10-Q 1 acn-20130531x10q.htm 10-Q ACN-2013.05.31-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED May 31, 2013
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM             TO   
Commission File Number: 001-34448
Accenture plc
(Exact name of registrant as specified in its charter)
 
Ireland
98-0627530
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1 Grand Canal Square,
Grand Canal Harbour,
Dublin 2, Ireland
(Address of principal executive offices)
(353) (1) 646-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
Accelerated filer ¨
Non-accelerated filer  ¨
Smaller reporting company  ¨
 

(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The number of shares of the registrant’s Class A ordinary shares, par value $0.0000225 per share, outstanding as of June 14, 2013 was 768,742,776 (which number includes 123,894,222 issued shares held by the registrant). The number of shares of the registrant’s Class X ordinary shares, par value $0.0000225 per share, outstanding as of June 14, 2013 was 30,888,896.



ACCENTURE PLC
INDEX
 
 
 
Page

2


PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACCENTURE PLC
CONSOLIDATED BALANCE SHEETS
May 31, 2013 and August 31, 2012
(In thousands of U.S. dollars, except share and per share amounts)
 
May 31,
2013
 
August 31,
2012
 
(Unaudited)
 
 
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
5,938,085

 
$
6,640,526

Short-term investments
2,486

 
2,261

Receivables from clients, net
3,375,047

 
3,080,877

Unbilled services, net
1,475,238

 
1,399,834

Deferred income taxes, net
723,656

 
685,732

Other current assets
564,407

 
778,701

Total current assets
12,078,919

 
12,587,931

NON-CURRENT ASSETS:
 
 
 
Unbilled services, net
17,262

 
12,151

Investments
55,577

 
28,180

Property and equipment, net
798,915

 
779,494

Goodwill
1,472,955

 
1,215,383

Deferred contract costs
538,361

 
537,943

Deferred income taxes, net
955,421

 
808,765

Other non-current assets
606,348

 
695,568

Total non-current assets
4,444,839

 
4,077,484

TOTAL ASSETS
$
16,523,758

 
$
16,665,415

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Current portion of long-term debt and bank borrowings
$

 
$
11

Accounts payable
922,658

 
903,847

Deferred revenues
2,253,450

 
2,275,052

Accrued payroll and related benefits
3,245,793

 
3,428,838

Accrued consumption taxes
321,504

 
317,622

Income taxes payable
283,608

 
253,527

Deferred income taxes, net
27,679

 
21,916

Other accrued liabilities
575,930

 
908,392

Total current liabilities
7,630,622

 
8,109,205

NON-CURRENT LIABILITIES:
 
 
 
Long-term debt

 
22

Deferred revenues relating to contract costs
504,628

 
553,764

Retirement obligation
918,810

 
1,352,266

Deferred income taxes, net
147,090

 
105,544

Income taxes payable
1,169,842

 
1,597,590

Other non-current liabilities
342,706

 
322,596

Total non-current liabilities
3,083,076

 
3,931,782

COMMITMENTS AND CONTINGENCIES

 

SHAREHOLDERS’ EQUITY:
 
 
 
Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of May 31, 2013 and August 31, 2012
57

 
57

Class A ordinary shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 768,553,789 and 745,749,177 shares issued as of May 31, 2013 and August 31, 2012, respectively
17

 
16

Class X ordinary shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 30,888,896 and 43,371,864 shares issued and outstanding as of May 31, 2013 and August 31, 2012, respectively
1

 
1

Restricted share units
929,427

 
863,714

Additional paid-in capital
2,153,906

 
1,341,576

Treasury shares, at cost: Ordinary, 40,000 shares as of May 31, 2013 and August 31, 2012; Class A ordinary, 122,574,101 and 112,370,409 shares as of May 31, 2013 and August 31, 2012, respectively
(6,310,666
)
 
(5,285,625
)
Retained earnings
9,404,277

 
7,904,242

Accumulated other comprehensive loss
(852,152
)
 
(678,148
)
Total Accenture plc shareholders’ equity
5,324,867

 
4,145,833

Noncontrolling interests
485,193

 
478,595

Total shareholders’ equity
5,810,060

 
4,624,428

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
16,523,758

 
$
16,665,415

The accompanying Notes are an integral part of these Consolidated Financial Statements.

3


ACCENTURE PLC
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended May 31, 2013 and 2012
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
 
 
Three Months Ended May 31,
 
Nine Months Ended May 31,
 
2013
 
2012
 
2013
 
2012
REVENUES:
 
 
 
 
 
 
 
Revenues before reimbursements (“Net revenues”)
$
7,198,140

 
$
7,154,690

 
$
21,476,143

 
$
21,026,437

Reimbursements
509,795

 
486,100

 
1,393,148

 
1,463,289

Revenues
7,707,935

 
7,640,790

 
22,869,291

 
22,489,726

OPERATING EXPENSES:
 
 
 
 
 
 
 
Cost of services:
 
 
 
 
 
 
 
Cost of services before reimbursable expenses
4,760,121

 
4,783,785

 
14,441,568

 
14,287,626

Reimbursable expenses
509,795

 
486,100

 
1,393,148

 
1,463,289

Cost of services
5,269,916

 
5,269,885

 
15,834,716

 
15,750,915

Sales and marketing
886,641

 
854,476

 
2,588,890

 
2,464,291

General and administrative costs
458,631

 
455,233

 
1,363,034

 
1,342,064

Reorganization (benefits) costs, net
(49,224
)
 
435

 
(272,526
)
 
1,258

Total operating expenses
6,565,964

 
6,580,029

 
19,514,114

 
19,558,528

OPERATING INCOME
1,141,971

 
1,060,761

 
3,355,177

 
2,931,198

Interest income
7,251

 
11,304

 
25,877

 
31,062

Interest expense
(3,588
)
 
(3,497
)
 
(11,778
)
 
(11,875
)
Other income (expense), net
951

 
(2,115
)
 
5,114

 
7,635

INCOME BEFORE INCOME TAXES
1,146,585

 
1,066,453

 
3,374,390

 
2,958,020

Provision for income taxes
272,522

 
303,622

 
547,198

 
769,242

NET INCOME
874,063

 
762,831

 
2,827,192

 
2,188,778

Net income attributable to noncontrolling interests in Accenture SCA and Accenture Canada Holdings Inc.
(53,177
)
 
(63,203
)
 
(190,495
)
 
(185,747
)
Net income attributable to noncontrolling interests – other
(10,628
)
 
(10,409
)
 
(25,819
)
 
(27,803
)
NET INCOME ATTRIBUTABLE TO ACCENTURE PLC
$
810,258

 
$
689,219

 
$
2,610,878

 
$
1,975,228

Weighted average Class A ordinary shares:
 
 
 
 
 
 
 
Basic
650,625,931

 
645,761,617

 
646,617,365

 
645,507,900

Diluted
714,984,161

 
729,528,085

 
714,990,587

 
729,754,854

Earnings per Class A ordinary share:
 
 
 
 
 
 
 
Basic
$
1.25

 
$
1.07

 
$
4.04

 
$
3.06

Diluted
$
1.21

 
$
1.03

 
$
3.92

 
$
2.96

Cash dividends per share
$
0.81

 
$
0.675

 
$
1.62

 
$
1.35

The accompanying Notes are an integral part of these Consolidated Financial Statements.

