability in Germany.
 31




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##### Table of Contents




    
    Asia Pacificgross profit slightly increased in the third quarter of 2007, primarily due
to significant improvements in profitability and staff utilization in the Companys business
in Japan. Other direct contract expenses significantly decreased as a result of reduced use
of subcontractors and increased use of internal resources.
    
    Latin Americagross profit decreased in the third 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 third quarter of 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.
 Other (Expense) Income, net.
 Income Tax Expense .
 Net Loss.
 32




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Nine Months ended September 30, 2007 Compared to Nine Months ended September 30, 2006
 Revenue.
 Nine Months EndedSeptember 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeRevenuePublic Services
    
    $
    1,084,080
    
    
    $
    1,006,022
    
    
    $
    78,058
    
    
    
    7.8
    %Commercial Services
    
    
    401,638
    
    
    
    409,683
    
    
    
    (8,045
    )
    
    
    (2.0
    %)Financial Services
    
    
    209,378
    
    
    
    319,833
    
    
    
    (110,455
    )
    
    
    (34.5
    %)EMEA
    
    
    570,111
    
    
    
    501,696
    
    
    
    68,415
    
    
    
    13.6
    %Asia Pacific
    
    
    267,161
    
    
    
    271,671
    
    
    
    (4,510
    )
    
    
    (1.7
    %)Latin America
    
    
    67,787
    
    
    
    56,639
    
    
    
    11,148
    
    
    
    19.7
    %Corporate/Other
    
    
    3,340
    
    
    
    4,128
    
    
    
    (788
    )
    
    
    n/mTotal
    
    $
    2,603,495
    
    
    $
    2,569,672
    
    
    $
    33,823
    
    
    
    1.3
    %
 Impact of
    
    Revenue growthcurrency
    
    (decline), net offluctuations
    
    currency impact
    
    TotalRevenuePublic Services
    
    
    0.0
    %
    
    
    7.8
    %
    
    
    7.8
    %Commercial Services
    
    
    0.0
    %
    
    
    (2.0
    %)
    
    
    (2.0
    %)Financial Services
    
    
    0.0
    %
    
    
    (34.5
    %)
    
    
    (34.5
    %)EMEA
    
    
    8.4
    %
    
    
    5.2
    %
    
    
    13.6
    %Asia Pacific
    
    
    0.5
    %
    
    
    (2.2
    %)
    
    
    (1.7
    %)Latin America
    
    
    7.9
    %
    
    
    11.8
    %
    
    
    19.7
    %Corporate/Other
    
    
    n/m
    
    
    
    n/m
    
    
    
    n/mTotal
    
    
    1.9
    %
    
    
    (0.6
    %)
    
    
    1.3
    %
 
 n/m = not meaningful 
    
    Public Servicesrevenue increased during the nine months ended September 30, 2007, led by
significant revenue growth in our Emerging Markets, SLED and Civilian sectors. Partially
offsetting these increases were revenue declines in our Defense and Healthcare sectors, both
of which have since experienced positive new contract booking increases in the fiscal
quarter ended September 30, 2007.
    
    Commercial Servicesrevenue decreased during the nine months ended September 30, 2007,
primarily due to reduced customer demand for our services within the telecommunications and
high technology industries. These decreases were partially offset by increased revenue in
our Manufacturing, Energy and Consumer Markets sector due to greater demand for the
solutions provided by our professionals who service this sector.
    
    Financial Servicesrevenue decreased during the nine months ended September 30, 2007, due
to significant revenue declines in all of its business sectors. Revenue decreases were
attributable to several factors, including the winding down of the business units largest
client engagement during 2007, the continuing effects of losses 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 generated earlier this year
regarding our financial position.
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
    
    EMEArevenue increased during the nine months ended September 30, 2007, primarily as a
result of the favorable impact of the strengthening of foreign currencies (primarily the
Euro) against the U.S. dollar but also due to significant revenue increases in Switzerland,
Russia, the United Kingdom and France. These increases were partially offset by revenue
declines in Germany. Switzerland, Russia and France revenue growth were attributable to
increased demand for consulting services in those local markets, while revenue growth in the
United Kingdom was driven by our continued expansion in that market. Revenue in Germany
decreased due to prior year restructuring efforts, resulting in continued reductions in
billable personnel while increasing focus on delivering more profitable engagements.
    
