UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
o 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 001 - 32205
CB RICHARD ELLIS GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware |
|
94-3391143 |
(State or other jurisdiction of
incorporation or |
|
(I.R.S. Employer Identification Number) |
|
|
|
865 South Figueroa Street, Suite 3400 |
|
90017 |
(Address of principal executive offices) |
|
(Zip Code) |
|
|
|
(213) 613-3226 |
|
|
(Registrants telephone number, including area code) |
|
(Former name, former address
and |
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 No .
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No ý.
The number of shares of Class A common stock outstanding at July 30, 2004 was 69,299,920.
FORM 10-Q
June 30, 2004
TABLE OF CONTENTS
2
CB RICHARD ELLIS GROUP, INC.
(Dollars in thousands, except share data)
|
|
June 30, |
|
December 31, |
|
||
|
|
(Unaudited) |
|
|
|
||
ASSETS |
|
|
|
|
|
||
Current Assets: |
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
179,592 |
|
$ |
163,881 |
|
Restricted cash |
|
12,044 |
|
14,899 |
|
||
Receivables, less allowance for doubtful accounts of $17,444 and $16,181 at June 30, 2004 and December 31, 2003, respectively |
|
295,256 |
|
322,416 |
|
||
Warehouse receivable |
|
219,935 |
|
230,790 |
|
||
Prepaid expenses |
|
23,687 |
|
22,854 |
|
||
Deferred tax assets, net |
|
67,786 |
|
57,681 |
|
||
Other current assets |
|
35,655 |
|
26,461 |
|
||
Total Current Assets |
|
833,955 |
|
838,982 |
|
||
Property and equipment, net |
|
123,384 |
|
113,569 |
|
||
Goodwill |
|
825,056 |
|
819,558 |
|
||
Other intangible assets, net of accumulated amortization of $84,759 and $73,449 at June 30, 2004 and December 31, 2003, respectively |
|
121,238 |
|
131,731 |
|
||
Deferred compensation assets |
|
79,094 |
|
76,389 |
|
||
Investments in and advances to unconsolidated subsidiaries |
|
75,993 |
|
68,361 |
|
||
Deferred tax assets, net |
|
35,442 |
|
32,179 |
|
||
Other assets, net |
|
124,914 |
|
132,712 |
|
||
Total Assets |
|
$ |
2,219,076 |
|
$ |
2,213,481 |
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
||
|
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
$ |
181,531 |
|
$ |
189,787 |
|
Compensation and employee benefits payable |
|
146,660 |
|
148,874 |
|
||
Accrued bonus and profit sharing |
|
126,503 |
|
200,343 |
|
||
Short-term borrowings: |
|
|
|
|
|
||
Warehouse line of credit |
|
219,935 |
|
230,790 |
|
||
Other |
|
28,618 |
|
39,347 |
|
||
Total short-term borrowings |
|
248,553 |
|
270,137 |
|
||
Current maturities of long-term debt |
|
13,029 |
|
11,285 |
|
||
Other current liabilities |
|
13,314 |
|
12,991 |
|
||
Total Current Liabilities |
|
729,590 |
|
833,417 |
|
||
|
|
|
|
|
|
||
Long-Term Debt: |
|
|
|
|
|
||
11¼% senior subordinated notes, net of unamortized discount of $2,456 and $2,827 at June 30, 2004 and December 31, 2003, respectively |
|
204,913 |
|
226,173 |
|
||
Senior secured term loan |
|
268,200 |
|
287,500 |
|
||
9¾% senior notes |
|
200,000 |
|
200,000 |
|
||
16% senior notes, net of unamortized discount of $2,516 and $2,844 at June 30, 2004 and December 31, 2003, respectively |
|
35,800 |
|
35,472 |
|
||
Other long-term debt |
|
43,437 |
|
42,275 |
|
||
Total Long-Term Debt |
|
752,350 |
|
791,420 |
|
||
Deferred compensation liability |
|
143,846 |
|
138,037 |
|
||
Pension liability |
|
36,715 |
|
35,998 |
|
||
Other liabilities |
|
95,215 |
|
75,024 |
|
||
Total Liabilities |
|
1,757,716 |
|
1,873,896 |
|
||
Minority interest |
|
8,163 |
|
6,656 |
|
||
Commitments and contingencies |
|
|
|
|
|
||
Stockholders Equity: |
|
|
|
|
|
||
Class A common stock; $0.01 par value; 325,000,000 shares authorized; 68,973,443 and 7,561,499 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively |
|
690 |
|
76 |
|
||
Class B common stock; $0.01 par value; 100,000,000 shares authorized; 53,409,556 shares issued and outstanding at December 31, 2003; no shares authorized, issued or outstanding at June 30, 2004 |
|
|
|
534 |
|
||
Additional paid-in capital |
|
498,904 |
|
361,522 |
|
||
Notes receivable from sale of stock |
|
(5,350 |
) |
