-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qZI/SgkaaAMhikLyKK8LNLiUl58gYTTCZpSrHDoclA2NBsWUtmfDR4RbpBb8Del9 hDE0qsksw6GmTdpNATCjCg== 0000912057-95-003694.txt : 19950516 0000912057-95-003694.hdr.sgml : 19950516 ACCESSION NUMBER: 0000912057-95-003694 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRUBB & ELLIS CO CENTRAL INDEX KEY: 0000216039 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 941424307 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08122 FILM NUMBER: 95538400 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY ST STE 3100 STREET 2: TELESIS TWR 9TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4159561990 MAIL ADDRESS: STREET 1: ONE MONTGOMERY ST STE 3100 STREET 2: TELESIS TWR 9TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 ------------------- 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: 1-8122 ----------------------- GRUBB & ELLIS COMPANY ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Delaware 94-1424307 - ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) One Montgomery Street, Telesis Tower, San Francisco, CA 94104 ------------------------------------- (Address of Principal Executive Offices) (Zip Code) (415) 956-1990 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) No Change --------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 X No --- --- 8,800,633 ------------------------------------------------- (Number of Shares Outstanding of the Registrant's Common Stock at May 1, 1995) 1 PART I FINANCIAL INFORMATION 2 ITEM 1. FINANCIAL STATEMENTS GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts and shares) (unaudited)
For the Three Months Ended March 31, ------------------------ 1995 1994 ----------- ----------- Revenue: Commercial real estate brokerage commissions $ 29,880 $ 27,779 Real estate services fees, commissions and other 8,193 6,566 ---------- ---------- Total Revenue 38,073 34,345 ---------- ---------- Costs and Expenses: Real estate brokerage and other commissions 17,095 15,620 Selling, general and administrative 12,405 11,412 Salaries and wages 11,621 10,745 Depreciation and amortization 437 452 Special charges and unusual items (119) -- ---------- ---------- Total costs and expenses 41,439 38,229 ---------- ---------- Total operating loss (3,366) (3,884) Other income and expenses: Interest income 288 133 Other income (loss), net (28) (293) Interest expense to related parties (739) (586) ---------- ---------- Loss before income taxes (3,845) (4,630) Provision for income taxes 66 117 ---------- ---------- Net loss $ (3,911) $ (4,747) ---------- ---------- ---------- ---------- Net loss applicable to common stockholders, net of dividends in arrears and accretion of liquidation preference on preferred stock in the amount of $701 and $638 in 1995 and 1994, respectively $ (4,612) $ (5,385) Net loss per common share and equivalents $ (.52) $ (1.33) Weighted average common shares outstanding 8,797,377 4,062,136
See notes to condensed consolidated financial statements. 3 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) ASSETS
March 31, December 31, March 31, 1995 1994 1994 --------- --------- --------- (unaudited) (unaudited) Current Assets: Cash and cash equivalents $ 12,462 $ 23,371 $ 9,859 Real estate brokerage commissions receivable 2,715 4,500 2,225 Real estate services fees and other commissions receivable 3,030 3,317 2,009 Other receivables 2,768 3,116 4,172 Prepaids and other current assets 1,184 2,222 2,077 --------- --------- --------- Total current assets 22,159 36,526 20,342 Noncurrent Assets: Real estate brokerage commissions receivable 352 454 1,136 Real estate investments held for sale and real estate owned 1,037 1,016 1,241 Equipment and leasehold improvements, net 5,251 5,203 4,977 Other assets 1,945 2,230 1,865 --------- --------- --------- Total assets $ 30,744 $ 45,429 $ 29,561 --------- --------- --------- --------- --------- ---------
See notes to condensed consolidated financial statements. 4 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets, continued (in thousands, except per share amounts and shares)
March 31, December 31, March 31, 1995 1994 1994 -------- -------- -------- (unaudited) (unaudited) LIABILITIES Current Liabilities: Notes payable and current portion of long-term debt $ 446 $ 508 $ 506 Current portion of notes payable and long-term debt to related party -- -- 4,000 Accounts payable 2,102 1,764 1,536 Compensation and employee benefits payable 5,330 8,556 6,375 Deferred commissions payable 125 5,195 180 Accrued severance obligations 709 876 2,323 Accrued office closure costs 1,236 1,346 2,782 Accrued claims and settlements 2,264 2,502 10,375 Other accrued expenses 6,346 8,430 6,005 -------- -------- -------- Total current liabilities 18,558 29,177 34,082 Long-Term Liabilities: Long-term debt, net of current portion 387 391 839 Long-term debt to related party, net of current portion 25,674 25,292 24,593 Accrued claims and settlements 13,274 13,404 9,124 Accrued severance obligations 202 277 457 Accrued office closure costs 1,910 2,220 3,938 Other 130 154 26 -------- -------- -------- Total liabilities 60,135 70,915 73,059 -------- -------- -------- Commitments and contingencies (Note 4) -- -- -- -------- -------- -------- REDEEMABLE PREFERRED STOCK 12% Senior Convertible Preferred Stock, $100.00 per share redemption value; 137,160 shares outstanding -- -- 14,857 5% Junior Convertible Preferred Stock, $100.00 per share redemption value; 150,000 shares outstanding -- -- 15,737 -------- -------- -------- Total redeemable preferred stock -- -- 30,594 -------- -------- -------- STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, $.01 par value: 1,000,000 shares authorized; 137,160 shares of 12% Senior Convertible Preferred Stock and 150,000 shares of 5% Junior Convertible Preferred Stock outstanding 32,143 32,143 -- Common stock, $.01 par value: 25,000,000 shares authorized; 8,800,633, 8,797,377 and 4,112,358 shares issued and outstanding at March 31, 1995, December 31, 1994 and March 31, 1994, respectively 89 89 42 Additional paid-in capital 56,923 56,917 47,591 Retained earnings (deficit) (118,546) (114,635) (121,725) -------- -------- -------- Total stockholders' equity (deficit) (29,391) (25,486) (74,092) -------- -------- -------- Total liabilities and stockholders' equity (deficit) $ 30,744 $ 45,429 $ 29,561 -------- -------- -------- -------- -------- --------
See notes to condensed consolidated financial statements. 5 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited - in thousands)
For the Three Months Ended March 31, ---------------------- 1995 1994 -------- ------- Cash Flows from Operating Activities: Net loss $ (3,911) $ (4,747) Adjustments to reconcile net loss to net cash used in operating activities (6,431) (5,450) -------- -------- Net cash used in operating activities (10,342) (10,197) -------- -------- Cash Flows from Investing Activities: Distribution from real estate joint ventures and real estate owned - 40 Purchases of equipment and leasehold improvements (501) (331) -------- ------- Net cash used in investing activities (501) (291) -------- ------- Cash Flows from Financing Activities: Proceeds from borrowing - 4,000 Repayment of notes payable (66) (62) Proceeds from issuance of common stock - 3 -------- -------- Net cash provided by (used in) financing activities (66) 3,941 -------- -------- Net decrease in cash and cash equivalents (10,909) (6,547) Cash and cash equivalents at beginning of period 23,371 16,406 -------- ------- Cash and cash equivalents at end of period $ 12,462 $ 9,859 -------- -------- -------- -------- ------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 603 $ 598 Income taxes 487 197
See notes to condensed consolidated financial statements. 6 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 1. INTERIM PERIOD REPORTING The accompanying unaudited condensed consolidated financial statements include the accounts of Grubb & Ellis Company, its wholly and majority owned and controlled subsidiaries and partnerships (the "Company"), and are prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and therefore, should be read in conjunction with the Company's Annual Report and footnotes thereto on Form 10-K for the year ended December 31, 1994. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain amounts in prior periods have been reclassified to conform to the current presentation. Operating results for the three month period ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. Any adjustments to reserves provided in prior periods in connection with offices which management determined in 1993 to close in 1994 are reflected as "Special charges and unusual items". 2. INCOME TAXES The Company's tax provision is attributable to federal, state and local income taxes assessed on profitable subsidiaries of the Company. 3. LOSS PER COMMON SHARE AND EQUIVALENTS Loss per common share computations are based on the weighted average number of common shares outstanding. Common equivalent shares from stock options and warrants are excluded from the computation if their effect is anti- dilutive. The calculation of net loss per common share includes net loss, adjusted for amounts applicable to the Senior and Junior Preferred Stock related to undeclared dividends earned in the amounts of approximately $498,000 and $203,000, respectively, for the quarter ended March 31, 1995, and accretion of liquidation preference (for periods during which the preferred stock was subject to mandatory redemption) of $444,000 and $194,000, respectively, for the quarter ended March 31, 1994. 