CB Richard Ellis Group, Inc. Reports Third Quarter Revenue Increase of 54% and Earnings Per Share Rise of 38%; Company Maintains Earnings Guidance.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 third quarter 2007 revenue increased 54.2% to $1.5 billion 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 increased 23.1% to $0.48 compared to the third quarter of 2006. Excluding one-time charges1, third quarter 2007 diluted earnings per share was $0.55, representing an increase of 37.5% from the third quarter of 2006. The strong earnings growth was achieved despite a $32.9 million increase in interest expense associated with the financing of the 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 acquisition and the exclusion of $8.4 million of gains from Development Services activities, which cannot be recognized under purchase accounting rules. Management's Commentary "Third quarter results clearly showed the economic and strategic benefits of our highly diversified diversified (di·verˑ·s business line and revenue base. During a period of extremes in the global credit markets as well as uneasiness about the U.S. economy generally, CBRE CBRE CB Richard Ellis (real-estate firm) CBRE Chemical, Biological, Radiological and Explosive CBRE Component-Based Reliability Estimation CBRE Coldwell Banker Richard Ellis (Boston, MA) posted very impressive year over year gains in both revenue and profitability. These gains were ahead of our internal projections and support our view of achieving full year guidance," 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 professionals, supported by the industry's most extensive global platform and most admired brand, continue to fashion innovative solutions that enable us to expand our range of services for clients and build market share. "Our success was evident throughout the world last quarter, most notably in the international marketplace. In Europe, we continue to realize the benefits of the fully integrated service offering that we have rolled out across the continent as the region's preeminent pre·em·i·nent or pre-em·i·nent adj. Superior to or notable above all others; outstanding. See Synonyms at dominant, noted. [Middle English, from Latin prae full-service commercial real estate services provider. Asia Pacific remains our fastest-growing geography, and our increased investments in countries like China, Japan and Australia have produced noteworthy returns. Global Investment Management also continues to perform exceptionally well, both by harvesting gains on property sales and growing 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. . "In the Americas, we benefited from the acquisition of Trammell Crow Company combined with organic revenue gains. Investment sales activity showed solid growth despite a pullback Pullback A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum. in property valuations, reduced availability of debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay for larger asset sales, and tighter underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. standards. We expect the changed market conditions to have more of an impact on our investment sales performance in the fourth quarter. While non-U.S. leasing performance was quite strong, U.S. leasing results were affected by uncertainty surrounding domestic economic growth, and the generally slower pace of activity in selected markets. However, office and industrial leasing market fundamentals remain positive, with higher rents, flat-to-lower vacancies and continued absorption. "Meanwhile, the integration of the Trammell Crow Company has enabled us to sharply expand our fee-based services for Global 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. clients. Revenues associated with outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. have increased to 23% of total revenues in the third quarter of 2007 from 14% in the year ago quarter. This provides a steady source of revenues that strongly complements our transaction-based businesses." Since the beginning of the year, CB Richard Ellis has added 24 new corporate outsourcing accounts, expanded its service offering with 12 existing corporate clients, and renewed its relationship with 14 others. Recent notable account additions and expansions/renewals in our corporate outsourcing business include Chrysler Corporation, McKesson Corporation, Fifth Third Bank and Diageo. Third Quarter Highlights For the third quarter of 2007, the Company generated revenue of $1.5 billion, up 54.2% over the $967.9 million posted in the third quarter of 2006. Strong growth globally drove the Company's performance for the quarter. The Company reported net income of $114.9 million, or $0.48 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 third quarter of 2007 compared with net income of $92.3 million, or $0.39 per diluted share, in the third quarter of 2006. Excluding one-time items, the Company would have earned net income2 of $130.2 million, or $0.55 per diluted share, in the third quarter of 2007, an increase of 37.8% and 37.5%, respectively, compared with net income of $94.5 million, or $0.40 per diluted share, in the third quarter of 2006. 