4


ACCENTURE PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended May 31, 2013 and 2012
(In thousands of U.S. dollars)
(Unaudited)

 
Three Months Ended May 31,
 
Nine Months Ended May 31,
 
2013
 
2012
 
2013
 
2012
NET INCOME
$
874,063

 
$
762,831

 
$
2,827,192

 
$
2,188,778

OTHER COMPREHENSIVE LOSS, BEFORE TAX:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(113,117
)
 
(250,438
)
 
(135,839
)
 
(420,300
)
Defined benefit plans:
 
 
 
 
 
 
 
Actuarial (loss) gain arising during the period
(5,536
)
 

 
9,303

 

Curtailment gain arising during the period
3,473

 

 
6,409

 

Prior service cost arising during the period

 

 
(48,774
)
 

Amortization of actuarial loss
6,916

 
8,141

 
26,540

 
25,419

Amortization of prior service cost (credit)
95

 
(1,076
)
 
844

 
(3,311
)
Total defined benefit plans
4,948

 
7,065

 
(5,678
)
 
22,108

Unrealized losses on cash flow hedges:
 
 
 
 
 
 
 
Unrealized losses during the period
(87,081
)
 
(165,385
)
 
(76,092
)
 
(194,458
)
Reclassification adjustments included in net income
3,080

 
15,360

 
20,272

 
34,790

Total unrealized losses on cash flow hedges
(84,001
)
 
(150,025
)
 
(55,820
)
 
(159,668
)
Unrealized (losses) gains on marketable securities:
 
 
 
 
 
 
 
Unrealized (losses) gains during the period

 
(84
)
 

 
158

Total unrealized (losses) gains on marketable securities

 
(84
)
 

 
158

TOTAL OTHER COMPREHENSIVE LOSS, BEFORE TAX
(192,170
)
 
(393,482
)
 
(197,337
)
 
(557,702
)
Income tax benefit related to other comprehensive loss
17,023

 
53,759

 
11,934

 
54,562

TOTAL OTHER COMPREHENSIVE LOSS
(175,147
)
 
(339,723
)
 
(185,403
)
 
(503,140
)
COMPREHENSIVE INCOME
698,916

 
423,108

 
2,641,789

 
1,685,638

Comprehensive income attributable to noncontrolling interests
(52,216
)
 
(48,319
)
 
(204,915
)
 
(172,584
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC
$
646,700

 
$
374,789

 
$
2,436,874

 
$
1,513,054

 The accompanying Notes are an integral part of these Consolidated Financial Statements.


5


ACCENTURE PLC
CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
For the Nine Months Ended May 31, 2013
(In thousands of U.S. dollars and share amounts)
(Unaudited)
 
Ordinary
Shares
 
Class A
Ordinary
Shares
 
Class X
Ordinary
Shares
 
Restricted
Share
Units
 
Additional
Paid-in
Capital
 
Treasury Shares
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Accenture plc
Shareholders’
Equity
 
Noncontrolling
Interests
 
Total
Shareholders’
Equity
 
$
 
No.
Shares
 
$
 
No.
Shares
 
$
 
No.
Shares
 
 
 
$
 
No.
Shares
 
 
 
 
 
Balance as of August 31, 2012
$
57

 
40

 
$
16

 
745,749

 
$
1

 
43,372

 
$
863,714

 
$
1,341,576

 
$
(5,285,625
)
 
(112,410
)
 
$
7,904,242

 
$
(678,148
)
 
$
4,145,833

 
$
478,595

 
$
4,624,428

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,610,878

 
 
 
2,610,878

 
216,314

 
2,827,192

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(174,004
)
 
(174,004
)
 
(11,399
)
 
(185,403
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,436,874

 
 
 
2,641,789

Income tax benefit on share-based compensation plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
195,012

 
 
 
 
 
 
 
 
 
195,012

 
 
 
195,012

Purchases of Class A ordinary shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
71,860

 
(1,243,970
)
 
(16,981
)
 
 
 
 
 
(1,172,110
)
 
(71,860
)
 
(1,243,970
)
Share-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
 
440,708

 
32,609

 
 
 
 
 
 
 
 
 
473,317

 
 
 
473,317

Purchases/redemptions of Accenture SCA Class I common shares, Accenture Canada Holdings Inc. exchangeable shares and Class X ordinary shares
 
 
 
 
 
 
 
 

 
(12,483
)
 
 
 
(189,960
)
 
 
 
 
 
 
 
 
 
(189,960
)
 
(13,608
)
 
(203,568
)
Issuances of Class A ordinary shares:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee share programs
 
 
 
 
1

 
11,969

 
 
 
 
 
(430,199
)
 
642,824

 
218,929

 
6,777

 
 
 
 
 
431,555

 
26,539

 
458,094

Upon redemption of Accenture SCA Class I common shares
 
 
 
 
 
 
10,836

 
 
 
 
 
 
 
49,413

 
 
 
 
 
 
 
 
 
49,413

 
(49,413
)
 

Dividends
 
 
 
 
 
 
 
 
 
 
 
 
55,204

 
 
 
 
 
 
 
(1,098,121
)
 
 
 
(1,042,917
)
 
(78,821
)
 
(1,121,738
)
Other, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,572

 
 
 
 
 
(12,722
)
 
 
 
(2,150
)
 
(11,154
)
 
(13,304
)
Balance as of May 31, 2013
$
57

 
40

 
$
17

 
768,554

 
$
1

 
30,889

 
$
929,427

 
$
2,153,906

 
$
(6,310,666
)
 
(122,614
)
 
$
9,404,277

 
$
(852,152
)
 
$
5,324,867

 
$
485,193

 
$
5,810,060

The accompanying Notes are an integral part of these Consolidated Financial Statements.


6


ACCENTURE PLC
CONSOLIDATED CASH FLOWS STATEMENTS
For the Nine Months Ended May 31, 2013 and 2012
(In thousands of U.S. dollars)
(Unaudited)
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
2,827,192

 
$
2,188,778

Adjustments to reconcile Net income to Net cash provided by operating activities —
 
 
 
Depreciation, amortization and asset impairments
439,321

 
414,636

Reorganization (benefits) costs, net
(272,526
)
 
1,258

Share-based compensation expense
473,317

 
412,389

Deferred income taxes, net
(129,371
)
 
(132,803
)
Other, net
(65,284
)
 
(160,073
)
Change in assets and liabilities, net of acquisitions —
 
 
 
Receivables from clients, net
(278,066
)
 
(218,540
)
Unbilled services, current and non-current
(75,626
)
 
(246,396
)
Other current and non-current assets
71,857

 
(18,845
)
Accounts payable
24,956

 
(132,028
)
Deferred revenues, current and non-current
(43,667
)
 
224,298

Accrued payroll and related benefits
(169,412
)
 
110,747

Income taxes payable, current and non-current
(254,699
)
 
35,936

Other current and non-current liabilities
(520,374
)
 
69,304

Net cash provided by operating activities
2,027,618

 
2,548,661

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from maturities and sales of available-for-sale investments

 
12,549

Purchases of available-for-sale investments

 
(7,554
)
Proceeds from sales of property and equipment
12,880

 
2,635

Purchases of property and equipment
(267,364
)
 
(256,716
)
Purchases of businesses and investments, net of cash acquired
(369,145
)
 
(173,684
)
Net cash used in investing activities
(623,629
)
 
(422,770
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of ordinary shares
458,094

 
397,665

Purchases of shares
(1,447,538
)
 
(1,403,100
)
Repayments of long-term debt, net
(34
)
 
(6,346
)
Proceeds from short-term borrowings, net
69

 
5,344

Cash dividends paid
(1,121,738
)
 
(950,857
)
Excess tax benefits from share-based payment arrangements
95,121

 
70,410

Other, net
(25,967
)
 
(28,987
)
Net cash used in financing activities
(2,041,993
)
 
(1,915,871
)
Effect of exchange rate changes on cash and cash equivalents
(64,437
)
 
(282,439
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(702,441
)
 
(72,419
)
CASH AND CASH EQUIVALENTS, beginning of period
6,640,526

 
5,701,078

CASH AND CASH EQUIVALENTS, end of period
$
5,938,085

 
$
5,628,659

The accompanying Notes are an integral part of these Consolidated Financial Statements.

7

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)



1. BASIS OF PRESENTATION
The accompanying unaudited interim Consolidated Financial Statements of Accenture plc and its controlled subsidiary companies (collectively, the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the SEC on October 30, 2012.
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. The Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three and nine months ended May 31, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2013.
Certain amounts in the Notes to Consolidated Financial Statements that were reported in the previous year have been reclassified to conform to the current-period presentation.
The Company has evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, the Company is not aware of any events or transactions (other than those disclosed herein) that occurred subsequent to the balance sheet date but prior to filing that would require recognition or disclosure in its Consolidated Financial Statements.
Allowances for Client Receivables and Unbilled Services
As of May 31, 2013 and August 31, 2012, total allowances recorded for client receivables and unbilled services were $85,894 and $64,874, respectively.
Accumulated Depreciation
As of May 31, 2013 and August 31, 2012, total accumulated depreciation was $1,699,087 and $1,548,256, respectively.
Recently Adopted Accounting Pronouncement
In September 2012, the Company adopted guidance issued by the Financial Accounting Standards Board which requires companies to present net income and other comprehensive income in either one continuous statement or in two separate but consecutive statements. The adoption of this guidance resulted in a change in the presentation of the components of comprehensive income, which are now presented in the Consolidated Statements of Comprehensive Income rather than in the Consolidated Shareholders’ Equity Statement, under Item 1, “Financial Statements.”

