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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2020
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)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A ordinary shares, par value $0.0000225 per share | ACN | New York Stock Exchange |
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
Smaller reporting company | ☐ | Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares of the registrant’s Class A ordinary shares, par value $0.0000225 per share, outstanding as of December 7, 2020 was 661,135,130 (which number includes 26,889,663 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 December 7, 2020 was 526,879.
Table of Contents
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Part I. | | |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
Part II. | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts) | |
ACCENTURE FORM 10-Q | | 3 |
Part I — Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
November 30, 2020 and August 31, 2020
| | | | | | | | | | | |
| November 30, 2020 | | August 31, 2020 |
ASSETS | (Unaudited) | | |
CURRENT ASSETS: | | | |
Cash and cash equivalents | $ | 8,594,003 | | | $ | 8,415,330 | |
Short-term investments | 83,148 | | | 94,309 | |
Receivables and contract assets | 8,547,711 | | | 7,846,892 | |
Other current assets | 1,401,232 | | | 1,393,225 | |
Total current assets | 18,626,094 | | | 17,749,756 | |
NON-CURRENT ASSETS: | | | |
Contract assets | 44,517 | | | 43,257 | |
Investments | 298,906 | | | 324,514 | |
Property and equipment, net | 1,506,825 | | | 1,545,568 | |
Lease assets | 3,100,120 | | | 3,183,346 | |
Goodwill | 8,127,411 | | | 7,709,820 | |
Deferred contract costs | 715,897 | | | 723,168 | |
Deferred tax assets | 4,178,723 | | | 4,153,146 | |
Other non-current assets | 1,669,818 | | | 1,646,018 | |
Total non-current assets | 19,642,217 | | | 19,328,837 | |
TOTAL ASSETS | $ | 38,268,311 | | | $ | 37,078,593 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
CURRENT LIABILITIES: | | | |
Current portion of long-term debt and bank borrowings | $ | 8,925 | | | $ | 7,820 | |
Accounts payable | 1,513,442 | | | 1,349,874 | |
Deferred revenues | 3,524,781 | | | 3,636,741 | |
Accrued payroll and related benefits | 5,179,301 | | | 5,083,950 | |
Income taxes payable | 445,824 | | | 453,542 | |
Lease liabilities | 732,878 | | | 756,057 | |
Accrued consumption taxes | 706,876 | | | 662,409 | |
Other accrued liabilities | 707,072 | | | 712,197 | |
Total current liabilities | 12,819,099 | | | 12,662,590 | |
NON-CURRENT LIABILITIES: | | | |
Long-term debt | 59,881 | | | 54,052 | |
Deferred revenues | 668,267 | | | 690,931 | |
Retirement obligation | 1,875,976 | | | 1,859,444 | |
Deferred tax liabilities | 201,376 | | | 179,703 | |
Income taxes payable | 995,478 | | | 930,695 | |
Lease liabilities | 2,627,185 | | | 2,667,584 | |
Other non-current liabilities | 594,833 | | | 534,421 | |
Total non-current liabilities | 7,022,996 | | | 6,916,830 | |
COMMITMENTS AND CONTINGENCIES | | | |
SHAREHOLDERS’ EQUITY: | | | |
Ordinary shares, par value 1.00 euros per share, 40,000 shares authorized and issued as of November 30, 2020 and August 31, 2020 | 57 | | | 57 | |
Class A ordinary shares, par value $0.0000225 per share, 20,000,000,000 shares authorized, 660,518,888 and 658,548,895 shares issued as of November 30, 2020 and August 31, 2020, respectively | 15 | | | 15 | |
Class X ordinary shares, par value $0.0000225 per share, 1,000,000,000 shares authorized, 526,879 and 527,509 shares issued and outstanding as of November 30, 2020 and August 31, 2020, respectively | — | | | — | |
Restricted share units | 1,721,681 | | | 1,585,302 | |
Additional paid-in capital | 7,551,089 | | | 7,167,227 | |
Treasury shares, at cost: Ordinary, 40,000 shares as of November 30, 2020 and August 31, 2020; Class A ordinary, 26,898,686 and 24,383,369 shares as of November 30, 2020 and August 31, 2020, respectively | (3,163,841) | | | (2,565,761) | |
Retained earnings | 13,276,702 | | | 12,375,533 | |
Accumulated other comprehensive loss | (1,479,202) | | | (1,561,837) | |
Total Accenture plc shareholders’ equity | 17,906,501 | | | 17,000,536 | |
Noncontrolling interests | 519,715 | | | 498,637 | |
Total shareholders’ equity | 18,426,216 | | | 17,499,173 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 38,268,311 | | | $ | 37,078,593 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts) | |
ACCENTURE FORM 10-Q | | 4 |
Consolidated Income Statements
For the Three Months Ended November 30, 2020 and 2019
(Unaudited)
| | | | | | | | | | | |
| 2020 | | 2019 |
REVENUES: | | | |
