-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jc4Ul9tdkITOBVXiZr3Jw7Qk6iH+IZCGonulpEcmgRBj3fVMLBXmcB/j4KIWxPSy j1uqGPFw2yA81YbHny74xw== 0000898430-01-500914.txt : 20010608 0000898430-01-500914.hdr.sgml : 20010608 ACCESSION NUMBER: 0000898430-01-500914 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010509 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CB RICHARD ELLIS SERVICES INC CENTRAL INDEX KEY: 0000852203 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521616016 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12231 FILM NUMBER: 1655458 BUSINESS ADDRESS: STREET 1: 200 NORTH SEPULVEDA BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3105638600 MAIL ADDRESS: STREET 1: 200 NORTH SEPULVEDA BLVD CITY: EL SEGUNDO STATE: CA ZIP: 90245 FORMER COMPANY: FORMER CONFORMED NAME: CB COMMERCIAL HOLDINGS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CB ACQUISITION CORP DATE OF NAME CHANGE: 19890731 8-K 1 d8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Rule 100 and 101 of Regulation FD Date of Report (Date of earliest event reported): May 9, 2001 ________________________ CB RICHARD ELLIS SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware 001-12231 52-1616016 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 200 North Sepulveda Boulevard, El Segundo, California 90245-4380 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 563-8611 Not Applicable (Former name or former address, if changed since last report) 1 Item 9. Regulation FD Disclosure On May 9, 2001, CB Richard Ellis (the Company) issued two press releases. One reported the Company's operating results for first quarter 2001. The second reported the first quarter 2001 operating results for the Company's Europe, Middle East and Africa Division. These press releases are filed as exhibits 99.1 and 99.2, respectively. Item 7. Financial Statement, Pro Forma Financial Information and Exhibits (c) Exhibits. 99.1 Press release dated May 9, 2001 issued by CB Richard Ellis Services, Inc. reporting the Company's operating results for first quarter 2001. 99.2 Press release dated May 9, 2001 issued by CB Richard Ellis Services, Inc. reporting the first quarter 2001 operating results for the Company's Europe, Middle East and Africa Division. 2 SIGNATURES Pursuant to the requirements of Rule 100 and 101 of Regulation FD, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CB RICHARD ELLIS SERVICES, INC. Date: June 7, 2001 By: /s/ James H. Leonetti ------------------------------------- James H. Leonetti Chief Financial Officer 3 Exhibit Index Exhibit Number Description of Exhibit - ------- ---------------------- 99.1 Press release dated May 9, 2001 issued by CB Richard Ellis Services, Inc. 99.2 Press release dated May 9, 2001 issued by CB Richard Ellis Services, Inc. Europe, Middle East and Africa (EMEA) Division. 4 EX-99.1 2 dex991.txt PRESS RELEASE DATED 5/9/01 Exhibit 99.1 P R E S S R E L E A S E CB Richard Ellis, Inc. - ------------------------ 200 N. Sepulveda Blvd. Suite 300 El Segundo, CA 90245 T 310 563 8600 F 310 563 8670 www.cbre.com FOR IMMEDIATE RELEASE -- 9 May 2001 For further information: Gallen Neilly & Associates CB Richard Ellis Tim Gallen James Leonetti 925/930-9848 310/563-8611 (media) (investors) CB Richard Ellis Reports Operating Results for First-Quarter 2001 EL SEGUNDO, Calif. - CB Richard Ellis (NYSE:CBG) today reported an increase in revenue over the prior year and positive operating results from its North America operations. These results were mitigated by a softening of revenue in Asia and in Europe. Revenue for the first quarter was $272.5 million, a 4% improvement over revenue generated during the first quarter of last year. This increase in revenue was the result of higher lease revenue, improved property and facility management fees, strong results by the valuation unit, and solid revenue growth of the mortgage banking unit. These revenue improvements were primarily achieved in the North America Division, partially mitigated by softening of revenue in Asia and Europe. EBITDA for the quarter was $14.0 million, as compared to a robust $19.8 million reported during the same period last year. Due to the seasonal nature of its operations, the company typically reports small losses or break-even results during its first calendar quarter. The company recorded a net loss for the first quarter of $2.8 million, which represents a net loss of $0.13 per share. Comparatively, during the first quarter of 2000, the company reported break-even net income. Operating results during the first quarter of 2001 and 2000 were impacted by the occurrence of non-recurring sales of business operations. The company recognized - - more - N A V I G A T I N G A N E W W O R L D 5 CB Richard Ellis First Quarter Earnings May 9, 2001 gains from one-time sales, net of related expenses, of $5.4 million during the first quarter of 2001 as compared to $4.7 