(4,680 |
) |
||
Accumulated (deficit) earnings |
|
(12,154 |
) |
1,449 |
|
||
Accumulated other comprehensive loss |
|
(26,581 |
) |
(23,780 |
) |
||
Treasury stock at cost, 405,883 and 385,103 shares at June 30, 2004 and December 31, 2003, respectively |
|
(2,312 |
) |
(2,192 |
) |
||
Total Stockholders Equity |
|
453,197 |
|
332,929 |
|
||
Total Liabilities and Stockholders Equity |
|
$ |
2,219,076 |
|
$ |
2,213,481 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
CB RICHARD ELLIS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
550,916 |
|
$ |
321,717 |
|
$ |
991,908 |
|
$ |
585,441 |
|
|
|
|
|
|
|
|
|
|
|
||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
||||
Cost of services |
|
272,611 |
|
153,066 |
|
496,833 |
|
276,665 |
|
||||
Operating, administrative and other |
|
230,539 |
|
137,421 |
|
429,790 |
|
263,596 |
|
||||
Depreciation and amortization |
|
10,830 |
|
6,329 |
|
27,661 |
|
12,500 |
|
||||
Merger-related charges |
|
11,574 |
|
3,310 |
|
21,534 |
|
3,310 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
25,362 |
|
21,591 |
|
16,090 |
|
29,370 |
|
||||
Equity income from unconsolidated subsidiaries |
|
2,768 |
|
3,801 |
|
5,294 |
|
6,864 |
|
||||
Interest income |
|
1,950 |
|
701 |
|
4,257 |
|
1,776 |
|
||||
Interest expense |
|
23,175 |
|
16,940 |
|
43,854 |
|
31,264 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) before provision (benefit) for income taxes |
|
6,905 |
|
9,153 |
|
(18,213 |
) |
6,746 |
|
||||
Provision (benefit) for income taxes |
|
3,940 |
|
3,981 |
|
(4,610 |
) |
2,921 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
2,965 |
|
$ |
5,172 |
|
$ |
(13,603 |
) |
$ |
3,825 |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income (loss) per share |
|
$ |
0.05 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for basic income (loss) per share |
|
63,990,494 |
|
41,683,699 |
|
63,256,275 |
|
41,667,644 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Diluted income (loss) per share |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for diluted income (loss) per share |
|
69,375,929 |
|
42,523,893 |
|
63,256,275 |
|
42,462,801 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
CB RICHARD ELLIS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
|
|
Six Months Ended |
|
||||
|
|
2004 |
|
2003 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
||
Net (loss) income |
|
$ |
(13,603 |
) |
$ |
3,825 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
27,661 |
|
12,500 |
|
||
Amortization and write-off of deferred financing costs |
|
3,533 |
|
1,793 |
|
||
Amortization and write-off of long-term debt discount |
|
699 |
|
247 |
|
||
Deferred compensation deferrals |
|
8,712 |
|
4,336 |
|
||
Gain on sale of servicing rights and other assets |
|
(2,396 |
) |
(1,874 |
) |
||
Equity income from unconsolidated subsidiaries |
|
(5,294 |
) |
(6,864 |
) |
||
Provision for doubtful accounts |
|
2,759 |
|
1,905 |
|
||
Deferred income tax benefit |
|
(4,609 |
) |
(106 |
) |
||
Decrease in receivables |
|
16,165 |
|
9,113 |
|
||
Increase in deferred compensation assets |
|
(2,705 |
) |
(5,892 |
) |
||
Decrease (increase) in prepaid expenses and other assets |
|
13,652 |
|
(7,210 |
) |
||
Decrease in compensation and employee benefits payable and accrued bonus and profit sharing |
|
(73,018 |
) |
(59,651 |
) |
||
Decease in accounts payable and accrued expenses |
|
(16,132 |
) |
(14,864 |
) |
||
Decrease in income tax payable |
|
(5,769 |
) |
(17,540 |
) |
||
Increase in other liabilities |
|
8,900 |
|
4,639 |
|
||
Other operating activities, net |
|
2,350 |
|
1,088 |
|
||
Net cash used in operating activities |
|
(39,095 |
) |
(74,555 |
) |
||
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
Capital expenditures, net of concessions received |
|
(22,134 |
) |
(1,171 |
) |
||
Acquisition of businesses including net assets acquired, intangibles and goodwill, net of cash acquired |
|
(4,957 |
) |
1,343 |
|
||
Other investing activities, net |
|
1,417 |
|
2,224 |
|
||
Net cash (used in) provided by investing activities |
|
(25,674 |
) |
2,396 |
|
||
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