Revenues | $ | 11,762,185 | | | $ | 11,358,958 | |
OPERATING EXPENSES: | | | |
Cost of services | 7,863,889 | | | 7,711,199 | |
Sales and marketing | 1,227,176 | | | 1,191,123 | |
General and administrative costs | 780,451 | | | 689,373 | |
Total operating expenses | 9,871,516 | | | 9,591,695 | |
OPERATING INCOME | 1,890,669 | | | 1,767,263 | |
Interest income | 10,685 | | | 27,419 | |
Interest expense | (8,854) | | | (5,474) | |
Other income (expense), net | 94,367 | | | 11,439 | |
| | | |
INCOME BEFORE INCOME TAXES | 1,986,867 | | | 1,800,647 | |
Income tax expense | 464,810 | | | 425,479 | |
NET INCOME | 1,522,057 | | | 1,375,168 | |
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc. | (1,700) | | | (1,741) | |
Net income attributable to noncontrolling interests – other | (20,081) | | | (16,459) | |
NET INCOME ATTRIBUTABLE TO ACCENTURE PLC | $ | 1,500,276 | | | $ | 1,356,968 | |
Weighted average Class A ordinary shares: | | | |
Basic | 634,271,482 | | | 635,722,309 | |
Diluted | 646,879,735 | | | 649,389,444 | |
Earnings per Class A ordinary share: | | | |
Basic | $ | 2.37 | | | $ | 2.13 | |
Diluted | $ | 2.32 | | | $ | 2.09 | |
Cash dividends per share | $ | 0.88 | | | $ | 0.80 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars) | |
ACCENTURE FORM 10-Q | | 5 |
| | | |
Consolidated Statements Of Comprehensive Income
For the Three Months Ended November 30, 2020 and 2019
(Unaudited)
| | | | | | | | | | | |
| 2020 | | 2019 |
NET INCOME | $ | 1,522,057 | | | $ | 1,375,168 | |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | | | |
Foreign currency translation | 67,312 | | | 37,730 | |
Defined benefit plans | 10,881 | | | 8,752 | |
Cash flow hedges | 4,393 | | | 14,127 | |
Investments | 49 | | | — | |
OTHER COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ACCENTURE PLC | 82,635 | | | 60,609 | |
Other comprehensive income (loss) attributable to noncontrolling interests | 1,461 | | | 1,180 | |
COMPREHENSIVE INCOME | $ | 1,606,153 | | | $ | 1,436,957 | |
| | | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO ACCENTURE PLC | $ | 1,582,911 | | | $ | 1,417,577 | |
Comprehensive income attributable to noncontrolling interests | 23,242 | | | 19,380 | |
COMPREHENSIVE INCOME | $ | 1,606,153 | | | $ | 1,436,957 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) | |
ACCENTURE FORM 10-Q | | 6 |
| | | |
Consolidated Shareholders’ Equity Statement
For the Three Months Ended November 30, 2020
(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, 2020 | $ | 57 | | | 40 | | | $ | 15 | | | 658,549 | | | $ | — | | | 528 | | | $ | 1,585,302 | | | $ | 7,167,227 | | | $ | (2,565,761) | | | (24,423) | | | $ | 12,375,533 | | | $ | (1,561,837) | | | $ | 17,000,536 | | | $ | 498,637 | | | $ | 17,499,173 | |
Net income | | | | | | | | | | | | | | | | | | | | | 1,500,276 | | | | | 1,500,276 | | | 21,781 | | | 1,522,057 | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | | | | | | | | | 82,635 | | | 82,635 | | | 1,461 | | | 84,096 | |
Purchases of Class A shares | | | | | | | | | | | | | | | 765 | | | (768,395) | | | (3,341) | | | | | | | (767,630) | | | (765) | | | (768,395) | |
Share-based compensation expense | | | | | | | | | | | | | 270,226 | | | 41,095 | | | | | | | | | | | 311,321 | | | | | 311,321 | |
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares | | | | | | | | | | | (1) | | | | | (500) | | | | | | | | | | | (500) | | | | | (500) | |
Issuances of Class A shares for employee share programs | | | | | | | 1,970 | | | | | | | (153,073) | | | 343,783 | | | 170,315 | | | 825 | | | (22,462) | | | | | 338,563 | | | 328 | | | 338,891 | |
Dividends | | | | | | | | | | | | | 19,226 | | | | | | | | | (576,645) | | | | | (557,419) | | | (633) | | | (558,052) | |
Other, net | | | | | | | | | | | | | | | (1,281) | | | | | | | | | | | (1,281) | | | (1,094) | | | (2,375) | |
Balance as of November 30, 2020 | $ | 57 | | | 40 | | | $ | 15 | | | 660,519 | | | $ | — | | | 527 | | | $ | 1,721,681 | | | $ | 7,551,089 | | | $ | (3,163,841) | | | (26,939) | | | $ | 13,276,702 | | | $ | (1,479,202) | | | $ | 17,906,501 | | | $ | 519,715 | | | $ | 18,426,216 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars and share amounts) | |
ACCENTURE FORM 10-Q | | 7 |
| | | |
Consolidated Shareholders’ Equity Statement — (continued)
For the Three Months Ended November 30, 2019
(Unaudited)
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| 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, 2019 | $ | 57 | | | 40 | | | $ | 15 | | | 654,739 | | | $ | — | | | 609 | | | $ | 1,411,903 | | | $ | 5,804,448 | | | $ | (1,388,376) | | | (19,005) | | | $ | 10,421,538 | | | $ | (1,840,577) | | | $ | 14,409,008 | | | $ | 418,683 | | | $ | 14,827,691 | |