million during the first quarter of 2000. Additionally, the company disposed of other business operations during 2000, which had generated approximately $1.8 million in revenues during the first quarter of 2000, with no such revenue during 2001. Chief Executive Officer Ray Wirta commented: "We are pleased with the revenue growth of our business, particularly in North America. Despite economic softness in several of our key markets in North America and internationally, each of our business segments continued to generate revenue growth. A softening economy in the United States has been evidenced by slower job growth, resulting in a predictable negative impact on real estate activity by corporate clients. "Our Transaction Management group produced quarter-over-quarter revenue growth of 1%, led by the Corporate Services business unit, which posted a 23% improvement in revenues. We believe that this affirms our strategy to focus resources to help our corporate clients manage their real estate operations more effectively." Wirta noted: "Led by our mortgage banking group, the Financial Services businesses continued to provide profitable growth, generating 22% growth in revenue and 25% growth in EBITDA from recurring operations. Excluding non- recurring items and adjusted for the effect of business disposals, Management Services generated 6% growth in revenue from recurring operations. "The growth in revenues was driven by our North America operations, which posted a 7% increase in revenue during the first quarter of 2001 as compared to the prior year. Asia operations were adversely affected by a reduction in the level of U.S. corporate expansion and by the recent dispute between China and the U.S. "Additionally, our European operations did not perform at the same level as the prior year. We are closely monitoring the situation in both Asia and Europe, and have already taken steps to reduce our operating expenses. "Although our North American results were positive, certain local regional economies in the U.S. are experiencing an economic slowdown. This is particularly evident in the Western United States, which we equate the economic softness to the pronounced decline in the technology and telecommunication sectors. "We continue to believe in the fundamentals for our business for the long term; however, if the softness in the U.S. economy continues, it will impact our revenue growth for the balance of the year. "Our business model allows for the flexibility to reduce expenses in response to declining revenues. We have contingency plans in place to reduce our costs should revenue begin to decline and have a history of successfully implementing such programs." 6 CB Richard Ellis First Quarter Earnings May 9, 2001 Quarterly Segment Performance The company reports its operations under three core business segments: . Transaction Management. Transaction Management generated $180.0 million of revenue in the first quarter, up 1% over the same period last year. The transaction management revenues improved in North America by 5% over the comparable period of last year. This was partially offset by softness in revenues in Europe and Asia. The Corporate Services business unit generated $29.9 million of revenue, an improvement of 23% over the $24.4 million of revenue during the same period of last year. The Investment Properties unit posted revenue of $38.0 million during the first quarter of 2001, which represents quarter-over-quarter growth of 11%. Transaction Management EBITDA for the first quarter was $2.0 million, a $7.6 million decrease from last year. Higher compensation costs relating to the expansion and retention of the sales force in North America, combined with the planned expansion of international operations, resulted in expenses being at a higher level than the prior year. . Financial Services. Financial Services generated $55.9 million of revenue during the first quarter, up 35% over the first quarter of last year. Revenue improved in the three major business lines that compose this segment: valuation, mortgage and investment management. EBITDA rose to $10.1 million during the first quarter, an improvement of $6.3 million, compared to the same period last year. Additionally, contributing to the first-quarter 2001 results was a one-time gain, net of related expenses, of $5.6 million resulting from the sale of a managed fund in the investment management business. Financial Services was a more significant part of the company's operating performance in the first quarter of 2001, reflecting the company's strategy to concentrate on higher-margin business lines and improved market conditions for the mortgage and valuation business lines. Excluding non-recurring items, revenue from Financial Services represented approximately 19% of total revenues during the first quarter of 2001, as compared to 16% during the first quarter of 2000. . Management