8

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


2. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
 
Three Months Ended May 31,
 
Nine Months Ended May 31,
 
2013
 
2012
 
2013
 
2012
Basic Earnings per share
 
 
 
 
 
 
 
Net income attributable to Accenture plc
$
810,258

 
$
689,219

 
$
2,610,878

 
$
1,975,228

Basic weighted average Class A ordinary shares
650,625,931

 
645,761,617

 
646,617,365

 
645,507,900

Basic earnings per share
$
1.25

 
$
1.07

 
$
4.04

 
$
3.06

Diluted Earnings per share
 
 
 
 
 
 
 
Net income attributable to Accenture plc
$
810,258

 
$
689,219

 
$
2,610,878

 
$
1,975,228

Net income attributable to noncontrolling interests in
    Accenture SCA and Accenture Canada Holdings Inc. (1)
53,177

 
63,203

 
190,495

 
185,747

Net income for diluted earnings per share calculation
$
863,435

 
$
752,422

 
$
2,801,373

 
$
2,160,975

Basic weighted average Class A ordinary shares
650,625,931

 
645,761,617

 
646,617,365

 
645,507,900

Class A ordinary shares issuable upon redemption/exchange of noncontrolling interests (1)
42,735,065

 
59,205,983

 
47,612,585

 
60,730,644

Diluted effect of employee compensation related to Class A ordinary shares (2)
21,562,644

 
24,452,125

 
20,747,594

 
23,453,555

Diluted effect of share purchase plans related to Class A ordinary shares
60,521

 
108,360

 
13,043

 
62,755

Diluted weighted average Class A ordinary shares (2)
714,984,161

 
729,528,085

 
714,990,587

 
729,754,854

Diluted earnings per share (2)
$
1.21

 
$
1.03

 
$
3.92

 
$
2.96

_______________
(1)
Diluted earnings per share assumes the redemption of all Accenture SCA Class I common shares owned by holders of noncontrolling interests and the exchange of all Accenture Canada Holdings Inc. exchangeable shares for Accenture plc Class A ordinary shares on a one-for-one basis. The income effect does not take into account “Net income attributable to noncontrolling interests — other,” since those shares are not redeemable or exchangeable for Accenture plc Class A ordinary shares.
(2)
Diluted weighted average Accenture plc Class A ordinary shares and earnings per share amounts for the three and nine months ended May 31, 2012 have been restated to reflect the impact of the issuance of additional restricted share units to holders of restricted share units in connection with the payments of cash dividends during fiscal 2013. This did not result in a change to previously reported Diluted earnings per share.
3. INCOME TAXES
Effective Tax Rate
The Company’s effective tax rates for the three months ended May 31, 2013 and 2012 were 23.8% and 28.5%, respectively. The Company’s effective tax rates for the nine months ended May 31, 2013 and 2012 were 16.2% and 26.0%, respectively. During the three and nine months ended May 31, 2013, the Company recorded reorganization benefits of $49,690 and $273,945, respectively, which increased income before income taxes without any increase in income tax expense. In addition, during the three months ended February 28, 2013, the Company recorded a benefit of $242,938 related to settlements of U.S. federal tax audits for fiscal years 2006 through 2009. Absent these items, the effective tax rates for the three and nine months ended May 31, 2013 would have been 24.8% and 25.5%, respectively.

9

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


4. REORGANIZATION (BENEFITS) COSTS, NET
In fiscal 2001, the Company accrued reorganization liabilities in connection with its transition to a corporate structure. These included liabilities for certain individual income tax exposures related to the transfer of interests in certain entities to the Company as part of the reorganization. The Company has recorded reorganization expense and the related liability where such liabilities are probable. Interest accruals are made to cover reimbursement of interest on such tax assessments.
The Company’s reorganization activity was as follows:
 
Three Months Ended May 31,
 
Nine Months Ended May 31,
 
2013
 
2012
 
2013
 
2012
Reorganization liability, beginning of period
$
64,279

 
$
287,913

 
$
268,806

 
$
307,286

Final determinations
(49,690
)
 

 
(273,945
)
 

Interest expense accrued
466

 
435

 
1,419

 
1,258

Other adjustments
787

 

 
3,532

 

Foreign currency translation adjustments
1,942

 
(22,645
)
 
17,972

 
(42,841
)
Reorganization liability, end of period
$
17,784

 
$
265,703

 
$
17,784

 
$
265,703

As a result of final determinations, certain reorganization liabilities established in connection with our transition to a corporate structure in 2001 are no longer probable. Accordingly, the Company recorded reorganization benefits of $49,690 and $273,945 during the three and nine months ended May 31, 2013, respectively. These benefits were partially offset by interest expense associated with carrying these liabilities of $466 and $1,419 for the three and nine months ended May 31, 2013, respectively. As of May 31, 2013, reorganization liabilities of $5,001 were included in Other accrued liabilities because final determinations could occur within 12 months, and reorganization liabilities of $12,783 were included in Other non-current liabilities. Final resolution, through settlement, conclusion of legal proceedings or a tax authority’s decision not to pursue a claim, will result in payment by the Company of amounts in settlement or judgment of these matters and/or recording of a reorganization benefit or cost in the Company’s Consolidated Income Statement. As of May 31, 2013, only a small number of countries remain that have active audits/investigations or open statutes of limitations.

10

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


5. BUSINESS COMBINATIONS AND GOODWILL
During the nine months ended May 31, 2013, the Company acquired the net assets of a provider of clinical and regulatory information management solutions and software for the pharmaceutical industry. In addition, the Company completed several individually immaterial acquisitions. The total consideration for all acquisitions was $369,145. In connection with the acquisitions during the nine months ended May 31, 2013, the Company recorded goodwill of $271,279, which was allocated among the reportable operating segments. Goodwill also included immaterial adjustments related to prior period acquisitions. The Company also recorded $80,877 in intangible assets, primarily related to customer relationships and technology-related assets. The intangible assets are being amortized over one to 13 years. The pro forma effects on the Company’s operations were not material.
On May 17, 2013, the Company announced that it had entered into a definitive agreement to acquire Acquity Group Ltd. (Acquity), a leading digital marketing and eCommerce company. Acquity provides strategy, digital marketing and technical services to companies to enhance their brand experience and eCommerce performance. The acquisition is expected to close in the fourth quarter of fiscal 2013.
The changes in the carrying amount of goodwill by reportable operating segment were as follows:
 
August 31,
2012
 
Additions/
Adjustments
 
Foreign
Currency
Translation
Adjustments
 
May 31,
2013
Communications, Media & Technology
$
168,413

 
$
44,498

 
$
(6,095
)
 
$
206,816

Financial Services
407,956

 
48,791

 
(2,707
)
 
454,040

Health & Public Service
285,333

 
10,907

 
(999
)
 
295,241

Products
270,178

 
156,284

 
(1,555
)
 
424,907

Resources
83,503

 
10,470

 
(2,022
)
 
91,951

Total
$
1,215,383

 
$
270,950

 
$
(13,378
)
 
$
1,472,955


11

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


6. SHAREHOLDERS’ EQUITY
Other Comprehensive (Loss) Income
The computation of Other comprehensive (loss) income and its components are presented in the Consolidated Statements of Comprehensive Income. The related before tax, income tax benefit (expense) and net of tax amounts for each component were as follows:
 
Three Months Ended May 31,
  
2013

2012
  
Before Tax
 
Income Tax Benefit (Expense)
 
Net of Tax
 
Before Tax
 
Income Tax Benefit (Expense)
 
Net of Tax
Foreign currency translation adjustments
$
(113,117
)
 
$
370

 
$
(112,747
)
 
$
(250,438
)
 
$
553

 
$
(249,885
)
Defined benefit plans
4,948

 
(12,855
)
 
(7,907
)
 
7,065

 
(3,035
)
 
4,030

Unrealized (losses) gains on cash flow hedges
(84,001
)
 
29,508

 
(54,493
)
 
(150,025
)
 
56,241

 
(93,784
)
Unrealized losses on marketable securities

 

 

 
(84
)
 

 
(84
)
Other comprehensive (loss) income
$
(192,170
)
 
$
17,023

 
$
(175,147
)
 
$
(393,482
)
 
$
53,759

 
$
(339,723
)
 
Nine Months Ended May 31,
  
2013

2012
  
Before Tax
 
Income Tax Benefit (Expense)
 
Net of Tax
 
Before Tax
 
Income Tax Benefit (Expense)
 
Net of Tax
Foreign currency translation adjustments
$
(135,839
)
 
$
101

 
$
(135,738
)
 
$
(420,300
)
 
$
1,892

 
$
(418,408
)
Defined benefit plans
(5,678
)
 