Net income | | | | | | | | | | | | | | | | | | | | | 1,356,968 | | | | | 1,356,968 | | | 18,200 | | | 1,375,168 | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | | | | | | | | | 60,609 | | | 60,609 | | | 1,180 | | | 61,789 | |
Purchases of Class A shares | | | | | | | | | | | | | | | 811 | | | (724,618) | | | (3,821) | | | | | | | (723,807) | | | (811) | | | (724,618) | |
Share-based compensation expense | | | | | | | | | | | | | 238,677 | | | 36,252 | | | | | | | | | | | 274,929 | | | | | 274,929 | |
Purchases/redemptions of Accenture Canada Holdings Inc. exchangeable shares and Class X shares | | | | | | | | | | | (15) | | | | | (4,593) | | | | | | | | | | | (4,593) | | | | | (4,593) | |
Issuances of Class A shares for employee share programs | | | | | | | 2,207 | | | | | | | (142,925) | | | 323,660 | | | 135,603 | | | 836 | | | (16,263) | | | | | 300,075 | | | 325 | | | 300,400 | |
Dividends | | | | | | | | | | | | | 18,243 | | | | | | | | | (525,968) | | | | | (507,725) | | | (656) | | | (508,381) | |
Other, net | | | | | | | | | | | | | | | 1,674 | | | | | | | | | | | 1,674 | | | (2,851) | | | (1,177) | |
Balance as of November 30, 2019 | $ | 57 | | | 40 | | | $ | 15 | | | 656,946 | | | $ | — | | | 594 | | | $ | 1,525,898 | | | $ | 6,162,252 | | | $ | (1,977,391) | | | (21,990) | | | $ | 11,236,275 | | | $ | (1,779,968) | | | $ | 15,167,138 | | | $ | 434,070 | | | $ | 15,601,208 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Consolidated Financial Statements (In thousands of U.S. dollars) | |
ACCENTURE FORM 10-Q | | 8 |
| | | |
Consolidated Cash Flows Statements
For the Three Months Ended November 30, 2020 and 2019
(Unaudited)
| | | | | | | | | | | |
| 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 1,522,057 | | | $ | 1,375,168 | |
Adjustments to reconcile Net income to Net cash provided by (used in) operating activities — | | | |
Depreciation, amortization and other | 468,200 | | | 399,458 | |
Share-based compensation expense | 311,321 | | | 274,929 | |
| | | |
| | | |
Deferred tax expense (benefit) | (19,096) | | | 36,591 | |
Other, net | (103,806) | | | (120,927) | |
Change in assets and liabilities, net of acquisitions — | | | |
Receivables and contract assets, current and non-current | (594,475) | | | (436,872) | |
Other current and non-current assets | (18,129) | | | (101,096) | |
Accounts payable | 148,495 | | | (61,929) | |
Deferred revenues, current and non-current | (151,356) | | | (185,313) | |
Accrued payroll and related benefits | 48,385 | | | (261,592) | |
Income taxes payable, current and non-current | 34,755 | | | 84,840 | |
Other current and non-current liabilities | (43,506) | | | (216,346) | |
Net cash provided by (used in) operating activities | 1,602,845 | | | 786,911 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| | | |
| | | |
Purchases of property and equipment | (93,115) | | | (95,063) | |
Purchases of businesses and investments, net of cash acquired | (503,843) | | | (109,848) | |
Proceeds from sales of businesses and investments | 149,002 | | | 39,200 | |
| | | |
Other investing, net | 1,549 | | | (182) | |
Net cash provided by (used in) investing activities | (446,407) | | | (165,893) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Proceeds from issuance of shares | 338,891 | | | 300,400 | |
Purchases of shares | (768,895) | | | (729,211) | |
Proceeds from (repayments of) long-term debt, net | (82) | | | (570) | |
Cash dividends paid | (558,052) | | | (508,381) | |
Other, net | (11,313) | | | (10,462) | |
Net cash provided by (used in) financing activities | (999,451) | | | (948,224) | |
Effect of exchange rate changes on cash and cash equivalents | 21,686 | | | 10,890 | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 178,673 | | | (316,316) | |
CASH AND CASH EQUIVALENTS, beginning of period | 8,415,330 | | | 6,126,853 | |
CASH AND CASH EQUIVALENTS, end of period | $ | 8,594,003 | | | $ | 5,810,537 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | | | |
Income taxes paid, net | $ | 344,628 | | | $ | 292,787 | |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 9 |
| | | |
1. Basis Of Presentation
The accompanying unaudited interim Consolidated Financial Statements of Accenture plc and its controlled subsidiary companies 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. We use the terms “Accenture,” “we” and “our” in the Notes to Consolidated Financial Statements to refer to Accenture plc and its subsidiaries. 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, 2020 included in our Annual Report on Form 10-K filed with the SEC on October 22, 2020.