Services. Management Services' revenue for the first quarter totaled $36.6 million as compared to $34.5 million of recurring revenue for the first quarter of 2000. Although the company reported revenue of $41.1 million from this segment during the first quarter of 2000, such revenue included $6.5 million of non-recurring items. During the first quarter of 2000, the company recorded a one-time gain of $4.7 million from the sale of a Telecommunication business. Additionally, during the fourth quarter of 2000, the company sold its Strategic HR business. The Strategic HR business generated approximately $1.8 million of revenue during the first quarter of 2000. Management Services' EBITDA for the quarter ended March 31, 2001, totaled $1.9 million, an improvement of 15% over recurring EBITDA for the prior year. The company reported EBITDA of $6.4 million during the first quarter of 2000; however, this includes the $4.8 million of non-recurring EBITDA related to the sale of the Telecommunication and Strategic HR businesses. 7 CB Richard Ellis First Quarter Earnings May 9, 2001 Update of Sale of the Company On Feb. 24, 2001, the company announced that it had entered into a merger agreement providing for the acquisition of the company by CBRE Holding Inc. for $16 per share in cash. On April 12, the company filed a preliminary proxy statement with the Securities and Exchange Commission. The company expects to mail a definitive proxy statement to its stockholders in late May and to hold a meeting of shareholders in July to vote on the proposed merger. Completion of the merger is subject to a number of conditions including the following: . Expiration or early termination of the Hart Scott Rodino waiting period; . Obtaining funding for the merger in accordance with the executed commitment letters with Credit Suisse First Boston and DLJ Investment Funding; . Obtaining the approval of a majority of the outstanding shares of the company and two-thirds of the shares held by shareholders not affiliated with the buying group; . Obtaining consents from holders of more than 50% of the $175 million face amount of 8 7/8% senior subordinated notes of the company to certain amendments to the indenture governing those notes; . Effectiveness of a registration statement of CBRE Holding Inc. pursuant to which it intends to offer its common stock to employees of the company; and . Other customary conditions for a transaction of this nature. CB Richard Ellis is the world's leading real estate services company. With headquarters in Los Angeles and approximately 9,700 employees worldwide, the company serves real estate owners, investors and occupiers through nearly 250 offices in 44 countries. Services include property sales and leasing, property management, corporate services, facilities management, commercial mortgage services, investment management, appraisal/valuation, research and consulting. CB Richard Ellis had 2000 revenues of $1.3 billion. For more information about CB Richard Ellis, visit the company's Web site at www.cbre.com. ------------ This release contains forward-looking statements concerning expectations for future revenues, cost reductions and earnings performance. These statements reflect the company's current plans and expectations and are based on information currently available to it. They rely on a number of assumptions and estimates, which could prove to be inaccurate, and which are subject to risks and uncertainties that could cause the company's actual results to vary materially from the results anticipated. CB Richard Ellis undertakes no obligation to update publicly or revise any forward-looking statements. These statements are qualified by reference to the company's 2000 Report on Form 10-K and its quarterly reports on Form 10-Q. CB Richard Ellis filed a preliminary proxy statement regarding the Merger on April 12, 2001, and will file a definitive proxy statement regarding the Merger when it is 8 CB Richard Ellis First Quarter Earnings May 9, 2001 available. Information regarding the identity of persons who, under rules of the Securities and Exchange Commission, may be considered participants in the solicitation of proxies from stockholders of CB Richard Ellis, and those persons' holdings of securities of CB Richard Ellis, are included in the preliminary proxy statement. Stockholders of CB Richard Ellis are urged to read the definitive proxy statement regarding the Merger when it is available, because it will contain important information. Copies of the proxy statements and related Rule 13e-3 Transaction Statement on Schedule 13E-3 may be obtained for free at the Securities and Exchange Commission Web site at www.sec.gov. These documents may also be obtained for free from CB Richard Ellis. Requests for copies should be directed to CB Richard Ellis Services Inc., 505 Montgomery St., Sixth Floor, San Francisco, Calif. 94111, Attention: Walter Stafford, Secretary. -- more -- 9 CB Richard Ellis First Quarter Earnings May 9, 2001 CB RICHARD ELLIS SERVICES INC. OPERATING RESULTS For the Three Months Ended March 31, 2001, and 2000 (Dollars in thousands, except share and per share data) (Unaudited)
