CB Richard Ellis Group, Inc. Reports Earnings Per Share up 33% for the Fourth Quarter of 2006 and 48% for the Full Year 2006.2006 Full Year Revenue Grows 26% to $4 Billion LOS ANGELES Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. -- CB Richard Ellis CB Richard Ellis Group, Inc. NYSE: CBG is a multinational real estate corporation currently based in Los Angeles, California, U.S.A.. On December 20, 2006, the corporation, also known as CBRE, completed acquisition of Trammell Crow Co. in a transaction valued at $2. Group, Inc. (NYSE NYSE See: New York Stock Exchange :CBG CBG corticosteroid-binding globulin. ) today reported revenue of $1.4 billion for the fourth quarter ended December 31, 2006, an increase of 36.5% over the fourth quarter of 2005, and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.53 for the fourth quarter of 2006, compared with $0.41 for the same quarter last year. Excluding one-time charges1, fourth quarter 2006 diluted earnings per share was $0.57, an increase of 32.6% from the $0.43 earned in the fourth quarter of 2005. These results include operations of the newly acquired Trammell Crow F. Trammell Crow (born June 11, 1914, in Dallas, Texas) is an American property developer who created several famous projects, including Dallas Market Center, Peachtree Center (Atlanta, Georgia), and San Francisco's Embarcadero Center. Company for the period December 20, 2006 through December 31, 2006. Excluding one-time items, the impact from the acquisition on quarterly results was negligible. Fourth Quarter Highlights For the fourth quarter of 2006, the Company generated revenue of $1.4 billion, up 36.5% over the $1.0 billion posted in the fourth quarter of 2005. The Company reported net income of $125.1 million, or $0.53 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, in the fourth quarter of 2006 compared with net income of $95.4 million, or $0.41 per diluted share, in the fourth quarter of 2005. Excluding one-time items, the Company would have earned net income2of $134.2 million, or $0.57 per diluted share, in the fourth quarter of 2006, an increase of 34.3% and 32.6%, respectively, compared with net income of $99.9 million, or $0.43 per diluted share, in the fourth quarter of 2005. Earnings Before Interest, Taxes, Depreciation, and Amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become )3 totaled $260.4 million for the fourth quarter of 2006, an increase of $74.2 million, or 39.8%, from the same quarter last year. The Company's fourth quarter results continue to reflect strong performance across virtually all business lines and geographies, as well as contributions from acquisitions. Of the 36.5% revenue growth, nearly three-fourths was due to organic growth with the remainder attributable to acquisitions completed in 2006. This marks the 17th straight quarter of double-digit year-over-year organic revenue growth. The organic growth was fueled by strong leasing activity in most major markets, continued strength in investment sales, especially overseas, as well as increased revenue in the appraisal/valuation, mortgage brokerage, and property and facilities management The management of a user's computer installation by an outside organization. All operations including systems, programming and the datacenter can be performed by the facilities management organization on the user's premises. operations. In addition, global investment management operations showed robust revenue growth. The Company has reclassified certain reimbursements (primarily salaries and related costs) related to its facilities and property management operations from cost of services to revenue. In the fourth quarter of 2006, the Company reclassified $72.7 million and $76.7 million for the three months ended December 31, 2006 and 2005, respectively, and $275.3 million and $283.4 million for the years ended December 31, 2006 and 2005, respectively. This reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. has no impact on operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , EBITDA, net income or earnings per share. Full Year Results Revenue was $4.0 billion for the year ended December 31, 2006, up $838.0 million, or 26.2%, compared to the same period last year. Over two-thirds of the improvement was due to organic growth, while acquisitions completed in 2005 and 2006 drove the remainder of the revenue increase. The Company reported net income of $318.6 million, or $1.35 per diluted share, for the year ended December 31, 2006 compared to net income of $217.3 million, or $0.95 per diluted share, in the same period last year. Excluding one-time items, the Company would have earned net income of $348.0 million, or $1.48 per diluted share, for the year ended December 31, 2006, up 51.4% and 48.0%, respectively, over net income of $229.9 million, or $1.00 per diluted share, for the year ended December 31, 2005. EBITDA was $653.5 million for the year ended December 31, 2006, up $199.3 million or 43.9% compared to the same period last year. Management's Commentary "Our performance in 2006 is the result of the powerful client-focused platform we have built and continue to enhance, which has resulted in the creation of the premier global commercial real estate services firm," said Brett White Brett White (born April 8 1982 in Cooma, New South Wales) is an Australian professional rugby league footballer. He plays for the Melbourne Storm in the National Rugby League. , president and chief executive officer of CB Richard Ellis. "Our primary markets remain strong. Worldwide economic expansion and increased employment rolls have produced strong demand for commercial space. Rental growth is accelerating as market fundamentals continue to improve while new construction remains limited. Commercial real estate continues to be a magnet for institutional and private-equity capital, especially in high-growth markets in Asia and traditional business centers like New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , London and Paris. Cross-border investment flows, in particular, have reached new highs. "We are ideally positioned to take advantage of macro trends in the marketplace, due to our global footprint, broad service offering, collaborative culture and leading position in virtually every major business center worldwide. The exceptional talent, resources, and relationships we have added with our new Trammell