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 we 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 months ended November 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2021.
Allowance for Credit Losses - Client Receivables and Contract Assets
We record client receivables and contract assets at their face amounts less an allowance for credit losses. The allowance represents our estimate of expected credit losses based on historical experience, current economic conditions and certain forward-looking information. As of November 30, 2020 and August 31, 2020, the total allowance for credit losses recorded for client receivables and contract assets was $38,315 and $40,277, respectively. The change in the allowance is primarily due to immaterial write-offs and changes in gross client receivables and contract assets.
Concentrations of Credit Risk
Our financial instruments, consisting primarily of cash and cash equivalents, foreign currency exchange rate instruments and client receivables, are exposed to concentrations of credit risk. We place our cash and cash equivalents and foreign exchange instruments with highly-rated financial institutions, limit the amount of credit exposure with any one financial institution and conduct ongoing evaluations of the credit worthiness of the financial institutions with which we do business. Client receivables are dispersed across many different industries and countries; therefore, concentrations of credit risk are limited.
Investments
All available-for-sale securities and liquid investments with an original maturity greater than three months but less than one year are considered to be Short-term investments. Non-current investments consist of equity securities in publicly-traded and privately-held companies and are accounted for using either the equity or fair value measurement alternative method of accounting (for investments without readily determinable fair values).
Our non-current investments are as follows:
| | | | | | | | | | | |
| November 30, 2020 | | August 31, 2020 |
Equity method investments | $ | 211,765 | | | $ | 240,446 | |
Investments without readily determinable fair values | 87,141 | | | 84,068 | |
Total non-current investments | $ | 298,906 | | | $ | 324,514 | |
For investments in which we can exercise significant influence but do not control, we use the equity method of accounting. Equity method investments are initially recorded at cost and our proportionate share of gains and losses of the investee are included as a component of other income (expense), net. Our equity method investments consist primarily of an investment in Duck Creek Technologies. As of November 30, 2020 and August 31, 2020, the carrying amount of our investment was $201,810 and $230,219, and the estimated fair value of our approximately 19% and 22% ownership was $850,825 and $956,308, respectively.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 10 |
| | | |
We account for the investment under the equity method because we have the ability to influence operations through the combination of our voting power and through other factors, such as representation on the board and our business relationship.
Depreciation and Amortization
As of November 30, 2020 and August 31, 2020, total accumulated depreciation was $2,414,951 and $2,313,731, respectively. See table below for summary of depreciation on fixed assets, deferred transition amortization, intangible assets amortization and operating lease cost for the three months ended November 30, 2020 and 2019, respectively.
| | | | | | | | | | | |
| Three Months Ended |
| November 30, 2020 | | November 30, 2019 |
Depreciation | $ | 133,918 | | | $ | 97,090 | |
Amortization - Deferred transition | 81,356 | | | 67,914 | |
Amortization - Intangible assets | 67,207 | | | 53,372 | |
Other - Operating lease cost | 185,719 | | | 181,082 | |
Total depreciation, amortization and other | $ | 468,200 | | | $ | 399,458 | |
Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13 (“Topic 326”)
On September 1, 2020, we adopted FASB ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on recognition and measurement of credit losses and related disclosures. The amendments replace the existing incurred loss impairment model with a methodology to measure and recognize lifetime expected credit losses for all in-scope financial assets, including accounts receivable and contract assets. The adoption did not have an impact on our Consolidated Financial Statements.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 11 |
| | | |
2. Revenues
Disaggregation of Revenue
See Note 11 (Segment Reporting) to these Consolidated Financial Statements for our disaggregated revenues.
Remaining Performance Obligations
We had remaining performance obligations of approximately $19 billion and $20 billion as of November 30, 2020 and August 31, 2020, respectively. Our remaining performance obligations represent the amount of transaction price for which work has not been performed and revenue has not been recognized. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Under Topic 606, only the non-cancelable portion of these contracts is included in our performance obligations. Additionally, our performance obligations only include variable consideration if we assess it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is resolved. Based on the terms of our contracts, a significant portion of what we consider contract bookings is not included in our remaining performance obligations. We expect to recognize approximately 62% of our remaining performance obligations as of November 30, 2020 as revenue in fiscal 2021, an additional 19% in fiscal 2022, and the balance thereafter.
