BearingPoint Approves 1 for 50 Shares Reverse-Split; Market Appears Poised for Bankruptcy Filing
McLean, Va., 9 December 2008 -- BearingPoint stockholders approved a 1 for 50 share reverse-split and ratified the selection of Ernst & Young as the firm's independent auditor for 2008.
The Board of Directors also amended and restated the firm's by-laws effective immediately following the annual stockholders meeting held on 5 December. At the meeting, stockholders approved an amendment to the firm's Certificate of Incorporation that authorized the board to implement a reverse stock split of the common stock at a ratio of from one-for-ten to one-for-fifty at any time prior to 16 January 2009. The board also approved a majority voting standard, which among other things, provides that directors will generally be elected by the majority of votes cast at any future shareholder meeting.
The date of record for the reverse stock split will be 10 December 2008, and will be effective at 6:01 p.m. Eastern. On a pre-split basis, on 5 December 2008, BearingPoint had 220,851,816 shares of Common Stock outstanding. The firm anticipated that after the reverse stock split, the number of shares of common stock outstanding will be approximately 4.4 million shares.
Fractional shares will not be issued as a result of the reverse stock split. Stockholders will receive cash payments for any fractional shares after the firm's transfer agent sells all of the aggregated fractional shares. Except for any changes as a result of the treatment of fractional shares, each holder of BearingPoint's Common Stock will hold the same percentage of stock outstanding immediately after the reverse stock split.
BearingPoint's shares will continue to trade on the OTC Bulletin Board under the symbol "BRGP" on a pre-split basis, until such time as determined by NASDAQ. The firm expects that, after the reverse stock split becomes effective for purposes of OTC quotations, the stock will trade under a new symbol on a post-split basis.
In the third quarter of 2008, BearingPoint was awarded business by Time Warner, Total US Exploration and Production, the Maryland Department of Human Resources, the Texas Department of Information Resources, Bendigo and Adelaide Bank, the U.S. Air Force, the U.S. Marine Corps, the U.S. Department of State, the U.S. Government Services Administration, and Unifi Mutual Holding Co.
MR Perspective
The 9-December closing price of BearingPoint's shares was 0.033. A one for fifty shares reverse split would set the share price above the NYSE Euronext $1 minimum. But with BearingPoint's market cap now at $7.28 million, well below the Big Board's $100 million minimum, the share split alone is not sufficient to resume trading on NYSE. To put this in perspective, if each employee invested just $464 to purchase shares, they would own the entire share capital of BearingPoint. The market for the firm's shares appears to be poised for an imminent bankruptcy filing.
BearingPoint's continuing efforts to replace its North American financial systems have now been postponed until the beginning of the second or third quarter of 2009. The firm says the delay will provide additional time for testing and organizational readiness. But if BearingPoint was to be acquired or file bankruptcy in the coming months, any resources devoted to implementing its new financial systems would have been wasted.
BearingPoint had $801 million in revenues in the most recent fiscal period ended 30 September, down 7.1 percent from the same quarter in 2007. The firm finished the period with $333 million in cash, down from $432.1 million in the 2007 quarter, with total liabilities exceeding assets by $469.2 million.
The firm's days-sales-outstanding improved from 78 days to 89 days. Consultant utilization was 79.1 percent compared to 78.5 percent for the third quarter of 2007, an increase of 60 basis points. Billable professionals was approximately 13,100 compared to around 14,500 in Q3 2007, and total staff was around 15,700. This represented a decrease in billable headcount of approximately 10.0% from headcount as of 31 December 2007. Voluntary, annualized attrition for the third quarter of 2008 was 25.4%, compared to 26.6% for the third quarter of 2007. The highly competitive market for talent in which BearingPoint operates combines with its weak financial position to make it "particularly critical and challenging for us to attract and retain experienced personnel," according to its most recent SEC 10-Q filing.
On 19 November, the firm's Chief Legal Officer and Secretary, Laurent C. Lutz, provided BearingPoint with notice of his intent to resign his positions "to pursue other professional opportunities." The effective date of Lutz's resignation has not been determined, but a related SEC filing said he will remain with the firm for a transition period that has not been determined. During the transition, Lutz will continue as head of the firm's legal function and will assist with ongoing debt restructuring activities.
BearingPoint provides management and technology consulting services to Global 2000 companies and government organizations in more than 60 countries worldwide. The firm is based in McLean, Va., and works with clients in public, commercial, and financial services. The firm's offerings help clients expand revenue and improve cost-effectiveness, manage regulatory compliance, integrate information, and transition to "next-generation" technology systems.