7 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 4. COMMITMENTS AND CONTINGENCIES The Company has guaranteed, in the aggregate amount of $4 million, the contingent liabilities of one of its wholly-owned subsidiaries with respect to two limited partnerships in which the subsidiary formerly acted as general partner. The Company is involved in various claims and lawsuits arising in the ordinary course of business, as well as in connection with its participation in various joint ventures, partnerships, and a trust, many of which may not be covered by the Company's insurance policies. In the opinion of management, the eventual outcome of such claims and lawsuits is not expected to have a material adverse effect on the Company's financial position or results of operations. The Company previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 1994 the details of a complaint, JOHSZ ET AL. V. KOLL COMPANY, ET AL., and a related complaint, YOUNKIN, MAIONA, ET AL. V. KOLL COMPANY, ET AL. and a purported class action lawsuit, JOHN W. MATTHEWS, ET AL. V. KIDDER, PEABODY & CO., ET AL. AND HSM INC., ET AL. The YOUNKIN case has been stayed pending appellate review of the trial court's denial of Edison's demurrer alleging that the California Public Utilities Commission has exclusive jurisdiction over the subject matter of the complaint. Except as described herein, there has been no material change with respect to these matters. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUE The Company's revenue is derived principally from commercial brokerage activities. Property management, mortgage brokerage and appraisal and consulting fees provide substantially all of the remaining revenue. The Company has historically experienced its lowest quarterly revenue in the first quarter of each year, generally running about 20% of total annual revenues. As a percentage of total annual revenue, quarterly revenue during 1994, 1993, and 1992 ranged from a high of 30.8% to a low of 19.8%. The fourth quarter has historically provided the highest quarterly revenue due to increased activity related to clients' desire to complete transactions by year-end. Additionally, the Company operates in an industry that may be affected by various economic conditions, such as interest rates, and tax and environmental laws. Total operating revenues of $38.1 million for the first quarter of 1995 increased by $3.7 million or 10.9% over the same period in 1994. Commercial brokerage commissions of $29.9 million increased by $2.1 million, or 7.6% over the first quarter of 1994. Commercial brokerage revenue increased primarily in the Pacific Southwest region as a result of improving market conditions for commercial real estate services coupled with the Company's efforts to increase its competitive position. Other real estate service fees of $8.2 million increased by $1.6 million, or 24.8% over the first quarter of 1994 primarily related to heightened business services activity in the Company's property management operations. COSTS AND EXPENSES Real estate brokerage and other commission expense (salespersons' participation) is the Company's major expense and is a direct function of gross brokerage commission revenue levels. Commission expense related to the commercial brokerage operations represents the major component of salespersons' participation. As a percentage of total commercial real estate brokerage commission revenue, commercial brokerage salespersons' participation expense for the first quarter of 1995 increased by .8% over the first quarter of 1994. Total costs and expenses, other than real estate brokerage commissions expense, increased by $1.7 million, or 8.0% to $24.4 million for the first quarter of 1995 as compared to the same period in 1994. The increase was primarily attributable to 9 COSTS AND EXPENSES, (CONTINUED) increased business activity levels in the commercial brokerage branch offices and property management operations, as well as increased commitments to upgrading marketing support and information systems which management believes will contribute to future earnings. Special charges and unusual items were favorably adjusted by $119,000 in the first quarter of 1995. The adjustment included $90,000 related to the reversal of a portion of the remaining lease liability of the Southern California residential brokerage operations sold in November 1994. NET LOSS Net loss of $3.9 million or $.52 per common share for the first quarter of 1995 compares favorably to the net loss of $4.7 million or $1.33 per common share for the same period in 1994. The improvement over prior year's performance was primarily related to the realization of financial benefits of closing unprofitable offices and operations, allowing management to focus on its core businesses. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents decreased by $10.9 million from December 31, 1994 to March 31, 1995. The decrease was mainly attributable to cash used by operations of $10.3 million, which included $2.9 million for 1994 salespersons' and managers' incentive compensation, $5.1 million for deferred salespersons' commission payments, and aggregate interest payments of $600,000 on the 9.9% Senior Notes and the Revolving Credit Note. Working capital decreased by $3.7 million to $3.6 million during the first quarter of 1995. The Company has historically experienced the highest use of operating cash in the first quarter of the year, primarily related to the payment of year-end compensation and deferred commission payment balances which attain peak levels as a result of fourth quarter business activity. Additionally, quarterly revenues are typically at their lowest level in the first quarter. During 1994, debt agreements with The Prudential Insurance Company of America were renegotiated and modified to provide, among other things, deferral of principal payments until November 1, 1997 and thereafter on the $15 million of principal amount of the 9.9% Senior Notes, 10.65% Payment-in-Kind Notes and the Revolving Credit Note which would have been due from 1994 through 1996. 