Proceeds from revolver and swingline credit facility |
|
186,750 |
|
140,600 |
|
||
Repayment of revolver and swingline credit facility |
|
(186,750 |
) |
(129,350 |
) |
||
Repayment of senior secured term loan |
|
(17,500 |
) |
(4,675 |
) |
||
(Repayment of) proceeds from euro cash pool loan and other loans, net |
|
(10,815 |
) |
7,330 |
|
||
Repayment of 11¼% senior notes |
|
(21,631 |
) |
|
|
||
Proceeds from issuance of common stock, initial public offering, net |
|
135,000 |
|
|
|
||
Other financing activities, net |
|
(2,367 |
) |
266 |
|
||
Net cash provided by financing activities |
|
82,687 |
|
14,171 |
|
||
|
|
|
|
|
|
||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
17,918 |
|
(57,988 |
) |
||
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD |
|
163,881 |
|
79,701 |
|
||
Effect of currency exchange rate changes on cash |
|
(2,207 |
) |
1,305 |
|
||
CASH AND CASH EQUIVALENTS, AT END OF PERIOD |
|
$ |
179,592 |
|
$ |
23,018 |
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
||
Interest, net of amount capitalized |
|
$ |
44,440 |
|
$ |
26,570 |
|
Income taxes, net of refunds |
|
$ |
6,685 |
|
$ |
19,535 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
CB RICHARD ELLIS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
CB Richard Ellis Group, Inc., formerly known as CBRE Holding, Inc. (which may be referred to in this Form 10-Q as we, us, and our), offers a full range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other commercial real estate markets globally under the CB Richard Ellis brand name. Our business is focused on several service competencies, including strategic advice and execution assistance for property leasing and sales; property valuations; commercial mortgage origination and servicing, facilities and property management; real estate investment management and real estate econometric forecasting. We generate revenues both on a per project or transaction basis and from annual management fees.
CB Richard Ellis Group, Inc. was incorporated on February 20, 2001 and was created to acquire all of the outstanding shares of CB Richard Ellis Services, Inc. (CBRE), an international real estate services firm. Prior to July 20, 2001, we were a wholly owned subsidiary of Blum Strategic Partners, L.P., which is an affiliate of Richard C. Blum, a director of CBRE and our company.
On July 20, 2001, we acquired all of the outstanding stock of CBRE pursuant to an Amended and Restated Agreement and Plan of Merger, dated May 31, 2001, among CBRE, Blum CB Corp. (Blum CB) and us. Blum CB was merged with and into CBRE with CBRE being the surviving corporation (the 2001 Merger). On July 23, 2003, our global position in the commercial real estate services industry was further solidified as CBRE acquired Insignia Financial Group, Inc.
2. Initial Public Offering
On June 15, 2004, we completed the initial public offering of shares of our Class A common stock (the IPO). In connection with the IPO, we issued and sold 7,726,764 shares of our Class A common stock and received aggregate net proceeds of approximately $135.0 million, after deducting underwriting discounts and commissions and offering expenses payable by us. Also in connection with the IPO, selling stockholders sold an aggregate of 16,273,236 shares of our Class A common stock and received net proceeds of approximately $290.6 million, after deducting underwriting discounts and commissions. We did not receive any of the proceeds from the sale of shares by the selling stockholders.
3. Insignia Acquisition
On July 23, 2003, pursuant to an Amended and Restated Agreement and Plan of Merger, dated May 28, 2003 (the Insignia Acquisition Agreement), by and among us, CBRE, Apple Acquisition Corp. (Apple Acquisition), a Delaware corporation and wholly owned subsidiary of CBRE, and Insignia Financial Group, Inc. (Insignia), Apple Acquisition was merged with and into Insignia (the Insignia Acquisition). Insignia was the surviving corporation in the Insignia Acquisition and at the effective time of the Insignia Acquisition became a wholly owned subsidiary of CBRE.
