Welcome to the Q2 2008 BearingPoint Inc. earnings conference call. (Operator Instructions) I would now like to turn the call over to Denise Stone.

I’m Denise Stone, Director of Investor Relations at BearingPoint. With me this afternoon is Ed Harbach, our Chief Executive Officer and Eddie Munson, our Chief Financial Officer. We hope you had a chance to review the press release and Form 10-Q filed earlier this afternoon. Let me quickly outline the agenda for this afternoon’s call. Ed will review key highlights from our 2008 second quarter 10-Q and Eddie will review the financial results. At the end of the call, we will conduct a Q&A session to address any questions you may have. Before we get started, I want to remind you that some of the information discussed in this call, particularly our 2008 business outlook includes forward-looking statements. These statements are based on our current expectations, estimates and projections. They speak only as of the date they are made. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that can cause actual results to differ materially is contained in our filings with the SEC. With that it is now my pleasure to welcome BearingPoint CEO Ed Harbach.

Thank you for joining us this afternoon to review our second quarter 2008 results. I am pleased to start on a positive note by saying the BearingPoint return to profitability in the second quarter for the first time in more than three years hosting GAAP net income of $18 million. There are a lot of moving pieces that go into these numbers and Eddie and I will walk you through them on today’s call, but the fact is that our bottom line continues to improve significantly. We told you that our goal was to return to profitability sometime in 2008 and we did so in Q2. Now our challenge is to finish the year strong. Before we look at the numbers, I would like to congratulate BearingPoint’s employees for staying focused in delivering these results. I’m proud of what they’ve been able to accomplish in a very challenging environment. I also want to thank all of you on the phone for your support and understanding over the last few months. I know we have not been very active in our communication to the street of late. There has been a lot going on much of which and still is highly sensitive so we weren’t in position to talk about it. You have my commitment to be more proactive in our communications going forward. In February at our investor meeting, we laid out a clear three-point strategy for the year and we’re working hard to execute this strategy. We said we would focus on creating a differentiation in the marketplace, getting our costs down to industry competitive levels and making BearingPoint the best place for people to develop their skills and serve clients. Let’s start with the goal of creating differentiation. This is about playing to our strengths rather than trying…

Looking at Q2 results, our gross revenue for second quarter 2008 was $87 million, and a $1.7 billion year-to-date amount. These represented an increase of 1.3% from the second quarter of 2007 and a 1.4% decrease year-to-date. Net revenue was $694 million for the quarter and $1.37 billion year-to-date, an increase of 1.2% from the second quarter of 2007 and a 0.7% increase year-to-date. We are all extremely proud of our ability to maintain net revenue in this challenging environment as we continue to reshape the business. Gross profit for the second quarter increased by $67 million to $209 million. This represents a 47% improvement. This compares with a gross profit of $143 million for the same period last year and notably, our gross profit as a percent of gross revenue increased to 23.6% as compared to 16.3% last year. For the six months ended June 30, 2008, gross profit improved by $88 million to 21.1% of gross revenue versus a 15.8% amount in the prior year period. Drivers for the improvement for reduced professional compensation costs due mainly to a benefit of the reversal of accruals associated with the local tax equalization expenses and a decline in stock-based compensation and bonus expenses. We had a number of accrual reversals this quarter that affected our results so let me give you a bit of a background. First, we estimate and record expenses so that our employees long-term assignments pay the same tax rates wherever they work, but actual expenses differ from estimates where accruals are reversed and additional expenses are charged. Second, our stock compensation expense is partially derived from estimates regarding forfeiture rates. We have changed those estimates of forfeiture rates in this quarter, primarily due to the high attrition rate that we experienced recently. Consequently, our professional compensation…