Three Months Ended March 31, Consolidated 2001 2000 Revenue: Leases $ 103,166 $ 99,753 Sales 73,843 74,281 Property and facilities management fees 27,872 25,285 Consulting and referral fees 16,367 16,314 Appraisal fees 18,836 16,284 Loan origination and servicing fees 14,812 9,263 Investment management fees 8,549 7,337 Other 9,053 12,402 Total revenue 272,498 260,919 Costs and expenses: Commissions, fees and other incentives 124,398 113,963 Operating, administrative and other 134,079 127,148 Depreciation and amortization 11,696 10,569 Operating income 2,325 9,239 Interest income 800 489 Interest expense 9,055 9,685 (Loss) income before (benefit) provision for income tax (5,930) 43 (Benefit) provision for income tax (3,084) 23 Net (loss) income $ (2,846) $ 20 Basic (loss) earnings per share $ (0.13) $ -- Weighted average shares outstanding for basic (loss) earnings per share 21,309,550 20,819,268 Diluted (loss) earnings per share $ (0.13) $ -- Weighted average shares outstanding for diluted (loss) earnings per share 21,309,550 20,851,184 EBITDA $ 14,021 $ 19,808 EBITDA margin 5.1% 7.6%
10 CB Richard Ellis First Quarter Earnings May 9, 2001 CB RICHARD ELLIS SERVICES INC. OPERATING RESULTS BY BUSINESS SEGMENT For the Three Months Ended March 31, 2001, and 2000 (Dollars in thousands) (Unaudited)
Three Months Ended March 31, 2001 2000 Transaction Management Revenue: Leases $ 97,215 $ 94,304 Sales 70,303 71,922 Other consulting and referral fees (a) 12,463 12,233 Total revenue 179,981 178,459 Costs and expenses: Commissions, fees and other incentives 101,622 94,912 Operating, administrative and other 76,342 73,965 Depreciation and amortization 6,147 4,951 Operating (loss) income $ (4,130) $ 4,631 EBITDA $ 2,017 $ 9,582 EBITDA margin 1.1% 5.4% EBITDA as a percent of consolidated EBITDA 14.4% 48.4% Financial Services Revenue: Appraisal fees $ 18,368 $ 15,941 Loan origination and servicing fees 14,812 9,230 Investment management fees 7,969 6,717 Other (a) 14,770 9,509 Total revenue 55,919 41,397 Costs and expenses: Commissions, fees and other incentives 15,743 12,207 Operating, administrative and other 30,081 25,405 Depreciation and amortization 3,246 2,980 Operating income $ 6,849 $ 805 EBITDA $ 10,095 $ 3,785 EBITDA margin 18.1% 9.1% EBITDA as a percent of consolidated EBITDA 72.0% 19.1%
11 CB Richard Ellis First Quarter Earnings May 9, 2001 Management Services Revenue: Property management fees $ 20,337 $ 19,234 Facilities management fees 6,881 5,291 Other (a) 9,380 16,538 Total revenue 36,598 41,063 Costs and expenses: Commissions, fees and other incentives 7,033 6,844 Operating, administrative and other 27,656 27,778 Depreciation and amortization 2,303 2,638 Operating (loss) income $ (394) $ 3,803 EBITDA $ 1,909 $ 6,441 EBITDA margin 5.2% 15.7% EBITDA as a percent of consolidated EBITDA 13.6% 32.5%
(a) Revenue is allocated by material line of business specific to each segment. "Other" includes types of revenue that have not been broken out separately due to their immaterial balances and/or nonrecurring nature within each segment. Certain revenue types disclosed on the consolidated statements of operations may not be derived directly from amounts shown in this table. CB RICHARD ELLIS SERVICES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
March 31, 2001 Dec. 31, 2000 (Unaudited) ASSETS Cash and cash equivalents $ 20,339 $ 20,854 Other current assets 173,432 202,191 Property and equipment, net 75,048 75,992 Goodwill and other intangible assets, net 459,468 470,407 Cash surrender value of insurance policies, deferred compensation plan 61,267 53,203 Other assets 141,742 140,458 Total assets $ 931,296 $ 963,105 LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of long-term debt $ 1,161 $ 1,378 Short-term borrowings 8,418 9,215 Other current liabilities 177,096 299,612 Long-term debt 409,653 303,571
12 CB Richard Ellis First Quarter Earnings May 9, 2001 Deferred compensation liability 79,980 80,503 Other liabilities 27,729 29,739 Total liabilities 704,037 724,018 Minority Interest 2,967 3,748 Stockholders' Equity Contributed capital 338,132 336,694 Accumulated deficit (113,840) (101,355) Total stockholders' equity 224,292 235,339 Total liabilities and stockholders' equity $ 931,296 $ 963,105
CB RICHARD ELLIS SERVICES INC. Three Months Ended March 31, 2001, and 2000 (Dollars in millions except per share data)