Crow Company operations have materially enhanced the depth and breadth of our service offering. We enter 2007 a stronger company poised for continued growth." Fourth-Quarter Segment Highlights Americas Region Fourth quarter revenue for the Americas region, including the U.S., Canada, Mexico and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , increased 18.0% to $ 791.0 million, compared with $670.3 million for the fourth quarter of 2005. Approximately two-thirds of the improvement was due to organic growth, while acquisitions completed in 2006 drove the remainder of the revenue increase. The organic growth was mainly attributable to a continued improving leasing trend, higher mortgage brokerage, appraisal/valuation and property and facilities management fees, as well as slightly increased sales activity. Operating income for the Americas region totaled $88.4 million for the fourth quarter of 2006, compared with $75.7 million for the fourth quarter of 2005. Excluding the impact of one-time items, operating income for the Americas region would have been $95.9 million for the fourth quarter of 2006, an increase of $19.3 million, or 25.2%, as compared to $76.6 million for the fourth quarter of last year. The Americas region's EBITDA totaled $115.1 million for the fourth quarter of 2006, an increase of $26.6 million, or 30.0%, from last year's fourth quarter. EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. Region Revenue for the EMEA region, mainly consisting of operations in Europe, increased 46.4% to $362.5 million for the fourth quarter of 2006, compared with $247.6 million for the fourth quarter of 2005. This revenue increase was largely organic and primarily driven by strong performance in the United Kingdom, France, Germany, Ireland and Belgium attributable to significantly increased transaction revenues as well as higher appraisal/valuation activities. Operating income for the EMEA segment totaled $91.4 million for the fourth quarter of 2006, compared with $56.9 million for the same period last year. Excluding the impact of one-time items, operating income for the EMEA region would have been $91.9 million for the fourth quarter of 2006, an increase of $35.0 million, or 61.5%, from the fourth quarter of last year. EBITDA for the EMEA region totaled $95.5 million for the fourth quarter of 2006, an increase of $35.2 million, or 58.2%, from last year's fourth quarter. Asia Pacific Region In the Asia Pacific region, which includes operations in Asia, Australia and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. , revenue totaled $117.7 million for the fourth quarter of 2006, a 101.7% increase from $58.4 million for the fourth quarter of 2005. The Company's acquisition of a majority interest in its affiliate in Japan in January 2006 accounted for almost two-thirds of the revenue increase, with the remainder primarily coming from organic growth throughout the region. Operating income for the Asia Pacific segment totaled $22.0 million for the fourth quarter of 2006, an increase of 120.9% as compared to $10.0 million for the same period last year. EBITDA for the Asia Pacific segment totaled $20.7 million for the fourth quarter of 2006, an increase of $9.5 million, or 85.3%, from last year's fourth quarter. Global Investment Management Business In the Global Investment Management segment, which consists of investment management operations in the U.S., Europe and Asia, revenue totaled $129.3 million for the fourth quarter of 2006, a 129.1% increase from the $56.4 million recorded in the fourth quarter of 2005. This increase was mainly due to carried interest revenue earned as well as higher asset management fees in the U.S. and the U.K. Assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. grew to $28.6 billion as of the end of the fourth quarter, up $11.3 billion, or 65.3%, from year-end 2005. This segment reported operating income of $25.1 million for the fourth quarter of 2006, compared with operating income of $16.3 million for the same period last year, an increase of 53.3%. The improved performance was mainly attributable to the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. increase in asset management fees. While revenue recognized from funds liquidating (carried interest revenue) increased by $54.8 million, it was offset by $52.7 million of higher incentive compensation expense recognized for dedicated executives and team leaders associated with this segment's carried interest programs. For the year ended December 31, 2006, the Company recorded a total of $91.1 million of incentive compensation expense related to carried interest revenue, only $40.9 million of which pertained to revenue recognized during the year ended December 31, 2006 with the remainder relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future periods' revenue. Revenues associated with these expenses cannot be recognized until certain contractual hurdles are met. The Company expects that it will recognize income from funds liquidating in future quarters that will more than offset accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. incentive compensation expense recognized. EBITDA for this segment totaled $27.1 million for the fourth quarter of 2006, an increase of 3.4% from last year's fourth quarter. The improvement in operating performance was partially offset by a decrease in equity earnings, which is included in the calculation of EBITDA but not in the calculation of operating income. Equity earnings were higher last year as a result of dispositions in the fourth quarter of 2005 within select funds. The Global Investment Management segment did not incur any one-time costs in the current or prior year quarter. Development Services The Development Services segment consists of real estate development and investment activities primarily in the U.S. acquired with the Trammell Crow Company on December 20, 2006. This segment includes activity from the acquisition date through December 31, 2006, including revenue of $8.8 million. This segment generated an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $3.1 million. Excluding the impact of one-time items, the operating loss translates into operating income of $2.5 million. EBITDA for this segment totaled $2.0 million. Development projects in process as of year-end 2006 totaled $5.4 billion, an increase of $1.8 billion, or 50% from year-end 2005. In