At the end of Q1, we provided you with the following guidance: flat revenue growth, SG&A of $580 to $585 million, net loss of approximately $70 million, year in cash and cash equivalents in the vicinity of $500 million and pre-cash flow of approximately $30 million. Now, let me give you our current thinking. Our gross revenue was down 1.4% year-to-date but our net revenue was up 0.7% year-to-date. We believe these trends will continue and are comfortable with our flat revenue growth guidance in 2008 in U.S. dollars. SG&A was $284 million year-to-date which resulted in approximately $568 million annualized thus we are also comfortable with our SG&A guidance. Regarding our net loss projection, we lost $23 million in Q1 and made $18 million in Q2. Our product guidance was for a loss of approximately $70 million for the year. If we can maintain our current trajectory, we believe that we can do significantly better than $70 million lost that we previously committed to you, suggesting a net loss in the range of negative $70 to negative $30 million. Regarding our yearly cash projection of approximately $500 million as of June 30, 2008, we had a cash balance of $351 million. We believe we will be cash flow positive in the second half of 2008. Our current cash projections of 2008 are approximately $425 to $475 million absent any sale of assets or other refinancing activities. Our longer-term goal is to achieve 10% net income. While there are still challenges to overcome, I’m excited about the progress we have made and the opportunities that will drive this company forward and create value. To that end, we continue to focus our energies on what is most important, our business and our people and to hold ourselves accountable for results. I am optimistic about the future and what it will bring to our employees, shareholders and customers. We truly appreciate your continued support. Now, I will be happy to take your questions.

(Operator Instructions) Your first question comes from Adam Frisch - UBS.

The first question I have is regarding the strategic alternatives. If you can first of all, give a little bit of color in terms of why you seem to be a lot more open to those alternatives than maybe six months ago and as a follow-up to that, if nothing comes of those alternatives which you did mention is a possibility, if that ends up being the case, how concerned should we be about the $200 million net obligation that can come back to you next April?

I think the reason that the question comes up, I remember my first call with each of you, I remember I said I was calling off a transaction and I wanted to focus on the business. I think in the beginning that was the most important thing. Said another way, if we fix the business, everything is possible. If the business deteriorates and we have another year like we had last year, where we are losing $300 million over nothing, then we can turn this thing around. So we did go back and focus on the business. I think as we start to stabilize that, you can decide whether Q2 is the stabilization. We started to look around a little bit at what some of the alternatives are because we obviously have a balance sheet issue that we have to deal with and we’ve started to look at those alternatives to do that. We believe a fix in business helps us do that. I know there’s lots of discussion taking place. We’ve had some discussions with third parties and I’m not sure how well a kept secret that is but we at least wanted to disclose those discussions. If nothing happens, we always have the default of running the business. We can talk about the cash if you want, but the cash is there and it’s a little tight. That’s where we are.

In terms of the free cash flow outlook for the year, if my math is right, you would need about plus $100 million or so in the second half of the year to get to the midpoint of your full year ’08 guidance.

That’s right, Jason. We are at $350 million or so now and I always use round numbers. You can look at the disclosures for exact numbers and we’re saying to get to $450 million, we need plus $100 million. To give a little color commentary on that, you have to look back at how we performed last year, DSOs will always come down in the second half of the year. So last year from the end of June to the end of December, we improved DSOs by 18 days. If we do the same this year, and by the way, our internal targets are to do that. Let’s see if we can execute. 18 days times seven, if I do the math, it’s about $126 million which takes you to 351 plus $126 million which takes you to the top end of the range. So if we break even for the business, we hit our DSOs reduction on the same scale as we did last year, we would be on the top end of the range. If we somehow only picked up $100 million in the second half of the year, it would go in the middle of the range and obviously, if we missed our target in orders we could go to the low end of the range.

Just to confirm on the non-cash reversals of the accruals, those are one-time in nature, I’m assuming, on the stock-based comp and the global tax equalization or is that going to get revisited further in the second half?

We don’t expect to have any adjustments but as you can imagine, those are judgment calls that we base on estimates of where we are at a particular point in time. When it comes to the global tax equalization matter, of course, as I indicated, we want to make sure our people are whole with respect to taxes. We don’t anticipate that level of reversal but sometimes it is beyond our control. On the other matter with respect to the PSUs, we have in fact trued up the books so to speak for the change in the forfeiture rate and we believe that we are at a rate that should hold for some period of time.

Your next question comes from Tien-Tsin Huang – JPMorgan.

For the global tax equalization expense, the accrual reversal, how does that get allocated to the segments? Is there any differentiation there in terms of looking at the gross margins by segment?

It does get allocated differently. Let’s take the PSUs for example. The PSUs were primarily allocated in North America. There’s an anomaly about why so you’re seeing more of those reversals show up in North America and less in Asia-Pacific and less of them in Amia. There is a difference by DU.

Is there anything in particular for the public service sector? It sounds like it would be up correct?

It would hit public services. Public services were allocated PSUs. So anything in North America, so North America Commercial, North America Financial Services and North America Public Services would have a disproportionately large share of the PSU reversal.

On headcount by segment, would it be possible to give us a rough estimate of what that looks like today?