Contract Estimates
Adjustments in contract estimates related to performance obligations satisfied or partially satisfied in prior periods were immaterial for the three months ended November 30, 2020 and 2019, respectively.
Contract Balances
Deferred transition revenues were $668,267 and $690,931 as of November 30, 2020 and August 31, 2020, respectively, and are included in Non-current deferred revenues. Costs related to these activities are also deferred and are expensed as the services are provided. Deferred transition costs were $715,897 and $723,168 as of November 30, 2020 and August 31, 2020, respectively, and are included in Deferred contract costs. Generally, deferred amounts are protected in the event of early termination of the contract and are monitored regularly for impairment. Impairment losses are recorded when projected remaining undiscounted operating cash flows of the related contract are not sufficient to recover the carrying amount of contract assets.
The following table provides information about the balances of our Receivables and Contract assets, net of allowance, and Contract liabilities (Deferred revenues):
| | | | | | | | | | | |
| As of November 30, 2020 | | As of August 31, 2020 |
Receivables | $ | 7,799,770 | | | $ | 7,192,110 | |
Contract assets (current) | 747,941 | | | 654,782 | |
Receivables and contract assets, net of allowance (current) | 8,547,711 | | | 7,846,892 | |
Contract assets (non-current) | 44,517 | | | 43,257 | |
Deferred revenues (current) | 3,524,781 | | | 3,636,741 | |
Deferred revenues (non-current) | 668,267 | | | 690,931 | |
Changes in the contract asset and liability balances during the three months ended November 30, 2020, were a result of normal business activity and not materially impacted by any other factors.
Revenues recognized during the three months ended November 30, 2020 that were included in Deferred revenues as of August 31, 2020 were $2.0 billion. Revenues recognized during the three months ended November 30, 2019 that were included in Deferred revenues as of August 31, 2019 were $1.8 billion.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 12 |
| | | |
3. Earnings Per Share
Basic and diluted earnings per share are calculated as follows:
| | | | | | | | | | | |
| Three Months Ended |
| November 30, 2020 | | November 30, 2019 |
Basic earnings per share | | | |
Net income attributable to Accenture plc | $ | 1,500,276 | | | $ | 1,356,968 | |
Basic weighted average Class A ordinary shares | 634,271,482 | | | 635,722,309 | |
Basic earnings per share | $ | 2.37 | | | $ | 2.13 | |
Diluted earnings per share | | | |
Net income attributable to Accenture plc | $ | 1,500,276 | | | $ | 1,356,968 | |
Net income attributable to noncontrolling interest in Accenture Canada Holdings Inc. (1) | 1,700 | | | 1,741 | |
Net income for diluted earnings per share calculation | $ | 1,501,976 | | | $ | 1,358,709 | |
Basic weighted average Class A ordinary shares | 634,271,482 | | | 635,722,309 | |
Class A ordinary shares issuable upon redemption/exchange of noncontrolling interest (1) | 718,767 | | | 815,515 | |
Diluted effect of employee compensation related to Class A ordinary shares | 11,633,343 | | | 12,626,225 | |
Diluted effect of share purchase plans related to Class A ordinary shares | 256,143 | | | 225,395 | |
Diluted weighted average Class A ordinary shares | 646,879,735 | | | 649,389,444 | |
Diluted earnings per share | $ | 2.32 | | | $ | 2.09 | |
(1)Diluted earnings per share assumes 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.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 13 |
| | | |
4. Accumulated Other Comprehensive Loss
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss attributable to Accenture plc:
| | | | | | | | | | | |
| Three Months Ended |
| November 30, 2020 | | November 30, 2019 |
Foreign currency translation | | | |
Beginning balance | $ | (1,010,279) | | | $ | (1,207,975) | |
Foreign currency translation | 67,443 | | | 40,145 | |
Income tax benefit (expense) | 1,313 | | | (1,264) | |
Portion attributable to noncontrolling interests | (1,444) | | | (1,151) | |
Foreign currency translation, net of tax | 67,312 | | | 37,730 | |
Ending balance | (942,967) | | | (1,170,245) | |
| | | |
Defined benefit plans | | | |
Beginning balance | (615,223) | | | (672,323) | |
| | | |
| | | |
| | | |
Reclassifications into net periodic pension and post-retirement expense (1) | 13,595 | | | 12,784 | |
Income tax benefit (expense) | (2,702) | | | (4,021) | |
Portion attributable to noncontrolling interests | (12) | | | (11) | |
Defined benefit plans, net of tax | 10,881 | | | 8,752 | |
Ending balance | (604,342) | | | (663,571) | |
| | | |
Cash flow hedges | | | |
Beginning balance | 63,714 | | | 38,993 | |
Unrealized gain (loss) | 25,364 | | | 38,408 | |
Reclassification adjustments into Cost of services | (20,895) | | | (20,019) | |
Income tax benefit (expense) | (71) | | | (4,244) | |
Portion attributable to noncontrolling interests | (5) | | | (18) | |
Cash flow hedges, net of tax | 4,393 | | | 14,127 | |
Ending balance (2) | 68,107 | | | 53,120 | |
| | | |
Investments | | | |
Beginning balance | (49) | | | 728 | |
Unrealized gain (loss) | 49 | | | — | |
| | | |
Income tax benefit (expense) | — | | | — | |
Portion attributable to noncontrolling interests | — | | | — | |
Investments, net of tax | 49 | | | — | |
Ending balance | — | | | 728 | |
| | | |
Accumulated other comprehensive loss | $ | (1,479,202) | | | $ | (1,779,968) | |
(1)Reclassifications into net periodic pension and post-retirement expense are recognized in Cost of services, Sales and marketing, General and administrative costs and non-operating expenses.