10 LIQUIDITY AND CAPITAL RESOURCES, (CONTINUED) The Company believes that its short-term and long-term cash requirements will be met by operating cash flow. With the completion of the previously mentioned long-term debt restructuring in 1994, and deployment of its 1995 business plan, management believes it will be able to focus on expanding its core commercial real estate business and should be prepared to take advantage of the improving real estate markets. However, if the Company's goals are not substantially achieved because of adverse economic conditions or other unfavorable events, the Company may find it necessary to further reduce expense levels, or undertake other actions as may be appropriate. 11 PART II OTHER INFORMATION (Items 2, 3, 4 and 5 are not applicable for the quarter ended March 31, 1995) 12 ITEM 1. LEGAL PROCEEDINGS The Company previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 1994 the details of a complaint, JOHSZ ET AL. V. KOLL COMPANY, ET AL., and a related complaint, YOUNKIN, MAIONA, ET AL. V. KOLL COMPANY, ET AL. and a purported class action lawsuit, JOHN W. MATTHEWS, ET AL. V. KIDDER, PEABODY & CO., ET AL. AND HSM INC., ET AL. The YOUNKIN case has been stayed pending appellate review of the trial court's denial of Edison's demurrer alleging that the California Public Utilities Commission has exclusive jurisdiction over the subject matter of the complaint. Except as described herein, there has been no material change with respect to these matters. ITEM 6(a). EXHIBITS (3) ARTICLES OF INCORPORATION AND BYLAWS 3.1 Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, effective November 1, 1994, incorporated herein by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10- K filed on March 31, 1995 (Commission File No. 1-8122). 3.2 Certificate of Incorporation of the Registrant, as restated effective November 1, 1994 (not yet filed with the Secretary of State of the State of Delaware), incorporated herein by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed on March 31, 1995 (Commission File No. 1-8122). 3.3 Grubb & Ellis Company Bylaws, as amended effective June 1, 1994, incorporated herein by reference to Exhibit 4.21 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 1994 (Commission File No. 1-8122). 3.4 Amendment to the Grubb & Ellis Company Bylaws, effective as of June 1, 1994, incorporated herein by reference to Exhibit 4.20 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 1994 (Commission File No. 1-8122). (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE ITEM 6(b) REPORTS ON FORM 8-K NONE 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GRUBB & ELLIS COMPANY --------------------- (Registrant) Date: May 12, 1995 /s/ James E. Klescewski ---------------------------- James E. Klescewski Vice President and Corporate Controller (Chief Accounting Officer) 14 Grubb & Ellis Company and Subsidiaries EXHIBIT INDEX (A) FOR THE QUARTER ENDED MARCH 31, 1995 EXHIBIT (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE (A) Exhibits incorporated by reference are listed in Item 6(a) of this report. 15 EX-11 2 EXHIBIT 11 GRUBB & ELLIS COMPANY AND SUBSIDIARIES EXHIBIT (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS - FORM 10-Q for the three months ended March 31, 1995 and 1994 (unaudited) (in thousands, except for shares and per share amounts)
Three Months Ended March 31, -------------------------------- 1995 1994 ------ ------- Primary loss per share applicable to Common Stock: Weighted average common shares outstanding 8,797,377 4,062,136 --------- --------- --------- --------- Net loss $ (3,911) $ (4,747) Dividends in arrears and accretion of liquidation preference on Preferred Stock (701) (638) --------- ---------- Net loss applicable to Common Stockholders $ (4,612) $ (5,385) --------- --------- --------- --------- Net loss per common share and equivalents applicable to Common Stock $ (.52) $ (1.33) --------- --------- --------- --------- Fully-diluted loss per share applicable to Common Stock: Weighted average common shares outstanding 8,797,377 4,062,136 --------- --------- --------- --------- Net loss $ (4,612) $ (5,385) --------- --------- --------- --------- Net loss per common share and equivalents applicable to Common Stock $ (.52) $ (1.33) --------- --------- --------- ---------
16 EX-27 3 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 12,462 0 11,207 5,110 0 22,159 19,041 13,790 30,744 18,558 0 89 0 32,143 56,923 30,744 0 38,333 0 17,095 24,344 0 739 (3,845) 66 (3,911) 0 0 0 (3,911) (.52) (.52) Interest income and Other income (loss), net are included in Total Revenue.
-----END PRIVACY-ENHANCED MESSAGE-----