Have a follow-up call with Denise and we can break that out. We just gave overall headcount but we don’t mind sharing headcount by segment. We just won’t do it on the call today. It’s detailed.

Then the reorg in Europe, I didn’t quite catch exactly what it was.

Do you remember last year when we had started a discussion about possibly spinning off a European MD and I called it off in December? We started off on that process and as part of that process, we identified some restructuring that we would do if we were going to go ahead and execute that. Once we called it off, we still thought that some of that restructuring made sense. We simplified our European organization and in doing that, we created an accrual from a tax standpoint, potential capital gains tax.

Tax outlook, you provided tax outlook in dollars for the rest of the year, can you give us some information on how that might look?

Let me talk first of all, one of the comments that we made to Jason was, in reference to go about making sure we got a better allocation of shares and service costs. Some of those costs are coming in from our foreign operations and in fact, we are going to be looking to bring those down. If I gave a range, it would be something in the neighborhood of $20 million per quarter. It should be a reasonable estimate.

Other income was a little bit bigger than what we expected by about a penny or so in contribution. What’s in that line, is it primarily foreign-related items, foreign exchange?

Yes.

Your next question comes from Rod Bourgeois - Bernstein.

I wanted to see if you could give us some details in your free cash flow guidance, specifically what you are assuming about DSO reduction in your free cash flow guidance. Assuming DSO reduction will be a benefit, how big of a benefit are you assuming there?

I think most of the cash pickup we are going to see in the second half of the year is through DSOs. I think it is a bit more complicated than this. My simple-time assumption is that the business breaks even from a cash standpoint. What we want to do with DSOs, we were approximately 87 days at the end of June. Last year we were 95. We went from 95 to 77 in the second half of the year. That is what we executed on. This year we are hoping to go from 87 to about 69, which picks up 18 days, which is about $126 million if I am doing the calculation quickly enough. In essence, the pickup in cash in the second part of the year is DSO-driven without having drains from non-DSO factors on it. Obviously the range we have in terms of free cash flow, what I described to you as our target takes us out to the upper end of the range. If we miss that in either DSO or we generate that net cash loss as a business, it will pull us down from that targeted number.

But are you expected to be cash-flow break-even in the second half on an operating basis, would you expect that to turn negative given seasonality in the first half of next year again?

Next year is tough, so I knew the question would come up in terms of that. Everyone is backing in the same numbers, using the current cash, and trying to go through the put and calculate the numbers. If you take first half and excuse me for digressing for a second but I think it will be helpful, if you take the first half of 2007, we were negative about $300 million or so in cash. If you take the first half of 2008, we are negative $100 million in cash. We just started the projections in terms of what we expect to do in the ’09 budget. We just started the ’09 budgeting process so we don’t have a plan in place to do that. Now it would be reasonable to assume that the DSO would increase. Like this year, it went from 77 at the end of the fourth quarter last year to basically 85 or so at the end of first quarter and 87 at the end of second quarter. So it popped up a little bit. I think that DSOs will also increase the first couple of quarters next year. What’s not clear yet, Rod, is we don’t have the operating plan for next year, but how much cash we are going to generate from just underlying business operations because if you look at Q1 and Q2 last year compared to Q1 and Q2 this year, it is a dramatic improvement. I’ll say it in a different way, I would be deeply disappointed if we didn’t show an improvement next year in Q1 and Q2. I don’t think we are going to swing it $200 million but I’d be disappointed if our cash from underlying operations in ’09 was the same as it was in ’08 because that would mean we leveled out from a recovery standpoint.

So you’re currently thinking you have enough liquidity to make it through the first half of next year even recognizing the put on the convert?

It’s close so if you do the calculation, it depends on where you are at in the range. Let me help you a little bit with the math. Let’s just say we end the year at $450 million, which is the middle of the range in terms of doing that. Let’s take a, I don’t want to say worst case, but let’s take a bad case. Let’s say we go $50 million negative in the first quarter to $50 million negative in the second quarter on cash, it takes from the $450 million range down to the $350 million range. You have a $250 million put on April 15 next year which takes you down to $150 million range that is tight in terms of running it. We said before we would like to have a couple hundred million dollars in the bank to run our business. The $150 million is tight from the put standpoint but not possible.

When you look at the commercial unit and you financial services unit, I wonder if you can help aggregate between how much of the decline in those units is coming from the potential exiting that you’re doing in certain portions of those business units and how much of that decline is just struggling with the actual growth rate. Can you just aggregate for us on that front?