Three Months Ended March 31, 2001 2000 Revenue $ 272.5 $ 260.9 EBITDA $ 14.0 $ 19.8 Net loss $ (2.8) $ -- Cash flow used in operating activities $ (104.3) $ (67.5) Net income after tax before goodwill amortization $ 1.1 $ 3.9 Cash flow used in operating activities per share (diluted) $ (4.89) $ (3.24) Basic loss per share $ (0.13) $ -- EBITDA per share (diluted) $ 0.66 $ 0.95 Diluted loss per share $ (0.13) $ -- Diluted number of shares 21,309,550 20,851,184 Debt/Equity 1.87x 2.04x EBITDA/Net interest expense 1.70x 2.15x Effective tax rate 52.0% 54.0% Operating expense as a % of revenue 49.2% 48.7% EBITDA as a % of revenue 5.1% 7.6% Net loss as a % of revenue -1.0% -- International revenue as a % of consolidated revenue 22.6% 23.9%
- -------------------------------------------------------------------------------- - --ends-- 13 EX-99.2 3 dex992.txt PRESSS RELEASE DATED 5/9/01 EXHIBIT 99.2 [CB Richard Ellis] www.cbre.com PRESS RELEASE WEDNESDAY 9 MAY 2001 For further information: Jim Reid Melissa Hubbard CB Richard Ellis Tavistock Communications Tel: 020 7412 9620 Tel: 020 7600 2288 CB Richard Ellis Reports Operating Results for First Quarter 2001 Jim Reid, Chairman of CB Richard Ellis' Europe, Middle East and Africa (EMEA) Division commented on today's first quarter 2001 earnings press release: "We are very pleased that the global business maintained revenue growth in the first quarter. In our EMEA Division, CB Hillier Parker in the UK achieved positive revenue growth over last year. However some of our other European businesses experienced modest declines. Overall, EMEA revenues declined 6% in the quarter from $35.5 million in 2000 to $33.3 million in 2001. "Not surprisingly, this revenue decrease was due to deferred lease transactions as both global and local occupiers assessed the changed economic environment. We remain guardedly optimistic for the entirety of the year as our business platform remains strong." A copy of the first quarter 2001 CB Richard Ellis press release and financial results is attached. In the UK CB Richard Ellis operates as CB Hillier Parker (www.cbhillierparker.com). CB Richard Ellis (NYSE:CBG) is the world's leading real estate services company. Headquartered in Los Angeles with 10,000 employees worldwide, the company serves real estate owners, investors and occupiers through nearly 250 principal offices in 44 countries. Services include property sales and leasing, property management, corporate services, facilities management, commercial mortgage services, investment management, appraisal/valuation, research and consulting. CB Richard Ellis had 2000 revenues of $1.3 billion. For more information about CB Richard Ellis, visit the company's website at www.cbre.com 14 PRESS RELEASE CB Richard Ellis, Inc. 200 N. Sepulveda Blvd. Suite 300 El Segundo, CA 90245 T 310 563 8600 F 310 563 8670 www.cbre.com FOR IMMEDIATE RELEASE -- 9 May 2001 For further information: CB Richard Ellis Gallen Neilly & Associates James Leonetti Tim Gallen 310/563-8611 925/930-9848 (investors) (media) CB Richard Ellis Reports Operating Results for First-Quarter 2001 EL SEGUNDO, Calif. - CB Richard Ellis (NYSE:CBG) today reported an increase in revenue over the prior year and positive operating results from its North America operations. These results were mitigated by a softening of revenue in Asia and in Europe. Revenue for the first quarter was $272.5 million, a 4% improvement over revenue generated during the first quarter of last year. This increase in revenue was the result of higher lease revenue, improved property and facility management fees, strong results by the valuation unit, and solid revenue growth of the mortgage banking unit. These revenue improvements were primarily achieved in the North America Division, partially mitigated by softening of revenue in Asia and Europe. EBITDA for the quarter was $14.0 million, as compared to a robust $19.8 million reported during the same period last year. Due to the seasonal nature of its operations, the company typically reports small losses or break-even results during its first calendar quarter. The company recorded a net loss for the first quarter of $2.8 million, which represents a net loss of $0.13 per share. Comparatively, during the first quarter of 2000, the company reported break-even net income. Operating results during the first quarter of 2001 and 2000 were impacted by the occurrence of non-recurring sales of business operations. The company recognized gains from one-time sales, net of related expenses, of $5.4 million during the first - more - [Graphic Appears Here] 15 CB Richard Ellis First Quarter Earnings May 9, 2001 quarter of 2001 as compared to $4.7 million during the first quarter of 2000. Additionally, the company disposed of other business operations during 2000, which had generated approximately $1.8 million in revenues during the first quarter of 2000, with no such revenue during 2001. Chief Executive Officer Ray Wirta commented: ``We are pleased with the revenue growth of our business, particularly in North America. Despite economic softness in several of our key markets in North America and internationally, each of our business segments