addition, there was $3.0 billion of development projects in the pipeline at year-end 2006. Guidance In 2007, as compared to 2006 performance, CB Richard Ellis expects to generate full year diluted earnings per share growth in the range of 25% to 30%, excluding one-time charges. The Company's fourth-quarter earnings conference call will be held on Wednesday, February 7, 2007 at 10:30 a.m. Eastern Standard Time (EST EST electroshock therapy. EST abbr. electroshock therapy ). A live webcast will be accessible through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's Web site at www.cbre.com. The direct dial-in number for the conference call is 800-553-0273 for U.S. callers and 612-332-0923 for international callers. A replay of the call will be available starting at 2:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on February 7, 2007 and ending at midnight EST on February 21, 2007. The dial-in number for the replay is 800-475-6701 (U.S. callers) and 320-365-3844 (for international callers). The access code for the replay is 861305. A transcript of the call will be available on the Company's Investor Relations Web site. About CB Richard Ellis CB Richard Ellis Group, Inc. (NYSE:CBG), an S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm (in terms of 2006 revenue). With over 24,000 employees, the Company serves real estate owners, investors and occupiers through more than 300 offices worldwide (excluding affiliate and partner offices). CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services Activities that combine or consolidate certain enterprise-wide needed support services, provided based on specialized knowledge, best practices, and technology to serve internal (and sometimes external) customers and business partners. ; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com. Note: This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including statements regarding our growth momentum in 2007, future operations and future financial performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this release. Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, the Company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the Company does update one or more forward-looking statements, no inference (logic) inference - The logical process by which new facts are derived from known facts by the application of inference rules. See also symbolic inference, type inference. should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: commercial real estate vacancy levels; employment conditions and their effect on vacancy rates; property values; rental rates; interest rates; realization of values in investment funds Noun 1. investment funds - money that is invested with an expectation of profit investment assets - anything of material value or usefulness that is owned by a person or company to offset related incentive compensation expense; any general economic recession domestically or internationally; general conditions of financial liquidity for real estate transactions, including the growth in cross-border capital flows; our ability to leverage our platform to sustain revenue growth; our ability to retain and incentivize in·cen·tiv·ize tr.v. in·cen·tiv·ized, in·cen·tiv·iz·ing, in·cen·tiv·iz·es To offer incentives or an incentive to; motivate: producers; our levels of borrowing; and the integration of our acquisitions (in particular, the Trammell Crow Company). Additional information concerning factors that may influence CB Richard Ellis Group, Inc.'s financial information is discussed under "Risk Factors", "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures About Market Risk" and "Forward-Looking Statements" in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005, and under "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures About Market Risk" and "Forward-Looking Statements" in our Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 2006, as well as in the Company's press releases and other periodic filings with the Securities and Exchange Commission. Such filings are available publicly and may be obtained off the Company's Web site at www.cbre.com or upon request from the CB Richard Ellis Investor Relations Department at investorrelations@cbre.com. 1One-time charges include amortization expense related to net revenue backlog and incentive fees acquired, integration costs related to acquisitions, loss on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt, income related to investment in Savills plc (disposed of in January 2007) and tax expense related to the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of foreign earnings under the American Jobs Creation Act of 2004. 2A reconciliation of net income to net income, as adjusted for one-time items, is provided in the exhibits to this release. 3The Company's management believes that EBITDA is useful in evaluating its performance compared to that of other companies in its industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and acquisitions, which items may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company's management uses EBITDA as a measure to evaluate the performance of various business lines and for other discretionary purposes, including as a significant component when measuring its performance under its employee incentive programs. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), and when analyzing the Company's operating performance, readers should use EBITDA in addition to, and not as an alternative for, net income determined in accordance with GAAP. Because not all companies use identical calculations, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as tax and debt service payments. The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in the Company's debt instruments, which are further adjusted to reflect certain other cash and non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. and are used to determine compliance with financial covenants and the Company's ability to engage in certain activities, such as incurring additional debt and making certain restricted payments. For a reconciliation of EBITDA with the most comparable financial measures calculated and presented in accordance with GAAP, see the section of this press release titled "Non-GAAP Financial Measures." [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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