(2)As of November 30, 2020, $66,522 of net unrealized gains related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of services in the next twelve months.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 14 |
| | | |
5. Business Combinations
During the three months ended November 30, 2020, we completed individually immaterial acquisitions for total consideration of $493,354, net of cash acquired. The pro forma effects of these acquisitions on our operations were not material.
6. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill by reportable operating segment are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| August 31, 2020 | | Additions/ Adjustments | | Foreign Currency Translation | | November 30, 2020 |
North America | $ | 4,604,441 | | | $ | 225,619 | | | $ | 647 | | | $ | 4,830,707 | |
Europe | 2,138,088 | | | 120,090 | | | 9,356 | | | 2,267,534 | |
Growth Markets | 967,291 | | | 48,909 | | | 12,970 | | | 1,029,170 | |
Total | $ | 7,709,820 | | | $ | 394,618 | | | $ | 22,973 | | | $ | 8,127,411 | |
Goodwill includes immaterial adjustments related to prior period acquisitions.
Intangible Assets
Our definite-lived intangible assets by major asset class are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | August 31, 2020 | | November 30, 2020 |
Intangible Asset Class | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Customer-related | | $ | 1,319,332 | | | $ | (495,367) | | | $ | 823,965 | | | $ | 1,386,214 | | | $ | (527,370) | | | $ | 858,844 | |
Technology | | 150,765 | | | (55,543) | | | 95,222 | | | 170,600 | | | (56,977) | | | 113,623 | |
Patents | | 129,295 | | | (66,954) | | | 62,341 | | | 128,399 | | | (65,928) | | | 62,471 | |
Other | | 82,676 | | | (34,986) | | | 47,690 | | | 82,622 | | | (36,575) | | | 46,047 | |
Total | | $ | 1,682,068 | | | $ | (652,850) | | | $ | 1,029,218 | | | $ | 1,767,835 | | | $ | (686,850) | | | $ | 1,080,985 | |
Total amortization related to our intangible assets was $67,207 and $53,372 for the three months ended November 30, 2020 and 2019, respectively. Estimated future amortization related to intangible assets held as of November 30, 2020 is as follows:
| | | | | | | | |
Fiscal Year | | Estimated Amortization |
Remainder of 2021 | | $ | 179,796 | |
2022 | | 198,541 | |
2023 | | 178,958 | |
2024 | | 158,361 | |
2025 | | 138,373 | |
Thereafter | | 226,956 | |
Total | | $ | 1,080,985 | |
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 15 |
| | | |
7. Shareholders’ Equity
Dividends
Our dividend activity during the three months ended November 30, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dividend Per Share | | Accenture plc Class A Ordinary Shares | | Accenture Canada Holdings Inc. Exchangeable Shares | | Total Cash Outlay |
Dividend Payment Date | | | Record Date | | Cash Outlay | | Record Date | | Cash Outlay | |
November 13, 2020 | | $ | 0.88 | | | October 13, 2020 | | $ | 557,419 | | | October 9, 2020 | | $ | 633 | | | $ | 558,052 | |
The payment of the cash dividends also resulted in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.
Subsequent Event
On December 16, 2020, the Board of Directors of Accenture plc declared a quarterly cash dividend of $0.88 per share on its Class A ordinary shares for shareholders of record at the close of business on January 14, 2021 payable on February 12, 2021. The payment of the cash dividend will result in the issuance of an immaterial number of additional restricted share units to holders of restricted share units.
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 16 |
| | | |
8. Financial Instruments
Derivatives
In the normal course of business, we use derivative financial instruments to manage foreign currency exchange rate risk. Our derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts.