continued to generate revenue growth. A softening economy in the United States has been evidenced by slower job growth, resulting in a predictable negative impact on real estate activity by corporate clients. ``Our Transaction Management group produced quarter-over-quarter revenue growth of 1%, led by the Corporate Services business unit, which posted a 23% improvement in revenues. We believe that this affirms our strategy to focus resources to help our corporate clients manage their real estate operations more effectively.'' Wirta noted: ``Led by our mortgage banking group, the Financial Services businesses continued to provide profitable growth, generating 22% growth in revenue and 25% growth in EBITDA from recurring operations. Excluding non- recurring items and adjusted for the effect of business disposals, Management Services generated 6% growth in revenue from recurring operations. ``The growth in revenues was driven by our North America operations, which posted a 7% increase in revenue during the first quarter of 2001 as compared to the prior year. Asia operations were adversely affected by a reduction in the level of U.S. corporate expansion and by the recent dispute between China and the U.S. ``Additionally, our European operations did not perform at the same level as the prior year. We are closely monitoring the situation in both Asia and Europe, and have already taken steps to reduce our operating expenses. ``Although our North American results were positive, certain local regional economies in the U.S. are experiencing an economic slowdown. This is particularly evident in the Western United States, which we equate the economic softness to the pronounced decline in the technology and telecommunication sectors. ``We continue to believe in the fundamentals for our business for the long term; however, if the softness in the U.S. economy continues, it will impact our revenue growth for the balance of the year. ``Our business model allows for the flexibility to reduce expenses in response to declining revenues. We have contingency plans in place to reduce our costs should revenue begin to decline and have a history of successfully implementing such programs.'' 16 CB Richard Ellis First Quarter Earnings May 9, 2001 Quarterly Segment Performance The company reports its operations under three core business segments: . Transaction Management. Transaction Management generated $180.0 million of revenue in the first quarter, up 1% over the same period last year. The transaction management revenues improved in North America by 5% over the comparable period of last year. This was partially offset by softness in revenues in Europe and Asia. The Corporate Services business unit generated $29.9 million of revenue, an improvement of 23% over the $24.4 million of revenue during the same period of last year. The Investment Properties unit posted revenue of $38.0 million during the first quarter of 2001, which represents quarter-over-quarter growth of 11%. Transaction Management EBITDA for the first quarter was $2.0 million, a $7.6 million decrease from last year. Higher compensation costs relating to the expansion and retention of the sales force in North America, combined with the planned expansion of international operations, resulted in expenses being at a higher level than the prior year. . Financial Services. Financial Services generated $55.9 million of revenue during the first quarter, up 35% over the first quarter of last year. Revenue improved in the three major business lines that compose this segment: valuation, mortgage and investment management. EBITDA rose to $10.1 million during the first quarter, an improvement of $6.3 million, compared to the same period last year. Additionally, contributing to the first-quarter 2001 results was a one-time gain, net of related expenses, of $5.6 million resulting from the sale of a managed fund in the investment management business. Financial Services was a more significant part of the company's operating performance in the first quarter of 2001, reflecting the company's strategy to concentrate on higher-margin business lines and improved market conditions for the mortgage and valuation business lines. Excluding non-recurring items, revenue from Financial Services represented approximately 19% of total revenues during the first quarter of 2001, as compared to 16% during the first quarter of 2000. . Management Services. Management Services' revenue for the first quarter totaled $36.6 million as compared to $34.5 million of recurring revenue for the first quarter of 2000. Although the company reported revenue of $41.1 million from this segment during the first quarter of 2000, such revenue included $6.5 million of non-recurring items. During the first quarter of 2000, the company recorded a one-time gain of $4.7 million from the sale of a Telecommunication business. Additionally, during the fourth quarter of 2000, the company sold its Strategic HR business. The Strategic HR business generated approximately $1.8 million of revenue during the first quarter of 2000. Management Services' EBITDA for the quarter ended March 31, 2001, totaled $1.9 million, an improvement of 15% over recurring EBITDA for the prior year. The company reported EBITDA of $6.4 million during the first quarter of 2000; however, this includes the $4.8 million of non-recurring EBITDA related to the sale of the Telecommunication and Strategic HR businesses. 