The aggregate preliminary purchase price for the acquisition of Insignia was approximately $329.1 million, which includes: (1) $267.9 million in cash paid for shares of Insignias outstanding common stock, at $11.156 per share, (2) $38.2 million in cash paid for Insignias outstanding Series A preferred stock and Series B preferred stock at $100.00 per share plus accrued and unpaid dividends, (3) cash payments of $7.9 million to holders of Insignias vested and unvested warrants and options and (4) $15.1 million of direct costs incurred in connection with the acquisition, consisting mostly of legal and accounting fees.
The preliminary purchase accounting adjustments related to the Insignia Acquisition have been recorded in the accompanying consolidated financial statements as of, and for periods subsequent to, July 23, 2003. Given the size and complexity of the acquisition, the fair valuation of certain assets is still preliminary. Accordingly, the final valuation of the net assets acquired is expected to be completed during the third quarter of 2004. Additionally, adjustment to the estimated liabilities assumed in connection with the Insignia Acquisition may still be required.
6
During the six months ended June 30, 2004, we made the following significant adjustments to goodwill:
In the first quarter of 2004, we assigned a $6.6 million estimated fair value to a broker draw asset acquired from Insignia. Based on our managements estimates, we generally derive benefit from brokers participating in our draw program over two years. Accordingly, we estimate that we will derive benefit from the broker draw asset related to Insignias brokers over two years from the date of the Insignia Acquisition and, accordingly, we are amortizing it on a straight-line basis, which reflects the pattern in which the economic benefits of the broker draw asset are consumed, during that period. The allocation of purchase price to the broker draw asset, net of related tax impact, resulted in a $3.8 million decrease in goodwill and a related $1.9 million increase in net loss during the six months ended June 30, 2004, which includes a $0.8 million adjustment to correct the amortization taken for the period from the date of the Insignia Acquisition through December 31, 2003.
During the six months ended June 30, 2004, we recorded a $15.4 million increase to goodwill due to an increase in liabilities primarily related to additional lease termination costs, contract termination costs and severance payments in excess of amounts previously accrued. All such adjustments were recorded in accordance with the requirements of Emerging Issues Task Force (EITF) Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. As of the consummation date of the acquisition of Insignia, our management began to assess and formulate a plan to close certain Insignia locations. Due to the size of this acquisition and the dispersed nature of Insignias operations, a significant amount of time and effort was required to finalize plans with respect to closures, analyze the provisions of contracts to be terminated and estimate the total exit costs. The adjustment during the six months ended June 30, 2004 represents a change in estimate as we completed our assessments and finalized our plans with respect to certain of the locations. Consistent with the requirements of EITF Issue No. 95-3, finalization of our plans for all Insignia closures will be completed within one year of the consummation date of the acquisition.
In the first quarter of 2004, we recorded a $4.2 million increase to goodwill related to the sale of certain assets acquired in connection with the Insignia Acquisition. Of this amount, $3.7 million represented a receivable due from a buyer, which was relieved in the second quarter of 2004 as cash was received in May 2004 and applied to the balance. During the second quarter of 2004, we received additional cash for the sale of such assets as well as finalized the fair value assigned to such assets in the purchase price allocation. This resulted in a overall increase to goodwill of approximately $2.6 million, which reflects the sale of assets at an amount less than the value assigned in the preliminary purchase price allocation. As no event occurred during the period from the acquisition date to the sale date that would have impacted the value of these assets, our management concluded that the amount at which these assets were ultimately sold represents the best estimate of the value of these assets at the date of the Insignia Acquisition.
During the second quarter of 2004, we finalized the fair value of liabilities assumed relating to annuities to former equity partners of Richard Ellis that are payable by Insignia until the times of their deaths. Our valuations of these annuities was based in part on a third-party valuation and resulted in a $4.2 million increase in goodwill in 2004.
During the six months ended June 30, 2004, we recorded a reduction of $15.0 million to goodwill related to the deferred tax impact of all purchase accounting adjustments recorded in 2004, excluding the deferred tax impact previously mentioned related to the broker draw asset.