Cash Flow Hedges
For a cash flow hedge, the effective portion of the change in estimated fair value of a hedging instrument is recorded in Accumulated other comprehensive loss as a separate component of Shareholders’ Equity and is reclassified into Cost of services in the Consolidated Income Statements during the period in which the hedged transaction is recognized. For information related to derivatives designated as cash flow hedges that were reclassified into Cost of services during the three months ended November 30, 2020 and 2019, as well as those expected to be reclassified into Cost of services in the next 12 months, see Note 4 (Accumulated Other Comprehensive Loss) to these Consolidated Financial Statements.
Other Derivatives
Realized gains or losses and changes in the estimated fair value of foreign currency forward contracts that have not been designated as hedges were net gains of $28,324 and net losses $56,619 for the three months ended November 30, 2020 and 2019, respectively. Gains and losses on these contracts are recorded in Other income (expense), net in the Consolidated Income Statements 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 are as follows:
| | | | | | | | | | | |
| November 30, 2020 | | August 31, 2020 |
Assets | | | |
Cash Flow Hedges | | | |
Other current assets | $ | 79,405 | | | $ | 75,871 | |
Other non-current assets | 50,138 | | | 50,914 | |
Other Derivatives | | | |
Other current assets | 42,697 | | | 27,964 | |
Total assets | $ | 172,240 | | | $ | 154,749 | |
Liabilities | | | |
Cash Flow Hedges | | | |
Other accrued liabilities | $ | 12,883 | | | $ | 13,614 | |
Other non-current liabilities | 12,691 | | | 13,576 | |
Other Derivatives | | | |
Other accrued liabilities | 5,428 | | | 11,828 | |
Total liabilities | $ | 31,002 | | | $ | 39,018 | |
Total fair value | $ | 141,238 | | | $ | 115,731 | |
Total notional value | $ | 9,367,230 | | | $ | 9,600,691 | |
We utilize standard counterparty master agreements containing provisions for the netting of certain foreign currency transaction obligations and for the set-off of certain obligations in the event of an insolvency of one of the parties to the transaction. In the Consolidated Balance Sheets, we record derivative assets and liabilities at gross fair value. The potential effect of netting derivative assets against liabilities under the counterparty master agreements is as follows:
| | | | | | | | | | | |
| November 30, 2020 | | August 31, 2020 |
Net derivative assets | $ | 159,030 | | | $ | 129,520 | |
Net derivative liabilities | 17,792 | | | 13,789 | |
Total fair value | $ | 141,238 | | | $ | 115,731 | |
| | | | | | | | | | | |
| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 17 |
| | | |
9. Income Taxes
We apply an estimated annual effective tax rate to our year-to-date operating results to determine the interim provision for income tax expense. In addition, we recognize taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior year as discrete items in the interim period in which the event occurs.
Our effective tax rates for the three months ended November 30, 2020 and 2019 were 23.4% and 23.6%, respectively. Absent the $119,700 and $60,492 gains on our investment in Duck Creek Technologies and related $22,906 and $10,183 in tax expense, our effective tax rates for the first quarter of fiscal 2021 and 2020 would have been 23.7% and 23.9%, respectively.
10. Commitments and Contingencies
Indemnifications and Guarantees
In the normal course of business and in conjunction with certain client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters.
As of November 30, 2020 and August 31, 2020, our aggregate potential liability to our clients for expressly limited guarantees involving the performance of third parties was approximately $848,000 and $832,000, respectively, of which all but approximately $81,000 and $87,000, respectively, may be recovered from the other third parties if we are obligated to make payments to the indemnified parties as a consequence of a performance default by the other third parties. For arrangements with unspecified limitations, we 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, we have not been required to make any significant payment under any of the arrangements described above. We have assessed the current status of performance/payment risk related to arrangements with limited guarantees, warranty obligations, unspecified limitations and/or indemnification provisions and believe that any potential payments would be immaterial to the Consolidated Financial Statements, as a whole.
Legal Contingencies
As of November 30, 2020, we or our present personnel had been named as a defendant in various litigation matters. We and/or our personnel also from time to time are involved in investigations by various regulatory or legal authorities concerning matters arising in the course of our 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 our results of operations or financial condition.
On July 24, 2019, Accenture was named in a putative class action lawsuit filed by consumers of Marriott International, Inc. (“Marriott”) in the U.S. District Court for the District of Maryland. The complaint alleges negligence by us, and seeks monetary damages, costs and attorneys’ fees and other related relief, relating to a data security incident involving unauthorized access to the reservations database of Starwood Worldwide Resorts, Inc. (“Starwood”), which was acquired by Marriott on September 23, 2016. Since 2009, we have provided certain IT infrastructure outsourcing services to Starwood. On October 27, 2020, the court issued an order largely denying Accenture’s motion to dismiss the claims against us. We continue to believe the lawsuit is without merit and we will vigorously defend it. At present, we do not believe any losses from this matter will have a material effect on our results of operations or financial condition.