    Asia Pacificrevenue decreased during the nine months ended September 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 Japan and China. 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, while
revenue growth in China resulted from an increased operational focus.
    
    Latin Americarevenue increased during the nine months ended September 30, 2007,
primarily as a result of revenue growth in Mexico and Brazil and the strengthening of our
relationships with existing clients. Latin America revenue was also positively impacted 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 52.9% for the
nine months ended September 30, 2007, compared to 49.2% for the nine months ended September
30, 2006. We experienced a net increase in professional compensation expense of $114.2
million, or 9.0%, to $1,378.2 million for the nine months ended September 30, 2007 over
$1,264.1 million for the nine months ended September 30, 2006. The increase in professional
compensation expense was primarily due to increases in stock-based compensation expense for
PSUs, RSUs, merit-based annual salary increases to our billable staff, as well as cash
bonuses.
    
    Other direct contract expenses decreased as a percentage of revenue to 22.9% for the nine
months ended September 30, 2007 compared to 26.1% for the nine months ended September 30,
2006. We experienced a net decrease in other direct contract expenses of $73.9 million, or
11.0%, to $596.8 million for the nine months ended September 30, 2007 from $670.7 million
for the nine months ended September 30, 2006. The decrease was driven primarily by reduced
subcontractor expenses as a result of increased use of internal resources. In addition, the
decline was driven by higher other direct contract expenses recorded in the first quarter of
2006 related to the settlement of the HT contract.
    
    Other costs of service as a percentage of revenue increased to 8.5% for the nine months
ended September 30, 2007 over 7.0% for the nine months ended September 30, 2006. We
experienced a net increase in other costs of service of $41.3 million, or 23.0%, to $221.0
million for the nine months ended September 30, 2007 over $179.7 million for the nine
months ended September 30, 2006. The increase was primarily due to increases in the
number of non-billable employees, higher recruiting costs and a software impairment charge
recorded within EMEA. The increase in the number of non-billable employees was due in part
to the redeployment of existing employees from client-facing roles to practice support roles, which results in related salaries and expenses now being reflected in other costs of service rather than professional expense.
    
    During the nine months ended September 30, 2007 we recorded, within the Corporate/Other
operating segment, a restructuring charge of $0.3 million related to lease, facilities and
other exit activities, compared with a $6.2 million charge during the nine months ended
September 30, 2006. These charges related primarily to the fair value of future lease
obligations associated with office space that we will no longer be using, primarily within
the EMEA and North America regions.
 34




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##### Table of Contents



Gross Profit by Segment.
 Nine Months EndedSeptember 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeGross ProfitPublic Services
    
    $
    219,505
    
    
    $
    206,985
    
    
    $
    12,520
    
    
    
    6.0
    %Commercial Services
    
    
    78,309
    
    
    
    50,169
    
    
    
    28,140
    
    
    
    56.1
    %Financial Services
    
    
    32,667
    
    
    
    113,797
    
    
    
    (81,130
    )
    
    
    (71.3
    %)EMEA
    
    
    113,191
    
    
    
    103,114
    
    
    
    10,077
    
    
    
    9.8
    %Asia Pacific
    
    
    61,015
    
    
    
    66,638
    
    
    
    (5,623
    )
    
    
    (8.4
    %)Latin America
    
    
    (4,127
    )
    
    
    5,267
    
    
    
    (9,394
    )
    
    
    n/mCorporate/Other
    
    
    (93,349
    )
    
    
    (96,966
    )
    
    
    3,617
    
    
    
    n/mTotal
    
    $
    407,211
    
    
    $
    449,004
    
    
    $
    (41,793
    )
    
    
    (9.3
    %)
 Nine Months EndedSeptember 30,2007
    
    2006Gross Profit as a % of revenuePublic Services
    
    
    20.2
    %
    
    
    20.6
    %Commercial Services
    
    
    19.5
    %
    
    
    12.2
    %Financial Services
    
    
    15.6
    %
    
    
    35.6
    %EMEA
    
    
    19.9
    %
    
    
    20.6
    %Asia Pacific
    
    
    22.8
    %
    
    
    24.5
    %Latin America
    
    
    (6.1
    %)
    