7
The Insignia Acquisition gave rise to the consolidation and elimination of some Insignia duplicate facilities and Insignia redundant employees as well as the termination of certain contracts as a result of a change of control of Insignia. As a result, we have accrued certain liabilities in accordance with EITF Issue No. 95-3. These liabilities assumed in connection with the Insignia Acquisition consist of the following (dollars in thousands):
|
|
2003 Charge |
|
2004 |
|
Utilized To Date |
|
To be Utilized |
|
||||
Severance |
|
$ |
30,706 |
|
$ |
524 |
|
$ |
(15,708 |
) |
$ |
15,522 |
|
Lease termination costs |
|
28,922 |
|
12,705 |
|
(7,135 |
) |
34,492 |
|
||||
Change of control payments |
|
10,451 |
|
|
|
(10,451 |
) |
|
|
||||
Costs associated with exiting contracts |
|
8,921 |
|
1,379 |
|
(8,862 |
) |
1,438 |
|
||||
Legal settlements anticipated |
|
8,739 |
|
800 |
|
(3,032 |
) |
6,507 |
|
||||
|
|
$ |
87,739 |
|
$ |
15,408 |
|
$ |
(45,188 |
) |
$ |
57,959 |
|
4. Basis of Presentation
The consolidated statements of operations and cash flows for the three and six months ended June 30, 2004 include full periods of activity for Insignia. However, the consolidated statements of operations and cash flows for the three and six months ended June 30, 2003 do not include any activity of Insignia, as the Insignia Acquisition occurred on July 23, 2003. As such, our consolidated financial statements after the Insignia Acquisition are not directly comparable to our consolidated financial statements prior to the Insignia Acquisition.
Pro forma results for the three and six months ended June 30, 2003, assuming the Insignia Acquisition had occurred as of January 1, 2003, are presented below. These pro forma results have been prepared for comparative purposes only and include adjustments, such as increased amortization expense as a result of intangible assets acquired in the Insignia Acquisition, as well as higher interest expense as a result of debt incurred to finance the Insignia Acquisition. These pro forma results do not purport to be indicative of what operating results would have been had the Insignia Acquisition occurred on January 1, 2003, and may not be indicative of future operating results (dollars in thousands, except share data).
|
|
June 30, 2003 |
|
||||
|
|
Three Months |
|
Six Months |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
471,942 |
|
$ |
865,566 |
|
Operating income (loss) |
|
$ |
11,872 |
|
$ |
(27,206 |
) |
Net loss |
|
$ |
(5,460 |
) |
$ |
(37,211 |
) |
Basic and diluted loss per share |
|
$ |
(0.09 |
) |
$ |
(0.60 |
) |
The accompanying consolidated financial statements have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ materially from those estimates. All significant inter-company transactions and balances have been eliminated, and certain reclassifications have been made to prior periods consolidated financial statements to conform with the current period presentation. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2004. The consolidated financial statements and notes to consolidated financial statements should be read in conjunction with our 2003 Annual Report on Form 10-K/A, which contains the latest
8
available audited consolidated financial statements and notes thereto, which are as of and for the year ended December 31, 2003.
On May 4, 2004, we amended our Certificate of Incorporation increasing the authorized shares of Class A common stock to 325,000,000 and the authorized shares of Class B common stock to 100,000,000. Also, on May 4, 2004, we effected a three-for-one split of our outstanding Class A common stock and Class B common stock, which split was effected by a stock dividend. In addition, on June 7, 2004, we effected a 1-for-1.0825 reverse stock split of our outstanding Class A common stock and Class B common stock. The applicable share and per share data for all periods included herein have been restated to give effect to these stock splits. In connection with the completion of the IPO, all outstanding shares of Class B common stock were converted into an equal number of shares of Class A common stock. On June 16, 2004, we amended our Certificate of Incorporation to eliminate the authorized shares of Class B common stock.
5. Stock-Based Compensation
Prior to the fourth quarter of 2003, we accounted for our employee stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related Financial Accounting Standards Board (FASB) interpretations. Accordingly, compensation cost for employee stock options was measured as the excess, if any, of the estimated market price of our Class A common stock at the date of grant over the amount an employee was required to pay to acquire the stock.
During the fourth quarter of 2003, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation prospectively to all employee awards granted, modified or settled after January 1, 2003, as permitted by SFAS No. 148, Accounting for Stock-Based CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123.