17 CB Richard Ellis First Quarter Earnings May 9, 2001 Update of Sale of the Company On Feb. 24, 2001, the company announced that it had entered into a merger agreement providing for the acquisition of the company by CBRE Holding Inc. for $16 per share in cash. On April 12, the company filed a preliminary proxy statement with the Securities and Exchange Commission. The company expects to mail a definitive proxy statement to its stockholders in late May and to hold a meeting of shareholders in July to vote on the proposed merger. Completion of the merger is subject to a number of conditions including the following: . Expiration or early termination of the Hart Scott Rodino waiting period; . Obtaining funding for the merger in accordance with the executed commitment letters with Credit Suisse First Boston and DLJ Investment Funding; . Obtaining the approval of a majority of the outstanding shares of the company and two-thirds of the shares held by shareholders not affiliated with the buying group; . Obtaining consents from holders of more than 50% of the $175 million face amount of 8 7/8% senior subordinated notes of the company to certain amendments to the indenture governing those notes; . Effectiveness of a registration statement of CBRE Holding Inc. pursuant to which it intends to offer its common stock to employees of the company; and . Other customary conditions for a transaction of this nature. CB Richard Ellis is the world's leading real estate services company. With headquarters in Los Angeles and approximately 9,700 employees worldwide, the company serves real estate owners, investors and occupiers through nearly 250 offices in 44 countries. Services include property sales and leasing, property management, corporate services, facilities management, commercial mortgage services, investment management, appraisal/valuation, research and consulting. CB Richard Ellis had 2000 revenues of $1.3 billion. For more information about CB Richard Ellis, visit the company's Web site at www.cbre.com. This release contains forward-looking statements concerning expectations for future revenues, cost reductions and earnings performance. These statements reflect the company's current plans and expectations and are based on information currently available to it. They rely on a number of assumptions and estimates, which could prove to be inaccurate, and which are subject to risks and uncertainties that could cause the company's actual results to vary materially from the results anticipated. CB Richard Ellis undertakes no obligation to update publicly or revise any forward-looking statements. These statements are qualified by reference to the company's 2000 Report on Form 10-K and its quarterly reports on Form 10-Q. CB Richard Ellis filed a preliminary proxy statement regarding the Merger on April 12, 2001, and will file a definitive proxy statement regarding the Merger when it is 18 CB Richard Ellis First Quarter Earnings May 9, 2001 available. Information regarding the identity of persons who, under rules of the Securities and Exchange Commission, may be considered participants in the solicitation of proxies from stockholders of CB Richard Ellis, and those persons' holdings of securities of CB Richard Ellis, are included in the preliminary proxy statement. Stockholders of CB Richard Ellis are urged to read the definitive proxy statement regarding the Merger when it is available, because it will contain important information. Copies of the proxy statements and related Rule 13e-3 Transaction Statement on Schedule 13E-3 may be obtained for free at the Securities and Exchange Commission Web site at www.sec.gov. These documents may also be obtained for free from CB Richard Ellis. Requests for copies should be directed to CB Richard Ellis Services Inc., 505 Montgomery St., Sixth Floor, San Francisco, Calif. 94111, Attention: Walter Stafford, Secretary. -- more -- 19 CB Richard Ellis First Quarter Earnings May 9, 2001 CB RICHARD ELLIS SERVICES INC. OPERATING RESULTS For the Three Months Ended March 31, 2001, and 2000 (Dollars in thousands, except share and per share data) (Unaudited)