It’s hard because it is not exact in terms of doing it but I’ll give you some commentary. It is not going to be precise numbers because I don’t think you can separate it precisely. On the promotional side, I believe most of the shrinkage is due to the decisions reached on our part. We’ve decided as I mentioned before, there are 13 industry segments we monitor. We’re being a little bit coy about which ones we are exiting but it’s difficult because you have some client commitments and contracts, but we are in the process of exiting several of those, doubling down on others. Sometimes we emphasize those. A lot of what’s going on in commercial services today is I would say over half of it is decisions on our part to do different things but there certainly are some situations where we have gone after commercial services work and we have not won that. In financial services, it is probably a little bit of the opposite. It’s a case, where it is probably more of that’s been our ability to execute when in the marketplace and the lesser extent of decisions made to exit that part of the business. It’s mixed depending on which of the two you’re in.

The other question I have relates to the performance on your major contracts. Are you seeing any cause for worry about problem contracts, is the catchall phrase for it, a continued build-up in receivables or other accruals related to contracts where your performance is subpar. Is that one of your major concerns right now or are the concerns for the other items that you spoken about?

It’s always a concern. I don’t want to upset some people that may not have the same background as you do on the call. With consulting firms that do fixed price contracts, we will always have problem contracts. It’s the nature of our beast. If we don’t have that, then we’re overbidding all of those contracts and we are losing too much work. We always allocated a certain percent of revenue. Like a snake in the ground, sometimes I use a 2% for in layman terms, I call it unplanned fee adjustments. So if you look back in ’05, we were way above that. In ’06, we were way above that. In ‘07, it came down significantly and we were within a reasonable range, maybe a little bit above that but we’re really close. In ’08, it’s running much, much lower year-to-date. We have a red list and a yellow list that I review on a weekly basis. We are looking at those. We right now believe that we are adequately reserved for all known problems. We have not seen receivables increase due to contract problems. In fact, if anything we are seeing a reduction in terms of the overall risk in the mix we have right now. You never know. You have to go through the year and these things have a way of creeping up and showing up in December. That’s why we try to manage them on a year-by-year basis. You end up always getting surprised a few times. It doesn’t like it is increasing, in fact if you just look at the facts, it looks like our portfolio risk has gone down and the writeoffs associated with our portfolio are certainly less year-to-date in 2008 and any time over the last three years. It’s something we monitor closely.

Your next question comes from [Inaudible Analyst]. [Inaudible Analyst]: You had mentioned in early May about possibly repricing the PSUs. Can you give us an update regarding that?

Yes, my intention is to do something about the PSUs. The PSUs are referred to, I think I mentioned this before, by our group is Confederate currency which is probably not a complement. They have a high P&L expense although I am sure most of you are sophisticated enough to look through that. They are called reversals that Eddie referred to before and they have no retentive value. They aren’t exactly something that has a high cost and no retentive value so that’s not necessarily good. I talked to several of our major investors and what they asked me to do is to, they understood the need to reissue equity. They wanted to have us demonstrate some progress on the financial turnaround before we reset the equity. So I will have some more conversations hopefully this quarter but Q1 and particularly Q2 is a step in the right direction. We will have some point in time take out the PSUs. The most likely thing is we will have a tender offer to our employees offering something of value in exchange for pennies on the dollar, whether it’s our issues or performance cash rewards or something will be determined. We will in effect take those PSUs back. We will take a charge for doing those. Just to let you know, if we did that to the end of Q2 which we obviously didn’t, that charge would be up to $88 million all going through the P&L one time. We will take a charge for doing that and we will reissue some equity going forward. That required two things before we pulled the trigger. Number one, we want to return to financial stability to demonstrate to our investors that we did that first before we repriced the securities. Number two, based on what we talked about earlier, we prefer not to do that during any type of strategic discussions. It’s just awkward. So we need to wrap those strategic discussions up one way or another before we redo the securities. [Inaudible Analyst]: You had mentioned from your commentary that the sales pipeline, in public in particular it is the highest it has been in some time. Can you give us, what is likely a makeshift in that pipeline, can you shed some light in terms of what should be assumed in terms of the lag time between current bookings versus revenue at some point? Is it three to six months or is it longer now?