In accordance with SFAS No. 123, we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility and the expected life of the options. As our Class A common stock was not freely tradeable on a national securities exchange or an over-the-counter market prior to the completion of the IPO, an effectively zero percent volatility was utilized for all periods ending prior to the IPO. The dividend yield is excluded from the calculation, as it is our present intention to retain all earnings. The following table illustrates the effect on net income (loss) and income (loss) per share if the fair value based method had been applied to all outstanding and unvested awards in each period (dollars in thousands, except share data):
9
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) as reported |
|
$ |
2,965 |
|
$ |
5,172 |
|
$ |
(13,603 |
) |
$ |
3,825 |
|
Add: Stock-based employee compensation expense included in reported net income (loss), net of the related tax effect |
|
53 |
|
|
|
106 |
|
|
|
||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of the related tax effect |
|
(190 |
) |
(147 |
) |
(387 |
) |
(293 |
) |
||||
Pro forma net income (loss) |
|
$ |
2,828 |
|
$ |
5,025 |
|
$ |
(13,884 |
) |
$ |
3,532 |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income (loss) per share: |
|
|
|
|
|
|
|
|
|
||||
As reported |
|
$ |
0.05 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.09 |
|
Pro forma |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.08 |
|
Diluted income (loss) per share: |
|
|
|
|
|
|
|
|
|
||||
As reported |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.09 |
|
Pro forma |
|
$ |
0.04 |
|
$ |
0.12 |
|
$ |
(0.22 |
) |
$ |
0.08 |
|
The weighted average fair value of options granted by us was $8.84 and $1.15 for the three months ended June 30, 2004 and 2003, respectively, and $5.62 and $1.58 for the six months ended June 30, 2004 and 2003, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, utilizing the following weighted average assumptions:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
3.92 |
% |
2.37 |
% |
3.58 |
% |
2.98 |
% |
Expected volatility |
|
50.00 |
% |
0.00 |
% |
30.00 |
% |
0.00 |
% |
Expected life |
|
5 years |
|
5 years |
|
5 years |
|
5 years |
|
Option valuation models require the input of subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, we do not believe that the Black-Scholes model necessarily provides a reliable single measure of the fair value of our employee stock options.
6. Fair Value of Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets. Value is defined as the amount at which an instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The fair value estimates of financial instruments are not necessarily indicative of the amounts we might pay or receive in actual market transactions. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Cash and Cash Equivalents: This balance includes cash and cash equivalents with maturities of less than three months. The carrying amount approximates fair value due to the short-term maturities of these instruments.
10
Short-Term Borrowings: The majority of this balance represents the warehouse line of credit. Due to their short-term maturities and variable interest rates, fair value approximates carrying value (See Note 10).
11¼% Senior Subordinated Notes: Based on dealers quotes, the estimated fair value of the 11¼% senior subordinated notes is $236.4 million and $256.5 million at June 30, 2004 and December 31, 2003, respectively. Their actual carrying value totaled $204.9 million and $226.2 million at June 30, 2004 and December 31, 2003, respectively (See Note 10).
9¾% Senior Notes: Based on dealers quotes, the estimated fair value of the 9¾% senior notes is $220.0 million and $222.0 million at June 30, 2004 and December 31, 2003, respectively. Their actual carrying value totaled $200.0 million at June 30, 2004 and December 31, 2003 (See Note 10).
16% Senior Notes: During the six months ended June 30, 2004, we were not aware of any trading activity for the 16% senior notes due 2011, and no dealers quote was available. Their carrying value totaled $35.8 million and $35.5 million at June 30, 2004 and December 31, 2003, respectively (see Note 10).
Senior Secured Terms Loans & Other Long-Term Debt: Estimated fair values approximate respective carrying values because a substantial majority of these instruments are based on variable interest rates (see Note 10).
7. Restricted Cash
Included in the accompanying consolidated balance sheets as of June 30, 2004 and December 31, 2003, is restricted cash of $12.0 million and $14.9 million, respectively, which primarily consists of cash pledged to secure the guarantee of certain short-term notes issued in connection with previous acquisitions by Insignia in the United Kingdom (U.K.). The acquisitions include the 1999 acquisition of St. Quintin Holdings Limited and the 1998 acquisition of Richard Ellis Group Limited.
8. Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for us and each of our segments (See Note 18 for a description of our segments) for the six months ended June 30, 2004 are as follows (dollars in thousands):
|
|
Americas |
|
EMEA |
|
Asia Pacific |
|
Total |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Balance at January 1, 2004 |
|
$ |
598,439 |
|
$ |
217,106 |
|
$ |
4,013 |
|
$ |
819,558 |
|
Purchase accounting adjustments related to acquisitions |
|
711 |
|
3,993 |
|
794 |
|
5,498 |
|
||||
Balance at June 30, 2004 |
|
$ |
599,150 |
|
$ |
221,099 |
|
$ |
4,807 |
|
$ |
825,056 |
|
11
Other intangible assets totaled $121.2 million and $131.7 million, net of accumulated amortization of $84.8 million and $73.4 million, as of June 30, 2004 and December 31, 2003, respectively, and are comprised of the following (dollars in thousands):
|
|
As of June 30, 2004 |
|
As of December 31, 2003 |
|
||||||||
|
|
Gross |
|
Accumulated |
|
Gross |
|
Accumulated |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Unamortizable intangible assets |
|
|
|
|
|
|
|
|
|
||||
Trademarks |
|
$ |
63,700 |
|
|
|
$ |
63,700 |
|
|
|
||
Trade name |
|
19,826 |
|
|
|
19,826 |
|
|
|
||||
|
|
$ |
83,526 |
|
|
|
$ |
83,526 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||||
Amortizable intangible assets |
|
|
|
|
|
|
|
|
|
||||
Backlog |
|
$ |
72,503 |
|
$ |
(66,825 |
) |
$ |
72,503 |
|
$ |
(59,108 |
) |
Management contracts |
|
25,690 |
|
(11,434 |
) |
25,649 |
|
(9,708 |
) |
||||
Loan servicing rights |
|
18,470 |
|
(4,748 |
) |
17,694 |
|
(3,812 |
) |
||||
Other |
|
5,808 |
|
(1,752 |
) |
5,808 |
|
(821 |
) |
||||
|
|
$ |
122,471 |
|
$ |
(84,759 |
) |
$ |
121,654 |
|
$ |
(73,449 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Total intangible assets |
|
$ |
205,997 |
|
$ |
(84,759 |
) |
$ |
205,180 |
|
$ |
(73,449 |
) |
In accordance with SFAS No. 141, Business Combinations, trademarks of $63.7 million were separately identified as a result of the 2001 Merger. As a result of the Insignia Acquisition, a $19.8 million trade name was separately identified, which represents the Richard Ellis trade name in the U.K. that was owned by Insignia prior to the Insignia Acquisition. Both the trademarks and the trade name have indefinite useful lives and accordingly are not being amortized.
Backlog represents the fair value of Insignias net revenue backlog as of July 23, 2003, which was acquired as part of the Insignia Acquisition. The backlog consists of the net commissions receivable on Insignias revenue producing transactions, which were at various stages of completion prior to the Insignia Acquisition. This intangible asset is being amortized as cash is received or upon final closing of these pending transactions.
Management contracts are primarily comprised of property management contracts in the United States (U.S.), the U.K., France and other European operations, as well as valuation services and fund management contracts in the U.K. These management contracts are being amortized over estimated useful lives of up to ten years.
Loan servicing rights represent the fair value of servicing assets in our mortgage banking line of business in the U.S., the majority of which were acquired as part of the 2001 Merger. The loan servicing rights are being amortized over estimated useful lives of up to ten years.
Other amortizable intangible assets represent other intangible assets acquired as a result of the Insignia Acquisition including an intangible asset recognized for other non-contractual revenue acquired in the U.S. as well as franchise agreements and a trade name in France. These other intangible assets are being amortized over estimated useful lives of up to 20 years.
Amortization expense related to intangible assets was $2.7 million and $0.9 million for the three months ended June 30, 2004 and 2003, respectively, and $11.3 million and $1.9 million for the six months ended June 30, 2004 and 2003, respectively. The estimated annual amortization expense for each of the years ended December 31, 2004 through December 31, 2008 approximates $20.6 million, $6.6 million, $5.2 million, $4.4 million and $3.7 million, respectively.