(8,063
)
 
(13,741
)
 
22,108

 
(8,485
)
 
13,623

Unrealized (losses) gains on cash flow hedges
(55,820
)
 
19,896

 
(35,924
)
 
(159,668
)
 
61,155

 
(98,513
)
Unrealized gains on marketable securities

 

 

 
158

 

 
158

Other comprehensive (loss) income
$
(197,337
)
 
$
11,934

 
$
(185,403
)
 
$
(557,702
)
 
$
54,562

 
$
(503,140
)
Dividends
The Company’s dividend activity during the nine months ended May 31, 2013 was as follows:
 
 
Dividend Per
Share
 
Accenture plc Class A
Ordinary Shares
 
Accenture SCA Class I Common
Shares and Accenture Canada Holdings
Inc. Exchangeable Shares
 
Total Cash
Outlay
Dividend Payment Date
 
 
Record Date
 
Cash Outlay
 
Record Date
 
Cash Outlay
 
November 15, 2012
 
$
0.81

 
October 12, 2012
 
$
516,170

 
October 9, 2012
 
$
43,965

 
$
560,135

May 15, 2013
 
0.81

 
April 12, 2013
 
526,747

 
April 9, 2013
 
34,856

 
561,603

Total Dividends
 
 
 
 
 
$
1,042,917

 
 
 
$
78,821

 
$
1,121,738

The payment of the cash dividends also resulted in the issuance of additional restricted share units to holders of restricted share units. Diluted weighted average Accenture plc Class A ordinary share amounts have been restated for all periods presented to reflect this issuance. For additional information, see Note 2 (Earnings Per Share).

12

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to manage foreign currency exchange rate risk. The Company’s derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts.
The activity related to the change in net unrealized (losses) gains on cash flow hedges in Accumulated other comprehensive loss was as follows:
 
Nine Months Ended May 31,
 
2013
 
2012
Net unrealized (losses) gains on cash flow hedges, beginning of period
$
(31,752
)
 
$
52,315

Change in fair value
(76,092
)
 
(194,458
)
Reclassification adjustments into Cost of services
20,272

 
34,790

Portion attributable to Noncontrolling interests
3,416

 
13,237

Net unrealized losses on cash flow hedges, end of period
$
(84,156
)
 
$
(94,116
)
As of May 31, 2013, $(49,242) of the amounts related to derivatives designated as cash flow hedges and recorded in Accumulated other comprehensive loss is expected to be reclassified into earnings in the next 12 months. The ineffective portion of the change in fair value of a cash flow hedge is recognized immediately in Other income, net in the Consolidated Income Statement and, for the three and nine months ended May 31, 2013, was not material. In addition, the Company did not discontinue any cash flow hedges during the three and nine months ended May 31, 2013.
Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were a net loss of $(59,586) and $(38,662) for the three and nine months ended May 31, 2013, respectively. Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were a net loss of $(116,407) and $(201,267) for the three and nine months ended May 31, 2012, respectively. Gains and losses on these contracts are recorded in Other income, net in the Consolidated Income Statement and are offset by gains and losses on the related hedged items.
Fair Value of Derivative Instruments
The notional and fair values of all derivative instruments were as follows:
 
May 31,
2013
 
August 31,
2012
Assets
 
 
 
Cash Flow Hedges
 
 
 
Other current assets
$
7,888

 
$
15,392

Other non-current assets
4,408

 
36,106

Other Derivatives
 
 
 
Other current assets
10,133

 
9,988

Total assets
$
22,429

 
$
61,486

Liabilities
 
 
 
Cash Flow Hedges
 
 
 
Other accrued liabilities
$
58,941

 
$
59,458

Other non-current liabilities
40,606

 
23,471

Other Derivatives
 
 
 
Other accrued liabilities
42,740

 
11,147

Total liabilities
$
142,287

 
$
94,076

Total fair value
$
(119,858
)
 
$
(32,590
)
Total notional value
$
5,205,934

 
$
4,853,191


13

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


8. COMMITMENTS AND CONTINGENCIES
Commitments
The Company has the right to purchase or may also be required to purchase substantially all of the remaining outstanding shares of its Avanade Inc. subsidiary (“Avanade”) not owned by the Company at fair value if certain events occur. Certain holders of Avanade common stock and options to purchase the stock have put rights that, under certain circumstances and conditions, would require Avanade to redeem shares of its stock at fair value. As of May 31, 2013 and August 31, 2012, the Company has reflected the fair value of $88,568 and $95,957, respectively, related to Avanade’s redeemable common stock and the intrinsic value of the options on redeemable common stock in Other accrued liabilities on the Consolidated Balance Sheet.
Indemnifications and Guarantees
In the normal course of business and in conjunction with certain client engagements, the Company has entered into contractual arrangements through which it may be obligated to indemnify clients with respect to certain matters. These arrangements with clients can include provisions whereby the Company has joint and several liability in relation to the performance of certain contractual obligations along with third parties also providing services and products for a specific project. In addition, our consulting arrangements may include warranty provisions that our solutions will substantially operate in accordance with the applicable system requirements. Indemnification provisions are also included in arrangements under which the Company agrees to hold the indemnified party harmless with respect to third-party claims related to such matters as title to assets sold or licensed or certain intellectual property rights.
Typically, the Company has contractual recourse against third parties for certain payments made by the Company in connection with arrangements where third-party nonperformance has given rise to the client’s claim. Payments by the Company under any of the arrangements described above are generally conditioned on the client making a claim, which may be disputed by the Company typically under dispute resolution procedures specified in the particular arrangement. The limitations of liability under these arrangements may be expressly limited or may not be expressly specified in terms of time and/or amount.
As of May 31, 2013 and August 31, 2012, the Company’s aggregate potential liability to its clients for expressly limited guarantees involving the performance of third parties was approximately $767,000 and $596,000, respectively, of which all but approximately $17,000 and $21,000, respectively, may be recovered from the other third parties if the Company is obligated to make payments to the indemnified parties that are the consequence of a performance default by the other third parties. For arrangements with unspecified limitations, the Company cannot reasonably estimate the aggregate maximum potential liability, as it is inherently difficult to predict the maximum potential amount of such payments, due to the conditional nature and unique facts of each particular arrangement.
To date, the Company has not been required to make any significant payment under any of the arrangements described above. The Company has assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations and/or indemnification provisions and believes that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole.
Legal Contingencies
As of May 31, 2013, the Company or its present personnel had been named as a defendant in various litigation matters. The Company and/or its personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of its business around the world. Based on the present status of these matters, management believes the range of reasonably possible losses in addition to amounts accrued, net of insurance recoveries, will not have a material effect on the Company’s results of operations or financial condition.

14

ACCENTURE PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)
(Unaudited)


9. SEGMENT REPORTING
The Company’s reportable operating segments are the five operating groups, which are Communications, Media & Technology; Financial Services; Health & Public Service; Products; and Resources. Information regarding the Company’s reportable operating segments is as follows:
 
Three Months Ended May 31,
 
2013
 
2012
 
Net
Revenues
 
Operating
Income
 
Net
Revenues
 
Operating
Income
Communications, Media & Technology
$
1,425,655

 
$
213,359

 
$
1,505,403

 
$
232,548

Financial Services
1,574,479

 
275,730

 
1,502,473

 
216,451

Health & Public Service
1,191,070

 
167,524

 
1,088,353

 
115,666

Products
1,724,596

 
263,978

 
1,701,823

 
241,558

Resources
1,279,221

 
221,380

 
1,351,838

 
254,538

Other
3,119

 

 
4,800

 

Total
$
7,198,140

 
$
1,141,971

 
$
7,154,690

 
$
1,060,761


 
Nine Months Ended May 31,
 
2013
 
2012
 
Net
Revenues
 
Operating
Income
 
Net
Revenues
 
Operating
Income
Communications, Media & Technology
$
4,295,930

 
$
622,151

 
$
4,521,967

 
$
664,481

Financial Services
4,646,286

 
760,986

 
4,362,931

 
574,020

Health & Public Service
3,558,478

 
499,201

 
3,198,534

 
328,093

Products
5,103,858

 
763,904

 
4,955,972

 
644,590

Resources
3,852,560

 
708,935

 
3,971,914

 
720,014

Other
19,031

 

 
15,119

 