No, I think that’s a reasonable time frame in terms of doing that. The key for us is what the conversion rate is. If you look at bookings for the first quarter, they were strong. The second quarter was a little weaker in terms of doing that. What we had done, we improved the pipeline. In 12/31 last year, we had a decent pipeline but it was still too thin and also it was too much in the early stages of the pipeline, so we had too many opportunities and not enough stuff in proposal. If you lock at our pipeline today, it is more balance across the various timings and it’s at a record level for us. I don’t think there’s anytime in our history, certainly not the last three or four years since I have access to our financials to where our pipeline has been. So we have a very strong pipeline. It’s also focused on the areas that we want to sell in. So the pipeline maybe six months ago, we did this reteaching and reshuffling with a focus on a lot of things but maybe some of those were non-strategic to us. Not only have we grown the pipeline as we refocused it, the pipeline is queued up to convert Q3, Q4, Q1, and Q2 next year. It is a normal distribution that you would expect to cross that. Obviously the major variable for us right now is conversion rates and can we convert that pipeline. [Inaudible Analyst]: You had mentioned some of the disruption associated with your stock price and clients’’ willingness to renew or sign up and so forth. Did they affect across the board your segments or was it one versus the other?

No, Joe, it differs where you are at. I am sitting in Manhattan today and I can make a joke sometimes, a little tongue-in-cheek that people are nervous about the economy is diametrically opposed to just how far they are in Manhattan. If you’re in Manhattan, it seems to be a lot worse than if you’re sitting in Moscow for example. We’re not seeing any significant issues in Asia-Pacific for example. We get a few questions but we really don’t see any significant issues in Latin America or Europe. Once you get within the U.S. base, with our public services business, we occasionally get questions but it is really more on or off. If you are an approved vendor and DCA is blessed you with that loose terminology, everything’s fine. People will ask us a question about our financials so we’re fine. So when you do get those questions, they tend to be more in financial services particularly, and the last step, it is somewhat in Commercial Services North America. It does differ dramatically DU by DU, if you look at our results for the first and second quarter, you would see some of that impact.

You final question comes from Shlomo Rosenbaum - Stifel Nicolaus.

I just want to go a little bit more over the liquidity. Can you go over, you got down to the $150 million, would that be the actual cash balance on the balance sheet if you were to go as a ongoing concern making those assumptions or would there be any income in having to repeat some of the cash from overseas to pay for some of the puts and cash burn?

That’s the cash on the balance sheet. Obviously, we’re doing that. We don’t have the time to get into that on the call. We’re looking at the cash around the world. We’re constantly moving cash around from country to country. But that would be the cash on the balance sheet.

So you wouldn’t have to burn some of the cash beyond that in order to repatriate into.

Purchasing costs at that level are relatively minor. There are some purchasing costs and some taxes associated with that. Part of the thing that we were talking about before, I didn’t go into much detail about some of the restructuring we are doing. Simplifying our entities helps make that easier. There’s a little friction but not significant.

On an operating level, are there some one-time items or some items in the first half that you can compare to the first half of 2009 that might not pop up? Maybe some tax payments or something that might actually boost you liquidity beyond the $150 million?

I certainly hope our tax payments are lower in 2009 than they are in 2008. You have been kind so far in not asking how somebody can have year-to-date taxes higher than net income. I certainly want to reduce taxes. Eddie mentioned accruals before. I think accruals should go down as we settle in more. There’s also, I think we put it in the conversation we had earlier in the queue but there were some severance costs in Q1 this year that we should not have next year. We are in balance in terms of supply and demand and obviously when I took over in December, we had some things to do. We changes some strategy, we do some headcount. We took the charge for that mostly last year, not completely. We took some of the charges in Q1 and Q2 of this year from that P&L standpoint. We certainly paid a lot of that cash in the first and second quarter. There are a number of things related to the turnaround in business where we took some charges in the first part of this year and paid some cash in the first part of this year that I don’t think will be replicated in the first half of 2009. I am sure we will have our challenges then.

On the global tax equalization, was that a true up, but you are still doing that, making sure your employees are paying the same taxes all over. Was it just catching up on that?

Yes, that is fair. We are at an amount that we are no longer subjected to pay and we do continue to monitor that amount, that liability.

Let me wrap up because we are running out of time but I do appreciate your questions. Thank you for joining us and we look forward to updating you on the progress and near future. In the meantime, if you have questions and we didn’t get to it today or you want to talk about something, go ahead and contact Denise Stone or Aaron Bedy, at 908-607-2100 and media contacts are also noted in our press release. Again, thank you very much for joining us. I look forward to talking to you over the next several days and weeks.