Three Months Ended March 31, Consolidated 2001 2000 Revenue: Leases $103,166 $ 99,753 Sales 73,843 74,281 Property and facilities management fees 27,872 25,285 Consulting and referral fees 16,367 16,314 Appraisal fees 18,836 16,284 Loan origination and servicing fees 14,812 9,263 Investment management fees 8,549 7,337 Other 9,053 12,402 Total revenue 272,498 260,919 Costs and expenses: Commissions, fees and other incentives 124,398 113,963 Operating, administrative and other 134,079 127,148 Depreciation and amortization 11,696 10,569 Operating income 2,325 9,239 Interest income 800 489 Interest expense 9,055 9,685 (Loss) income before (benefit) provision for income tax (5,930) 43 (Benefit) provision for income tax (3,084) 23 Net (loss) income $ (2,846) $ 20 Basic (loss) earnings per share $ (0.13) $ -- Weighted average shares outstanding for basic (loss) earnings per share 21,309,550 20,819,268 Diluted (loss) earnings per share $ (0.13) $ -- Weighted average shares outstanding for diluted (loss) earnings per share 21,309,550 20,851,184 EBITDA $ 14,021 $ 19,808 EBITDA margin 5.1% 7.6%
20 CB Richard Ellis First Quarter Earnings May 9, 2001 CB RICHARD ELLIS SERVICES INC. OPERATING RESULTS BY BUSINESS SEGMENT For the Three Months Ended March 31, 2001, and 2000 (Dollars in thousands) (Unaudited)
Three Months Ended March 31, 2001 2000 Transaction Management Revenue: Leases $ 97,215 $ 94,304 Sales 70,303 71,922 Other consulting and referral fees (a) 12,463 12,233 Total revenue 179,981 178,459 Costs and expenses: Commissions, fees and other incentives 101,622 94,912 Operating, administrative and other 76,342 73,965 Depreciation and amortization 6,147 4,951 Operating (loss) income $ (4,130) $ 4,631 EBITDA $ 2,017 $ 9,582 EBITDA margin 1.1% 5.4% EBITDA as a percent of consolidated EBITDA 14.4% 48.4% Financial Services Revenue: Appraisal fees $ 18,368 $ 15,941 Loan origination and servicing fees 14,812 9,230 Investment management fees 7,969 6,717 Other (a) 14,770 9,509 Total revenue 55,919 41,397 Costs and expenses: Commissions, fees and other incentives 15,743 12,207 Operating, administrative and other 30,081 25,405 Depreciation and amortization 3,246 2,980 Operating income $ 6,849 $ 805 EBITDA $ 10,095 $ 3,785 EBITDA margin 18.1% 9.1% EBITDA as a percent of consolidated EBITDA 72.0% 19.1%
21 CB Richard Ellis First Quarter Earnings May 9, 2001
Management Services Revenue: Property management fees $20,337 $19,234 Facilities management fees 6,881 5,291 Other (a) 9,380 16,538 Total revenue 36,598 41,063 Costs and expenses: Commissions, fees and other incentives 7,033 6,844 Operating, administrative and other 27,656 27,778 Depreciation and amortization 2,303 2,638 Operating (loss) income $ (394) $ 3,803 EBITDA $ 1,909 $ 6,441 EBITDA margin 5.2% 15.7% EBITDA as a percent of consolidated EBITDA 13.6% 32.5%
(a) Revenue is allocated by material line of business specific to each segment. "Other" includes types of revenue that have not been broken out separately due to their immaterial balances and/or nonrecurring nature within each segment. Certain revenue types disclosed on the consolidated statements of operations may not be derived directly from amounts shown in this table. CB RICHARD ELLIS SERVICES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
March 31, Dec. 31, 2001 2000 (Unaudited) ASSETS Cash and cash equivalents $ 20,339 $ 20,854 Other current assets 173,432 202,191 Property and equipment, net 75,048 75,992 Goodwill and other intangible assets, net 459,468 470,407 Cash surrender value of insurance policies, deferred compensation plan 61,267 53,203 Other assets 141,742 140,458 Total assets $931,296 $963,105 LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of long-term debt $ 1,161 $ 1,378 Short-term borrowings 8,418 9,215 Other current liabilities 177,096 299,612 Long-term debt 409,653 303,571
22 CB Richard Ellis First Quarter Earnings May 9, 2001 Deferred compensation liability 79,980 80,503 Other liabilities 27,729 29,739 Total liabilities 704,037 724,018 Minority Interest 2,967 3,748 Stockholders' Equity Contributed capital 338,132 336,694 Accumulated deficit (113,840) (101,355) Total stockholders' equity 224,292 235,339 Total liabilities and stockholders' equity $ 931,296 $ 963,105
CB RICHARD ELLIS SERVICES INC. Three Months Ended March 31, 2001, and 2000 (Dollars in millions except per share data)
Three Months Ended March 31, 2001 2000 Revenue $ 272.5 $ 260.9 EBITDA $ 14.0 $ 19.8 Net loss $ (2.8) $ -- Cash flow used in operating activities $(104.3) $ (67.5) Net income after tax before goodwill amortization $ 1.1 $ 3.9 Cash flow used in operating activities per share (diluted) $ (4.89) $ (3.24) Basic loss per share $ (0.13) $ -- EBITDA per share (diluted) $ 0.66 $ 0.95 Diluted loss per share $ (0.13) $ -- Diluted number of shares 21,309,550 20,851,184 Debt/Equity 1.87x 2.04x EBITDA/Net interest expense 1.70x 2.15x Effective tax rate 52.0% 54.0% Operating expense as a % of revenue 49.2% 48.7% EBITDA as a % of revenue 5.1% 7.6% Net loss as a % of revenue -1.0% -- International revenue as a % of consolidated revenue 22.6% 23.9%
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