Total
$
21,476,143

 
$
3,355,177

 
$
21,026,437

 
$
2,931,198



15


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended August 31, 2012, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2012.
We use the terms “Accenture,” “we,” the “Company,” “our” and “us” in this report to refer to Accenture plc and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “fiscal 2013” means the 12-month period that will end on August 31, 2013. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.
We use the term “in local currency” so that certain financial results may be viewed without the impact of foreign currency exchange rate fluctuations, thereby facilitating period-to-period comparisons of business performance. Financial results “in local currency” are calculated by restating current period activity into U.S. dollars using the comparable prior year period’s foreign currency exchange rates. This approach is used for all results where the functional currency is not the U.S. dollar.
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) relating to our operations, results of operations and other matters that are based on our current expectations, estimates, assumptions and projections. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “positioned,” “outlook” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to:
Our results of operations could be adversely affected by volatile, negative or uncertain economic conditions and the effects of these conditions on our clients’ businesses and levels of business activity.
Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations.
If we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected.
The markets in which we compete are highly competitive, and we might not be able to compete effectively.
We could have liability or our reputation could be damaged if we fail to protect client and/or Accenture data or information systems as obligated by law or contract or if our information systems are breached.
Our results of operations and ability to grow could be materially negatively affected if we cannot adapt and expand our services and solutions in response to ongoing changes in technology and offerings by new entrants.
As a result of our geographically diverse operations and our growth strategy to continue geographic expansion, we are more susceptible to certain risks.
Our Global Delivery Network is increasingly concentrated in India and the Philippines, which may expose us to operational risks.
Our results of operations could materially suffer if we are not able to obtain sufficient pricing to enable us to meet our profitability expectations.
If our pricing estimates do not accurately anticipate the cost, risk and complexity of performing our work or third parties upon whom we rely do not meet their commitments, then our contracts could have delivery inefficiencies and be unprofitable.
Our work with government clients exposes us to additional risks inherent in the government contracting environment.

16


Our business could be materially adversely affected if we incur legal liability in connection with providing our services and solutions.
Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.
Our alliance relationships may not be successful or may change, which could adversely affect our results of operations.
Outsourcing services and the continued expansion of our other services and solutions into new areas subject us to different operational risks than our consulting and systems integration services.
Our services or solutions could infringe upon the intellectual property rights of others or we might lose our ability to utilize the intellectual property of others.
We have only a limited ability to protect our intellectual property rights, which are important to our success.
Our ability to attract and retain business and employees may depend on our reputation in the marketplace.
We might not be successful at identifying, acquiring or integrating businesses or entering into joint ventures.
Our profitability could suffer if our cost-management strategies are unsuccessful, and we may not be able to improve our profitability through improvements to cost-management to the degree we have done in the past.
Many of our contracts include payments that link some of our fees to the attainment of performance or business targets and/or require us to meet specific service levels. This could increase the variability of our revenues and impact our margins.
Changes in our level of taxes, and audits, investigations and tax proceedings, or changes in our treatment as an Irish company, could have a material adverse effect on our results of operations and financial condition.
If we are unable to manage the organizational challenges associated with our size, we might be unable to achieve our business objectives.
If we are unable to collect our receivables or unbilled services, our results of operations, financial condition and cash flows could be adversely affected.
Our share price and results of operations could fluctuate and be difficult to predict.
Our results of operations and share price could be adversely affected if we are unable to maintain effective internal controls.
We are incorporated in Ireland and a significant portion of our assets are located outside the United States. As a result, it might not be possible for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States. We may also be subject to criticism and negative publicity related to our incorporation in Ireland.
Irish law differs from the laws in effect in the United States and might afford less protection to shareholders.
We might be unable to access additional capital on favorable terms or at all. If we raise equity capital, it may dilute our shareholders’ ownership interest in us.
For a more detailed discussion of these factors, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2012. We undertake no obligation to update or revise any forward-looking statements.

17


Overview
Revenues are driven by the ability of our executives to secure new contracts and to deliver solutions and services that add value relevant to our clients’ current needs and challenges. The level of revenues we achieve is based on our ability to deliver market-leading service offerings and to deploy skilled teams of professionals quickly and on a global basis.
Our results of operations are affected by economic conditions, including macroeconomic conditions, credit market conditions and levels of business confidence. There continues to be significant volatility in markets around the world, as well as economic and geopolitical uncertainty in many of the markets where we operate, which is impacting, and we expect will continue to impact, our business. Such volatility and uncertainty adversely affects our clients and the levels of business activities in the industries and geographies where we operate. This has also impacted the types of services our clients are demanding. Clients are requesting a higher volume of outsourcing services and are placing a greater emphasis on cost savings initiatives; procuring our consulting services over longer durations; and slowing the pace and level of both consulting and outsourcing spending. These changing demand patterns are currently having an adverse impact on the timing of revenue and could in the future have a material adverse effect on our results of operations. We continue to monitor the impact of this volatility and uncertainty and seek to manage our costs in order to respond to changing conditions.
Revenues before reimbursements (“net revenues”) for the third quarter of fiscal 2013 were $7.20 billion, compared with $7.15 billion for the third quarter of fiscal 2012, an increase of 1% in U.S. dollars and 3% in local currency. Net revenues for the nine months ended May 31, 2013 were $21.48 billion, compared with $21.03 billion for the nine months ended May 31, 2012, an increase of 2% in U.S. dollars and 4% in local currency. During the third quarter of fiscal 2013, Health & Public Service, Financial Services and Products experienced year-over-year revenue growth in local currency, while Resources and Communications, Media & Technology experienced year-over-year revenue declines in local currency. Revenue growth in local currency was solid in outsourcing, while consulting revenues were flat during the third quarter of fiscal 2013. We expect quarterly year-over-year revenue growth in local currency to moderate further in the fourth quarter of fiscal 2013, with slight moderation in our outsourcing revenue growth and consulting revenues ranging from a modest decline to a slight increase.
In our consulting business, net revenues for the third quarter of fiscal 2013 were $3.87 billion, compared with $3.97 billion for the third quarter of fiscal 2012, a decrease of 2% in U.S. dollars and flat in local currency. Net consulting revenues for the nine months ended May 31, 2013 were $11.58 billion, compared with $11.82 billion for the nine months ended May 31, 2012, a decrease of 2% in U.S. dollars and flat in local currency. Health & Public Service experienced strong consulting revenue growth in local currency during the third quarter of fiscal 2013. Year-over-year consulting revenue growth in local currency was slight in Financial Services and declined in our Resources, Products, and Communications, Media & Technology operating groups. In our consulting business in these four operating groups, revenue was slightly lower than we expected, with the largest impacts in Resources and Products, and in Brazil and certain countries in EMEA. This was driven by lower than anticipated new consulting bookings this quarter, including a lower volume of short-term projects and add-on work on existing projects. In addition, we entered into a higher proportion of contracts with longer duration that are converting to revenue at a slower pace, and clients are slowing the pace and level of their spending. We expect these trends to continue in the near term. Clients continued to be focused on initiatives designed to deliver cost savings and operational efficiency, as well as projects to integrate their global operations and grow and transform their businesses. We continue to experience growing demand for our services in emerging technologies, including analytics, cloud computing and mobility. Compared to fiscal 2012, we continued to provide a greater proportion of systems integration consulting through use of lower-cost resources in our Global Delivery Network, and we expect this trend to continue. The business environment is more competitive and, in some areas, we are experiencing pricing pressures.
In our outsourcing business, net revenues for the third quarter of fiscal 2013 were $3.33 billion, compared with $3.19 billion for the third quarter of fiscal 2012, an increase of 4% in U.S. dollars and 7% in local currency. Net outsourcing revenues for the nine months ended May 31, 2013 were $9.90 billion, compared with $9.20 billion for the nine months ended May 31, 2012, an increase of 8% in U.S. dollars and 10% in local currency. Financial Services, Products and Health & Public Service experienced strong outsourcing revenue growth in local currency during the third quarter of fiscal 2013. Year-over-year outsourcing revenue growth in local currency was flat in Resources and declined in Communications, Media & Technology. We expect outsourcing revenue growth for the fourth quarter of fiscal 2013 to continue to moderate from the strong year-over-year growth that we experienced in the first half of fiscal 2013, as we are experiencing lower demand for short-term projects and clients are slowing the pace and level of their spending. Clients continue to be focused on transforming their operations to improve effectiveness and save costs. Compared to fiscal 2012, we provided a greater proportion of application outsourcing through use of lower-cost resources in our Global Delivery Network.
As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange-rate fluctuations. If the U.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues and revenue growth in U.S. dollars may be higher. If the U.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues and revenue growth in U.S. dollars may be lower. When compared to the nine months ended May 31, 2012, the U.S. dollar strengthened against many currencies during the nine months ended May 31, 2013. This resulted in unfavorable currency translation and U.S. dollar revenue growth that was 2.5% and 2.0% lower than our revenue