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 $239.9 million for the third quarter of 2007, an increase of $76.4 million, or 46.7%, from the same quarter last year despite the inclusion of $14.8 million4 of acquisition-related expenses. The integration of Trammell Crow Company is continuing to progress well and as previously announced, is ahead of schedule with regard to the timing and attainment of synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. savings. The Company is still forecasting annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. net expense synergy savings of approximately $90 million, and expects to realize about 60% of those savings in calendar year 2007. In line with the Company's strategy to reduce debt, the Company repaid $152.8 million of its senior secured term loans in the third quarter of 2007. The Company expects to achieve annual cash interest savings of nearly $20 million as a result of its de-leveraging efforts to date in 2007. Nine-Month Results Revenue was $4.2 billion for the nine months ended September 30, 2007, up $1.6 billion, or 60.0%, compared to the same period last year. The Company reported net income of $268.1 million, or $1.13 per diluted share, for the nine months ended September 30, 2007 compared to net income of $193.5 million, or $0.83 per diluted share, in the same period last year. Excluding one-time items, the Company would have earned net income of $352.5 million, or $1.49 per diluted share, for the nine months ended September 30, 2007, up 64.9% and 63.7%, respectively, over net income of $213.8 million, or $0.91 per diluted share, for the nine months ended September 30, 2006. EBITDA was $576.4 million for the nine months ended September 30, 2007, up $183.3 million or 46.6% compared to the same period last year despite the inclusion of $107.8 million5 of acquisition-related expenses. The strong earnings growth was achieved despite an $89.8 million increase in interest expense associated with the financing of the Trammell Crow Company acquisition and the exclusion of $21.0 million of gains from Development Services activities, which cannot be recognized under purchase accounting rules. Third-Quarter Segment Highlights Americas Region Third 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 46.3% to $914.7 million, compared with $625.4 million for the third quarter of 2006. This increase was attributable to the combination of acquisitions, particularly the Trammell Crow Company acquisition, and organic revenue growth. 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. for the Americas region totaled $102.4 million for the third quarter of 2007, compared with $87.9 million for the third quarter of 2006. Excluding the impact of one-time items, operating income for the Americas region would have been $125.2 million for the third quarter of 2007, an increase of $34.6 million, or 38.2%, as compared to $90.6 million for the third quarter of last year. The Americas region's EBITDA totaled $126.2 million for the third quarter of 2007, an increase of $25.0 million from last year's third quarter despite the inclusion of $13.4 million6 of acquisition-related expenses. 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 increased 49.5% to $320.2 million for the third quarter of 2007, compared with $214.2 million for the third quarter of 2006. This revenue increase reflects the growing strength of the Company's platform across most business lines, particularly in the United Kingdom, France, Spain and Germany. Operating income for the EMEA segment totaled $66.0 million for the third quarter of 2007, compared with $35.1 million for the same period last year. Excluding the impact of one-time items, operating income for the EMEA region would have been $67.4 million for the third quarter of 2007, an increase of $31.9 million, or 89.7%, from the third quarter of last year. EBITDA for the EMEA region totaled $68.7 million for the third quarter of 2007, an increase of $30.0 million, or 77.4%, from last year's third 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 $134.5 million for the third quarter of 2007, a 54.5% increase from $87.0 million for the third quarter of 2006. This revenue increase was driven by improved performance in Australia, China, Japan and Singapore. Operating income for the Asia Pacific segment increased to $18.3 million for the third quarter of 2007 compared to $5.0 million for the same period last year. EBITDA for the Asia Pacific segment totaled $19.1 million for the third quarter of 2007, an increase of $10.7 million, or 128.6%, from last year's third quarter. The Asia Pacific segment did not incur any significant one-time costs in the current or prior year 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 $99.1 million for the third quarter of 2007, a 139.5% increase from the $41.4 million recorded in the third quarter of 2006. This increase was mainly due to higher incentive fees as well as increased investment management fees, a source of recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. revenue, in the U.S. and the U.K. Higher investment management fees resulted from a continued steady increase in assets under management. Total assets under management have grown 24.5% from year-end 2006 to $35.6 billion at the end of the third quarter. This segment reported operating income of $20.8 million for the third quarter of 2007, compared with $10.9 million for the same period last year. EBITDA for this segment totaled $23.2 million for the third quarter of 2007, an increase of $8.1 million, or 53.1%, from last year's third quarter. 