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| | Notes To Consolidated Financial Statements (In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed) | |
ACCENTURE FORM 10-Q | | 18 |
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11. Segment Reporting
Our reportable segments are our three geographic markets, which are North America, Europe and Growth Markets. Information regarding reportable segments, industry groups and type of work is as follows:
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| Revenues |
| Three Months Ended |
| November 30, 2020 | | November 30, 2019 |
GEOGRAPHIC MARKETS | | | |
North America | $ | 5,480,963 | | | $ | 5,287,812 | |
Europe | 3,967,408 | | | 3,789,657 | |
Growth Markets | 2,313,814 | | | 2,281,489 | |
Total Revenues | $ | 11,762,185 | | | $ | 11,358,958 | |
INDUSTRY GROUPS (1) | | | |
Communications, Media & Technology | $ | 2,333,645 | | | $ | 2,245,470 | |
Financial Services | 2,346,291 | | | 2,190,107 | |
Health & Public Service | 2,211,889 | | | 1,969,214 | |
Products | 3,206,125 | | | 3,220,015 | |
Resources | 1,664,235 | | | 1,734,152 | |
Total Revenues | $ | 11,762,185 | | | $ | 11,358,958 | |
TYPE OF WORK | | | |
Consulting | $ | 6,332,572 | | | $ | 6,377,251 | |
Outsourcing | 5,429,613 | | | 4,981,707 | |
Total Revenues | $ | 11,762,185 | | | $ | 11,358,958 | |
(1)Effective September 1, 2020, we revised the reporting of our industry groups to include amounts previously reported in Other. Prior period amounts have been reclassified to conform with the current period presentation.
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| Operating Income |
| Three Months Ended |
| November 30, 2020 | | November 30, 2019 |
GEOGRAPHIC MARKETS | | | |
North America | $ | 888,809 | | | $ | 828,407 | |
Europe | 629,430 | | | 558,951 | |
Growth Markets | 372,430 | | | 379,905 | |
Total Operating Income | $ | 1,890,669 | | | $ | 1,767,263 | |
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ACCENTURE FORM 10-Q | | Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
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, 2020, 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, 2020.
We use the terms “Accenture,” “we,” “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 2021” means the 12-month period that will end on August 31, 2021. 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 those identified below. For a discussion of risks and actions taken in response to the coronavirus (COVID-19) pandemic, see the “Overview” below and “Our results of operations have been significantly adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic.” under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2020. Many of the following risks, uncertainties and other factors identified below are, and will be, amplified by the COVID-19 pandemic.
•Our results of operations have been significantly adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic.
•Our results of operations have been, and may in the future be, adversely affected by volatile, negative or uncertain economic and political 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, including through the adaptation and expansion of our services and solutions in response to ongoing changes in technology and offerings, and a significant reduction in such demand or an inability to respond to the evolving technological environment 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.
•We could face legal, reputational and financial risks if we fail to protect client and/or Accenture data from security incidents or cyberattacks.
•The markets in which we operate are highly competitive, and we might not be able to compete effectively.
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ACCENTURE FORM 10-Q | | Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 |
•Our profitability could materially suffer if we are unable to obtain favorable pricing for our services and solutions, if we are unable to remain competitive, if our cost-management strategies are unsuccessful or if we experience delivery inefficiencies or fail to satisfy certain agreed-upon targets or specific service levels.
•Changes in our level of taxes, as well as audits, investigations and tax proceedings, or changes in tax laws or in their interpretation or enforcement, could have a material adverse effect on our effective tax rate, results of operations, cash flows and financial condition.
•Our ability to attract and retain business and employees may depend on our reputation in the marketplace.
•As a result of our geographically diverse operations and our growth strategy to continue to expand in our key markets around the world, we are more susceptible to certain risks.
•Our business could be materially adversely affected if we incur legal liability.
•Our work with government clients exposes us to additional risks inherent in the government contracting environment.
•Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.
•If we are unable to manage the organizational challenges associated with our size, we might be unable to achieve our business objectives.
•If we do not successfully manage and develop our relationships with key alliance partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected.
•We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures or divesting businesses.
•If we are unable to protect or enforce our intellectual property rights, or if our services or solutions infringe upon the intellectual property rights of others or we lose our ability to utilize the intellectual property of others, our business could be adversely affected.
•Our results of operations and share price could be adversely affected if we are unable to maintain effective internal controls.
•Changes to accounting standards or in the estimates and assumptions we make in connection with the preparation of our consolidated financial statements could adversely affect our financial results.
•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.
•We are incorporated in Ireland and Irish law differs from the laws in effect in the United States and might afford less protection to our shareholders. We may also be subject to criticism and negative publicity related to our incorporation in Ireland.