18


growth in local currency for the three and nine months ended May 31, 2013, respectively. Assuming that exchange rates stay within recent ranges for the remainder of fiscal 2013, we estimate the foreign-exchange impact to our full fiscal 2013 revenue growth will be approximately 1.7% lower growth in U.S. dollars than our growth in local currency.
The primary categories of operating expenses include cost of services, sales and marketing and general and administrative costs. Cost of services is primarily driven by the cost of client-service personnel, which consists mainly of compensation, subcontractor and other personnel costs, and non-payroll outsourcing costs. Cost of services as a percentage of revenues is driven by the prices we obtain for our solutions and services, the utilization of our client-service personnel and the level of non-payroll costs associated with outsourcing contracts. Utilization primarily represents the percentage of our consulting professionals’ time spent on billable work. Utilization for the third quarter of fiscal 2013 was approximately 88%, flat with the second quarter of fiscal 2013, and within our target range. This level of utilization reflects continued strong demand for resources in our Global Delivery Network and in most countries. We continue to hire to meet current and projected future demand.
We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services, given that compensation costs are the most significant portion of our operating expenses. Based on current and projected future demand, we have increased our headcount, the majority of which serve our clients, to approximately 266,000 as of May 31, 2013, compared with approximately 261,000 as of February 28, 2013 and 249,000 as of May 31, 2012. The year-over-year increase in our headcount reflects an overall increase in demand for our services, including those delivered through our Global Delivery Network in lower-cost locations. Annualized attrition, excluding involuntary terminations, for the third quarter of fiscal 2013 was 12%, up from 11% in the second quarter of fiscal 2013 and down from 13% in the third quarter of fiscal 2012. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as means to keep our supply of skills and resources in balance with increases or decreases in client demand. In addition, we adjust compensation in certain skill sets and geographies in order to attract and retain appropriate numbers of qualified employees, and we may need to continue to adjust compensation in the future. For the majority of our personnel, compensation increases for fiscal 2013 became effective September 1, 2012. As in prior fiscal years, we strive to adjust pricing and/or the mix of resources to reduce the impact of compensation increases on our gross margin. Our ability to grow our revenues and increase our margins could be adversely affected if we are unable to: keep our supply of skills and resources in balance with changes in the types or amounts of services clients are demanding, such as the increase in demand for various outsourcing services; deploy our employees globally on a timely basis; manage attrition; recover increases in compensation; and/or effectively assimilate and utilize new employees.
Gross margin (Net revenues less Cost of services before reimbursable expenses as a percentage of Net revenues) for the third quarter of fiscal 2013 was 33.9%, compared with 33.1% for the third quarter of fiscal 2012. Gross margin for the nine months ended May 31, 2013 was 32.8%, compared with 32.0% for the nine months ended May 31, 2012. The increase in gross margin for the nine months ended May 31, 2013 was principally due to higher outsourcing contract profitability, partially offset by higher costs associated with investments in offerings.
Sales and marketing and general and administrative costs as a percentage of net revenues were 18.7% for the third quarter of fiscal 2013 and 18.4% for the nine months ended May 31, 2013, compared with 18.3% for the third quarter of fiscal 2012 and 18.1% for the nine months ended May 31, 2012. Sales and marketing costs are driven primarily by: compensation costs for business development activities; investment in offerings; marketing- and advertising-related activities; and acquisition-related costs. General and administrative costs primarily include costs for non-client-facing personnel, information systems and office space. We continuously monitor these costs and implement cost-management actions, as appropriate. For the nine months ended May 31, 2013 compared to the nine months ended May 31, 2012, sales and marketing costs as a percentage of net revenues increased approximately 40 basis points as a result of higher selling and other business development costs associated with generating new contract bookings and expanding our pipeline of business opportunities. Our margins could be adversely affected if our cost-management actions are not sufficient to maintain sales and marketing and general and administrative costs at or below current levels as a percentage of net revenues.
Operating expenses in the third quarter of fiscal 2013 and nine months ended May 31, 2013 included reorganization benefits of $50 million and $274 million, respectively, as a result of final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure in 2001. For additional information, see Note 4 (Reorganization (Benefits) Costs, Net) to our Consolidated Financial Statements under Item 1, “Financial Statements.”
Operating income for the third quarter of fiscal 2013 was $1,142 million, compared with $1,061 million for the third quarter of fiscal 2012. Operating income for the nine months ended May 31, 2013 was $3,355 million, compared with $2,931 million for the nine months ended May 31, 2012. Operating margin (Operating income as a percentage of Net revenues) for the third quarter of fiscal 2013 was 15.9%, compared with 14.8% for the third quarter of fiscal 2012. Operating margin for the nine months ended May 31, 2013 was 15.6%, compared with 13.9% for the nine months ended May 31, 2012. The reorganization benefits of $50 million in the third quarter of fiscal 2013 and $274 million in the nine months ended May 31, 2013 increased operating margin by 70 and 130 basis points, respectively. Excluding the effects of the reorganization benefits, operating margin would have been 15.2% and 14.3% for the third quarter of fiscal 2013 and the nine months ended May 31, 2013, respectively, an increase of 40 basis points for both periods, compared with the same periods in fiscal 2012.

19


The effective tax rates for the third quarter of fiscal 2013 and the nine months ended May 31, 2013 were 23.8% and 16.2%, respectively. The above noted reorganization benefits increased income before income taxes without any increase in income tax expense. In addition, during the second quarter of fiscal 2013, we recorded a benefit of $243 million related to settlements of U.S. federal tax audits for fiscal years 2006 through 2009. Absent these items, our effective tax rates for the third quarter of fiscal 2013 and the nine months ended May 31, 2013 would have been 24.8% and 25.5%, respectively.
Diluted earnings per share were $1.21 for the third quarter of fiscal 2013, compared with $1.03 for the third quarter of fiscal 2012. Absent the reorganization benefits recorded during the third quarter of fiscal 2013, diluted earnings per share would have been $1.14 for the third quarter of fiscal 2013. Diluted earnings per share were $3.92 for the nine months ended May 31, 2013, compared with $2.96 for the nine months ended May 31, 2012. Absent the reorganization benefits recorded year-to-date in fiscal 2013 and the tax benefit recorded during the second quarter of fiscal 2013, diluted earnings per share would have been $3.20 for the nine months ended May 31, 2013.
Our Operating income and Earnings per share are also affected by currency exchange-rate fluctuations on revenues and costs. Most of our costs are incurred in the same currency as the related net revenues. Where practical, we also seek to manage foreign currency exposure for costs not incurred in the same currency as the related net revenues, such as the cost of our Global Delivery Network, by using currency protection provisions in our customer contracts and through our hedging programs. We seek to manage our costs taking into consideration the residual positive and negative effects of changes in foreign exchange rates on those costs.
On December 1, 2012, we ceased using the designation “senior executive.” The majority of our leaders are now designated “managing directors,” and a select group of our most experienced leaders are “senior managing directors.” Managing directors and senior managing directors, along with members of the Accenture global management committee (the Company’s primary management and leadership team, which consists of 18 of our most senior leaders), comprise “Accenture Leadership.”