    
    9.3
    %Corporate/Other
    
    
    n/m
    
    
    
    n/mTotal
    
    
    15.6
    %
    
    
    17.5
    %
 
 n/m = not meaningful  
    
    Public Servicesgross profit increased in the nine months ended September 30, 2007,
primarily due to revenue increases in our Emerging Markets, SLED and Civilian sectors
combined with substantial improvement in gross profit in our SLED sector resulting from
significant reductions in other direct contract expenses recorded in fiscal 2006
attributable to two completed contracts. This increase in revenue more than offset increases
in professional compensation expense related primarily to costs associated with additional
personnel to meet the demand for our services and, to a lesser extent, additional
stock-based compensation expense attributable to PSUs and RSUs.
    
    Commercial Servicesgross profit significantly increased in the nine months ended
September 30, 2007. This increase was primarily due to the absence of 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 nine months ended
September 30, 2007, primarily due to significantly lower revenue in the first nine months of
2007 compared to the first nine months of 2006 as well as a decline in the mix of higher
margin engagements. Despite a decrease in billable personnel, compensation expense declined
at a slower pace due to increases in stock-based compensation expense.
    
    EMEAgross profit increased in the nine months ended September 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.
 35




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##### Table of Contents



This increase was partially offset by an increase in professional compensation due to higher
billable personnel, and to a lesser extent, an increase in other costs of services while other
direct contract expenses remained relatively flat.
 
    
    Asia Pacificgross profit decreased in the nine months ended September 30, 2007, due
primarily to lower revenue recognized in that region and estimated accruals to resolve
issues related to a previously completed client engagement.
    
    Latin Americagross profit decreased in the nine months ended September 30, 2007, as
increases in compensation expense, driven by an increase in 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 decreased in the nine months ended September 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 .
  36




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##### Table of Contents



Liquidity and Capital Resources
  Nine Months EndedSeptember 30,2006 to 20072007
    
    
    2006
    
    
    ChangeNet cash provided by (used in):Operating activities
    
    $
    (221,951
    )
    
    $
    (74,524
    )
    
    $
    (147,427
    )Investing activities
    
    
    (31,848
    )
    
    
    87,799
    
    
    
    (119,647
    )Financing activities
    
    
    282,156
    
    
    
    (7,316
    )
    
    
    289,472Effect of exchange rate changes on cash and cash equivalents
    
    
    10,203
    
    
    
    7,600
    
    
    
    2,603Net increase in cash and cash equivalents
    
    $
    38,560
    
    
    $
    13,559
    
    
    $
    25,001
 Operating Activities.
 Investing Activities .
 Financing Activities .
 Additional Cash Flow Information
     37




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##### Table of Contents



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
  38




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##### Table of Contents



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
  39




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##### Table of Contents



ITEM 1A. RISK FACTORS
  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
  40




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##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   (1)
    
    Election of Directors. The stockholders elected the following persons as Class
I directors to hold office until the annual meeting of stockholders to be held in 2010 and
their respective successors have been duly elected and qualified.
 Nominee for Class I Director
    
    For
    
    WithholdDouglas C. Allred
    
    
    152,960,864
    
    
    
    28,469,643Betsy J. Bernard
    
    
    153,017,163
    
    
    
    28,413,344Spencer C. Fleischer
    
    
    179,134,849
    
    
    
    2,295,658
  (2)
    
    Ratification of Appointment of Ernst & Young LLP. The stockholders ratified the
appointment of Ernst & Young LLP as the Companys independent registered public accounting
firm for the Companys 2007 fiscal year.
 For
    
    Against
    
    Abstain178,240,625
    
    
    567,529
    
    
    
    2,622,353
 
 ITEM 5. OTHER INFORMATION
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##### Table of Contents



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 ended 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.), which is
incorporated herein by reference to Exhibit 4.4 from the Companys Form 10-Q for
the quarter ended June 30, 2007.31.1
    
    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.
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##### Table of Contents



SIGNATURES
   Bearingpoint, Inc.DATE: December 3, 2007
    By:
    /s/ Judy A. EthellJudy A. EthellChief Financial Officer