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 incentive and asset management fees, partially offset by carried interest activity. As compared with the prior year third quarter, revenue recognized from funds liquidating (carried interest revenue) decreased by $3.0 million while incentive compensation expense recognized for dedicated executives and team leaders associated with this segment's carried interest programs was $11.0 million higher. For the third quarter of 2007, the Company recorded a total of $17.6 million of incentive compensation expense related to carried interest revenue, only $0.1 million of which pertained to revenue recognized during the third quarter of 2007 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 the additional $17.5 million of incentive compensation expense recognized. 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 in December 2006. Revenue for this segment totaled $24.3 million for the third quarter of 2007. This segment reported operating income of $7.8 million for the third quarter of 2007. Excluding the impact of one-time items, operating income would have been $8.4 million. EBITDA for this segment totaled $2.7 million for the third quarter of 2007. The difference primarily reflects the impact of minority interest expense, which is included in the calculation of EBITDA, but not in the calculation of operating income. Excluding the impact of purchase accounting, the Company's earnings would have increased by approximately $8.4 million from net gains on real estate sold during the third quarter of 2007. Development projects in process as of September 30, 2007 totaled $6.7 billion, a 24% increase from year-end 2006. The inventory of pipeline deals as of September 30, 2007 stood at $2.9 billion. The combined total of $9.6 billion of in-process and pipeline activity matches the level achieved at mid-year 2007. Guidance The Company is maintaining its guidance of full-year diluted earnings per share growth of approximately 50% for 2007 as compared to 2006, excluding one-time items. The Company's third-quarter earnings conference call will be held on Tuesday, October 30, 2007 at 10:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . 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 800-700-8174 for U.S. callers and 612-234-9960 for international callers. A replay of the call will be available starting at 2:00 p.m. EDT on October 30, 2007 and ending at midnight EST EST electroshock therapy. EST abbr. electroshock therapy on November 13, 2007. The dial-in number for the replay is 800-475-6701 for U.S. callers and 320-365-3844 for international callers. The access code for the replay is 890505. A transcript A generic term for any kind of copy, particularly an official or certified representation of the record of what took place in a court during a trial or other legal proceeding. A transcript of record 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; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. In 2007, CB Richard Ellis was named one of the 50 "best in class" companies by BusinessWeek, and one of the 100 fastest growing companies by Fortune. 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: general conditions of financial liquidity for real estate transactions; 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; our ability to leverage our platform to sustain revenue growth and capture market share; 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 cash interest savings resulting from debt reductions; and the integration of our acquisitions (in particular, the Trammell Crow Company) and the level of synergy savings achieved as a result. Additional information concerning factors that may influence the Company'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, 2006, 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 June 30, 2007, 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, incentive fees and customer relationships resulting from acquisitions, merger-related charges, integration costs related to acquisitions and the loss on sale of trading securities acquired in the Trammell Crow Company acquisition. 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." 4Includes merger-related expenses of $5.1 million and integration costs related to acquisitions of $9.7 million, the majority of which related to the Trammell Crow Company acquisition. 5Includes merger-related expenses of $39.8 million, the loss on sale of trading securities acquired in the Trammell Crow Company acquisition of $33.6 million and integration costs related to acquisitions of $34.4 million, the majority of which related to the Trammell Crow Company acquisition. 6Includes merger-related expenses of $4.3 million and integration costs related to acquisitions of $9.1 million, the majority of which related to the Trammell Crow Company acquisition. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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