20


Bookings and Backlog
New contract bookings for the third quarter of fiscal 2013 were $8.29 billion, with consulting bookings of $3.85 billion and outsourcing bookings of $4.44 billion. New contract bookings for the nine months ended May 31, 2013 were $24.88 billion, with consulting bookings of $12.42 billion and outsourcing bookings of $12.46 billion.
We provide information regarding our new contract bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. However, new bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large outsourcing contracts. Clients continue to enter into contracts that are converting to revenue at a slower pace and clients are slowing the pace and level of their spending, all of which can impact the conversion of new contract bookings to revenues. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. There are no third-party standards or requirements governing the calculation of bookings. New contract bookings involve estimates and judgments regarding new contracts as well as renewals, extensions and changes to existing contracts. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally recorded in prior fiscal years. New contract bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations.
The majority of our contracts are terminable by the client on short notice, and some without notice. Accordingly, we do not believe it is appropriate to characterize bookings attributable to these contracts as backlog. Normally, if a client terminates a project, the client remains obligated to pay for commitments we have made to third parties in connection with the project, services performed and reimbursable expenses incurred by us through the date of termination.
Revenues by Segment/Operating Group
Our five reportable operating segments are our operating groups, which are Communications, Media & Technology; Financial Services; Health & Public Service; Products; and Resources. Operating groups are managed on the basis of net revenues because our management believes net revenues are a better indicator of operating group performance than revenues. In addition to reporting net revenues by operating group, we also report net revenues by two types of work: consulting and outsourcing, which represent the services sold by our operating groups. Consulting net revenues, which include management and technology consulting and systems integration, reflect a finite, distinct project or set of projects with a defined outcome and typically a defined set of specific deliverables. Outsourcing net revenues typically reflect ongoing, repeatable services or capabilities provided to transition, run and/or manage operations of client systems or business functions.
From time to time, our operating groups work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating operating groups. Generally, operating expenses for each operating group have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on the industries served by our operating groups affect revenues and operating expenses within our operating groups to differing degrees. The mix between consulting and outsourcing is not uniform among our operating groups. Local currency fluctuations also tend to affect our operating groups differently, depending on the geographic concentrations and locations of their businesses.
While we provide discussion about our results of operations below, we cannot measure how much of our revenue growth in a particular period is attributable to changes in price or volume. Management does not track standard measures of unit or rate volume. Instead, our measures of volume and price are extremely complex, as each of our services contracts is unique, reflecting a customized mix of specific services that does not fit into standard comparability measurements. Pricing for our services is a function of the nature of each service to be provided, the skills required and outcome sought, as well as estimated cost, risk, contract terms and other factors.

21


Results of Operations for the Three Months Ended May 31, 2013 Compared to the Three Months Ended May 31, 2012
Net revenues (by operating group, geographic region and type of work) and reimbursements were as follows:
  
Three Months Ended May 31,
 
Percent
Increase
(Decrease)
U.S. Dollars
 
Percent
Increase
(Decrease)
Local
Currency
 
Percent of Total Net Revenues
for the Three Months Ended May 31,
  
2013
 
2012
 
 
 
2013
 
2012
 
(in millions of U.S. dollars)
 
 
 
 
 
 
 
 
OPERATING GROUPS
 
 
 
 
 
 
 
 
 
 
 
Communications, Media & Technology
$
1,426

 
$
1,505

 
(5
)%
 
(3
)%
 
20
%
 
21
%
Financial Services
1,574

 
1,502

 
5

 
8

 
22

 
21

Health & Public Service
1,191

 
1,088

 
9

 
11

 
16

 
15

Products
1,725

 
1,702

 
1

 
4

 
24

 
24

Resources
1,279

 
1,352

 
(5
)
 
(3
)
 
18

 
19

Other
3

 
5

 
n/m

 
n/m

 

 

TOTAL NET REVENUES
7,198

 
7,155

 
1
 %
 
3
 %
 
100
%
 
100
%
Reimbursements
510

 
486

 
5

 
 
 
 
 
 
TOTAL REVENUES
$
7,708

 
$
7,641

 
1
 %
 
 
 
 
 
 
GEOGRAPHIC REGIONS
 
 
 
 
 
 
 
 
 
 
 
Americas
$
3,444

 
$
3,227

 
7
 %
 
8
 %
 
48
%
 
45
%
EMEA (1)
2,778

 
2,907

 
(4
)
 
(1
)
 
39

 
41

Asia Pacific
975

 
1,021

 
(5
)
 

 
13

 
14

TOTAL NET REVENUES
$
7,198

 
$
7,155

 
1
 %
 
3
 %
 
100
%
 
100
%
TYPE OF WORK
 
 
 
 
 
 
 
 
 
 
 
Consulting
$
3,867

 
$
3,965

 
(2
)%
 
 %
 
54
%
 
55
%
Outsourcing
3,331

 
3,189

 
4

 
7

 
46

 
45

TOTAL NET REVENUES
$
7,198

 
$
7,155

 
1
 %
 
3
 %
 
100
%
 
100
%
_______________ 
n/m = not meaningful
(1)
EMEA includes Europe, the Middle East and Africa.
(2)
Amounts in table may not total due to rounding.
Net Revenues
Outsourcing revenue growth in local currency was solid during the third quarter of fiscal 2013. Financial Services, Products and Health & Public Service experienced strong outsourcing revenue growth in local currency during the third quarter of fiscal 2013. Year-over-year outsourcing revenue growth in local currency was flat in Resources and declined in Communications, Media & Technology. Consulting revenues were flat in local currency during the third quarter of fiscal 2013 compared with the third quarter of fiscal 2012. Health & Public Service experienced strong consulting revenue growth in local currency during the third quarter of fiscal 2013. Year-over-year consulting revenue growth in local currency was slight in Financial Services and declined in Resources, Products and Communications, Media & Technology.
The following net revenues commentary discusses local currency net revenue changes for the third quarter of fiscal 2013 compared to the third quarter of fiscal 2012:
Operating Groups
Communications, Media & Technology net revenues decreased 3% in local currency. Outsourcing revenues declined modestly, due to a significant decline in Electronics & High Tech in EMEA, principally due to an expected year-over-year revenue decline from one contract. The revenue decline on this contract is expected to continue to impact outsourcing revenue growth in the near term. In addition, outsourcing revenues decreased in Electronics & High Tech in Asia Pacific. These declines were partially offset by strong growth in Americas across all industry groups. Consulting revenues declined slightly, due to Media & Entertainment and Communications in Americas and Electronics & High Tech in Asia Pacific and EMEA. These declines were partially offset by strong growth in Communications in EMEA and Electronics & High Tech in Americas. Some of our clients continued to reduce and/or defer their investment in consulting, which had a negative impact on our consulting revenues during the third quarter of fiscal 2013. We expect these trends will continue to impact our net revenue growth in the near term.

22


Financial Services net revenues increased 8% in local currency. Outsourcing revenues reflected very strong growth, driven by all industry groups in Americas and Banking in EMEA. Consulting revenues reflected slight growth, driven by growth in Insurance in Asia Pacific and Americas and Capital Markets in EMEA. These increases were partially offset by declines in Insurance in EMEA and Banking in EMEA and Americas. Changes in the banking and capital markets industries continue to influence the business needs of our clients. This is resulting in higher current demand for outsourcing services, including transformational projects, and lower demand for short-term consulting services.
Health & Public Service net revenues increased 11% in local currency. Consulting revenues reflected strong growth, led by Public Service in Americas and Asia Pacific and Health in Americas and EMEA. This growth was partially offset by declines in Public Service in EMEA and Health in Asia Pacific. Outsourcing revenues also reflected strong growth, led by Health in Americas and Asia Pacific, and Public Service in Americas.
Products net revenues increased 4% in local currency. Outsourcing revenues reflected strong growth, driven by growth across all geographic regions and industry groups, led by Life Sciences, Retail and Industrial Equipment. Consulting revenues reflected a modest decline, due to declines in Americas in Consumer Goods & Services and Retail, Asia Pacific across most industry groups and EMEA in Retail. These decreases were partially offset by growth in EMEA in Consumer Goods & Services and Life Sciences, and Americas in Industrial Equipment. Some of our clients are reducing and/or deferring their level of consulting investments, particularly short-term projects. This had a higher than expected negative impact on our consulting revenues during the third quarter of fiscal 2013. In addition, several large systems integration projects have ended or have transitioned to smaller phases. We expect to continue to experience higher demand for outsourcing services, including transformational projects, and a lower demand for short-term consulting services in the near term.
Resources net revenues decreased 3% in local currency. Outsourcing revenues were flat, as growth in Utilities and Energy in Asia Pacific and all industry groups in EMEA, was offset by declines in all industry groups in Americas. Consulting revenues reflected a modest decline, as significant growth in Chemicals in Americas was more than offset by declines in Natural Resources in Asia Pacific and Americas, Utilities in EMEA and Energy in Americas. Some of our clients, primarily in Natural Resources and Utilities, reduced their level of consulting investments and demand for our outsourcing services continued to moderate. These trends had a higher than expected negative impact on our revenues during the third quarter of fiscal 2013, particularly in Brazil. In addition, several large systems integration projects have ended or have transitioned to smaller phases. We expect Resources year-over-year net revenue growth to continue to decline slightly in the near term.
Geographic Regions
Americas net revenues increased 8% in local currency, driven by growth in the United States, partially offset by a decline in Brazil.
EMEA net revenues decreased 1% in local currency. We experienced a significant decline in Finland, principally due to an expected year-over-year decline from one contract in Communications, Media & Technology, as well as declines in Spain, Sweden and Norway. These declines were partially offset by growth in most countries across the remainder of the region, led by Switzerland, the Netherlands, the United Kingdom, Germany, South Africa and Italy.
Asia Pacific net revenues were flat in local currency, as growth in China and India was offset by declines in Australia and Japan.
Operating Expenses
Operating expenses for the third quarter of fiscal 2013 were $6,566 million, a decrease of $14 million from the third quarter of fiscal 2012, and decreased as a percentage of revenues to 85.2% from 86.1% during this period. Operating expenses before reimbursable expenses for the third quarter of fiscal 2013 were $6,056 million, a decrease of $38 million, or 1%, from the third quarter of fiscal 2012, and decreased as a percentage of net revenues to 84.1% from 85.2% during this period.
Cost of Services
Cost of services for the third quarter of fiscal 2013 was $5,270 million, flat with the third quarter of fiscal 2012, and decreased as a percentage of revenues to 68.4% from 69.0% during this period. Cost of services before reimbursable expenses for the third quarter of fiscal 2013 was $4,760 million, a decrease of $24 million, from the third quarter of fiscal 2012, and decreased as a percentage of net revenues to 66.1% from 66.9% during this period. Gross margin for the third quarter of fiscal 2013 increased to 33.9% from 33.1% for the third quarter of fiscal 2012, principally due to higher outsourcing contract profitability and lower accruals for annual bonus compensation, partially offset by higher costs associated with investments in offerings.

