BearingPoint Getting Close To Timely

Up-to-Date Books Would Give Firm More Flexibility

Technology and management consultant BearingPoint was four months late when it handed federal securities regulators its 2006 financial results late last month. By law the information should have been ready March 1.

The filing showed that the company lost more than $213 million last year and that employee turnover was higher than the industry average.

Yet the June 28 filing with the Securities and Exchange Commission could be a positive development for several reasons, not the least of which is that it brings the McLean company a step closer to the day when all its filings are up to date and it can once again consider corporate options such as spinning off a unit or buying back its shares.

"We want to get back to being current and timely, and it's now within sight," chief executive Harry L. You told analysts during a telephone conference the day of the filing. "We're converging on that target."

Analysts said up-to-date filings would free the company to examine its alternatives, something it has not been able to do for the past two years as it struggled to correct accounting errors dating back to 2004.

The company has explored the possibility of letting employees purchase the firm's European unit and buying back some of its shares to reduce the number available on the market. In response to an analyst's question, You noted that having up-to-date financial disclosures also is a prerequisite for fielding offers from potential buyers. Such an offer needs a shareholder vote, which can't happen if a company is behind in its filings, he said.

Does that mean is the company up for sale or is likely to be?

"That is not a stated strategy at this time," said Steve Lunceford, a company spokesman. "Of course, as a public company we would have a fiduciary responsibility to shareholders to review any such offers if received."

BearingPoint advises the government -- including the SEC -- and companies around the world on technology and management innovations. It was spun off from accounting giant KPMG in 2001, and posted losses of $721 million in 2005 and $516 million in 2004.

The company's stock price has slipped for several months now. It hit a high of $8.56 on Feb. 13 but has dropped 14.7 percent since. BearingPoint closed Friday at $7.30 a share, down 7 cents.

The company hopes to have first-quarter results for 2007 filed within weeks and be current by year-end with published reports of financial performance.

Analysts Jonathan Maietta and Richard Davis Jr., at Needham & Co., said getting back on track with current filings would make BearingPoint appeal to a wider group of investors. And it would help boost the morale of workers, whose turnover rate in 2006 was 25.6 percent, several points higher than the industry average, they said in a July 2 report.

While the company's turnover rate declined in the first three months of 2007 to 23.9 percent, Lunceford said, the company agrees that resolving the firm's bookkeeping errors would help it attract and keep workers. So would other initiatives, including a new program under which employees can take a week-long course at Yale's graduate school of management.

Not all indicators in its latest government filing were positive. Bookings of new business were $709.5 million in the first three months of 2007, down from $804.6 million in the first quarter of 2006, in part because of a problem affecting all government contractors: BearingPoint can't book some contracts with the federal government because Congress hasn't appropriated money for those projects.

Historically, a high percentage of such bookings do get funded, You said, but uncertainties of the Iraq war make the risk of doing business with the public sector higher than normal.

An SEC investigation of the company's accounting problems continues, as does an SEC and Justice Department investigation into possible violations of anti-bribery laws by some BearingPoint officials or affiliates in China.