23


Sales and Marketing
Sales and marketing expense for the third quarter of fiscal 2013 was $887 million, an increase of $32 million, or 4%, over the third quarter of fiscal 2012, and increased as a percentage of net revenues to 12.3% from 11.9% during this period. The increase as a percentage of net revenues was primarily driven by higher business development costs associated with generating new contract bookings and expanding our pipeline of business opportunities as well as acquisition-related costs.
General and Administrative Costs
General and administrative costs for the third quarter of fiscal 2013 were $459 million, an increase of $3 million, or 1%, over the third quarter of fiscal 2012, and remained flat as a percentage of net revenues at 6.4% during this period.
Reorganization (Benefits) Costs, net
We recorded net reorganization benefits of $49 million ($50 million in reorganization benefits less $0.5 million in interest expense accrued) during the third quarter of fiscal 2013 as a result of final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure in 2001. As of May 31, 2013, the remaining liability for reorganization costs was $18 million, of which $5 million was classified as current liabilities because expirations of statutes of limitations or other final determinations could occur within 12 months. For additional information, refer to Note 4 (Reorganization (Benefits) Costs, Net) to our Consolidated Financial Statements above under Item 1, “Financial Statements.”

24


Operating Income and Operating Margin
Operating income for the third quarter of fiscal 2013 was $1,142 million, an increase of $81 million, or 8%, over the third quarter of fiscal 2012, and increased as a percentage of net revenues to 15.9% from 14.8% during this period. The reorganization benefits of $50 million recorded in the third quarter of fiscal 2013 increased operating margin by 70 basis points. Excluding the effects of the reorganization benefits, operating margin for the third quarter of fiscal 2013 increased 40 basis points compared with the third quarter of fiscal 2012.
Operating income and operating margin for each of the operating groups were as follows:
  
Three Months Ended May 31,
  
2013
 
2012
  
Operating
Income
 
Operating
Margin
 
Operating
Income
 
Operating
Margin
 
 (in millions of U.S. dollars)
Communications, Media & Technology
$
213

 
15
%
 
$
233

 
15
%
Financial Services
276

 
18

 
216

 
14

Health & Public Service
168

 
14

 
116

 
11

Products
264

 
15

 
242

 
14

Resources
221

 
17

 
255

 
19

Total
$
1,142

 
15.9
%
 
$
1,061

 
14.8
%
_______________ 
(1)
Amounts in table may not total due to rounding.

Operating Income and Operating Margin Excluding Reorganization Benefits (Non-GAAP)
 
Three Months Ended May 31,
 
 
 
2013
 
2012
 
 
 
 
 
Operating Income and Operating Margin
Excluding Reorganization Benefits
(Non-GAAP)
 
Operating Income and Operating Margin as Reported (GAAP)
 
 
 
 
 
 
 
 
 
Operating
Income
(GAAP)
 
Reorganization
Benefits (1)
 
Operating
Income (2)
 
Operating
Margin (2)
 
Operating
Income
 
Operating
Margin
 
Increase
(Decrease)
 
(in millions of U.S. dollars)
Communications, Media & Technology
$
213

 
$
10

 
$
204

 
14
%
 
$
233

 
15
%
 
$
(29
)
Financial Services
276

 
11

 
265

 
17

 
216

 
14

 
49

Health & Public Service
168

 
9

 
159

 
13

 
116

 
11

 
43

Products
264

 
12

 
252

 
15

 
242

 
14

 
11

Resources
221

 
9

 
212

 
17

 
255

 
19

 
(42
)
Total
$
1,142

 
$
50

 
$
1,092

 
15.2
%
 
$
1,061

 
14.8
%
 
$
32

_______________ 
(1)
Represents reorganization benefits related to final determinations of certain reorganization liabilities established in connection with our transition to a corporate structure during 2001.
(2)
We have presented Operating income and operating margin excluding reorganization benefits, as we believe the effect of the reorganization benefits on Operating income and operating margin facilitates understanding as to both the impact of these benefits and our operating performance.
(3)
Amounts in table may not total due to rounding.
During the third quarter of fiscal 2013, each operating group recorded a portion of the $50 million in reorganization benefits. The commentary below provides additional insight into operating group performance and operating margin for the third quarter of fiscal 2013, exclusive of the reorganization benefits, compared with the third quarter of fiscal 2012. See “—Reorganization (Benefits) Costs, net.”
Communications, Media & Technology operating income decreased, primarily due to a decline in revenues, including an expected significant year-over-year decline from one outsourcing contract, and higher sales and marketing costs as a percentage of net revenues.

25


Financial Services operating income increased, primarily due to strong outsourcing revenue growth and improved consulting contract profitability. Operating income for the third quarter of fiscal 2012 included the impact of costs related to acquisitions.
Health & Public Service operating income increased, primarily due to revenue growth and improved outsourcing contract profitability.
Products operating income increased, primarily due to strong outsourcing revenue growth and improved outsourcing contract profitability, partially offset by a decline in consulting revenues and higher sales and marketing costs as a percentage of net revenues.
Resources operating income decreased, primarily due to a decline in consulting revenue and higher sales and marketing costs as a percentage of net revenues.
Provision for Income Taxes
The effective tax rate for the third quarter of fiscal 2013 was 23.8%, compared with 28.5% for the third quarter of fiscal 2012. During the third quarter of fiscal 2013, we recorded reorganization benefits of $50 million, which increased income before income taxes without any increase in income tax expense. Absent this item, our effective tax rate for the third quarter of fiscal 2013 would have been 24.8%. The lower effective tax rate in the third quarter of fiscal 2013 was due to lower additions to tax reserves.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests for the third quarter of fiscal 2013 was $64 million, a decrease of $10 million, or 13%, from the third quarter of fiscal 2012. The decrease was due to a reduction in the Accenture SCA Class I common shares and Accenture Canada Holdings Inc. exchangeable shares average noncontrolling ownership interest to 6% for the third quarter of fiscal 2013 from 8% for the third quarter of fiscal 2012, partially offset by higher Net income of $111 million during the third quarter of fiscal 2013.
Earnings Per Share
Diluted earnings per share were $1.21 for the third quarter of fiscal 2013, compared with $1.03 for the third quarter of fiscal 2012. The $0.18 increase in our earnings per share included the impact of reorganization benefits of $50 million, which increased earnings per share by $0.07. Excluding the impact of this benefit, earnings per share increased $0.11 compared with the third quarter of fiscal 2012, due to increases of $0.06 from a lower effective tax rate, excluding the impact of the tax benefit related to the reorganization benefits, $0.03 from higher revenues and operating results and $0.02 from lower weighted average shares outstanding. For information regarding our earnings per share calculations, see Note 2 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.”

26


Results of Operations for the Nine Months Ended May 31, 2013 Compared to the Nine Months Ended May 31, 2012
Net revenues (by operating group, geographic region and type of work) and reimbursements were as follows:
  
Nine Months Ended May 31,
 
Percent
Increase
(Decrease)
U.S. Dollars
 
Percent
Increase
(Decrease)
Local
Currency
 
Percent of Total Net Revenues
for the Nine Months Ended May 31,
  
2013
 
2012
 
 
 
2013
 
2012
 
(in millions of U.S. dollars)
 
 
 
 
 
 
 
 
OPERATING GROUPS
 
 
 
 
 
 
 
 
 
 
 
Communi