12
9. Investments in and Advances to Unconsolidated Subsidiaries
Investments in and advances to unconsolidated subsidiaries are accounted for under the equity method of accounting. Combined condensed financial information for these entities is as follows (dollars in thousands):
Condensed Balance Sheets Information:
|
|
June 30, |
|
December 31, |
|
||
Current assets |
|
$ |
247,212 |
|
$ |
208,743 |
|
Non current assets |
|
$ |
2,552,388 |
|
$ |
2,040,138 |
|
Current liabilities |
|
$ |
173,614 |
|
$ |
154,778 |
|
Non current liabilities |
|
$ |
1,218,973 |
|
$ |
969,993 |
|
Minority interest |
|
$ |
5,838 |
|
$ |
4,600 |
|
Condensed Statements of Operations Information:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net revenue |
|
$ |
115,755 |
|
$ |
103,782 |
|
$ |
236,334 |
|
$ |
202,813 |
|
Operating income |
|
$ |
31,647 |
|
$ |
32,146 |
|
$ |
55,535 |
|
$ |
55,750 |
|
Net income |
|
$ |
39,915 |
|
$ |
26,711 |
|
$ |
74,099 |
|
$ |
47,787 |
|
Our investment management business involves investing our own capital in certain real estate investments with clients. We have provided investment management, property management, brokerage and other professional services to these equity investees.
10. Debt
Since 2001, we have maintained a credit agreement with Credit Suisse First Boston (CSFB) and other lenders to fund strategic acquisitions and to provide for our working capital needs. On April 23, 2004, we entered into an amendment to our previously amended and restated credit agreement that included a waiver generally permitting us to prepay, redeem, repurchase or otherwise retire up to $30.0 million of our existing indebtedness and provided for the refinancing of all outstanding amounts under our previous credit agreement as well as the amendment and restatement of our credit agreement upon the completion of our initial public offering. On June 15, 2004, in connection with the completion of our IPO, we completed a refinancing of all amounts outstanding under our amended and restated credit agreement and entered into a new amended and restated credit agreement (the Credit Agreement), which became effective in connection with such refinancing.
Our Credit Agreement permits us, among other things, to use the net proceeds received from our IPO to pay down debt, including the redemption of all $38.3 million in aggregate principal amount of our 16% senior notes due 2011 and $70.0 million in aggregate principal amount of our 9¾% senior notes due 2010, and the prepayment of $15.0 million in principal amount of our term loan under our Credit Agreement, which prepayment occurred on June 15, 2004 (See Note 19 for additional information on the use of the net proceeds from our IPO).
Our Credit Agreement includes the following: (1) a term loan facility of $295.0 million, requiring quarterly principal payments of $2.95 million through December 31, 2009 with the balance payable on March 31, 2010; and (2) a $150.0 million revolving credit facility, including revolving credit loans, letters of credit and a swingline loan facility, all maturing on March 31, 2009. Our Credit Agreement also permits us to increase the term facility by up to $25.0 million, subject to the satisfaction of customary conditions.
13
Borrowings under the term loan facility bear interest at varying rates based, at our option, on either LIBOR plus 2.25% to 2.50% or the alternate base rate plus 1.25% to 1.50%, in both cases as determined by reference to the credit rating assigned to the term facility by Moodys Investors Service and Standard & Poors. The potential increase of up to $25.0 million for the term loan facility would bear interest either at the same rate as described in the immediately preceding sentence or, in some circumstances as described in the Credit Agreement, at a higher or lower rate. The total amount outstanding under the term loan facility included in senior secured term loan and current maturities of long-term debt in the accompanying consolidated balance sheets was $280.0 million and $297.5 million as of June 30, 2004 and December 31, 2003, respectively.
Borrowings under the revolving credit facility bear interest at varying rates based at our option, on either the applicable LIBOR plus 2.00% to 2.50% or the alternate base rate plus 1.00% to 1.50%, in both cases as determined by reference to our ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement). The alternate base rate is the higher of (1) CSFBs prime rate or (2) the Federal Funds Effective Rate plus one-half of one percent. We repaid our revolving credit facility as of June 30, 2004 and at December 31, 2003 we had no revolving credit principal outstanding.
Borrowings under the prior credit agreements and our current Credit Agreement have been, and continue to be, jointly and severally guaranteed by us and substantially all of our domestic subsidiaries and are secured by a pledge of substantially all of our assets. Additionally, the prior credit agreements required, and our current Credit Agreement continues to require, us to pay a fee based on the total amount of the unused revolving credit facility commitment.
In May 2003, in connection with the Insignia Acquisition, CBRE Escrow, Inc. (CBRE Escrow), a wholly owned subsidiary of CBRE, issued $200.0 million in aggregate principal amount of 9¾% senior notes, which are due May 15, 2010. CBRE Escrow merged with and into CBRE, and CBRE assumed all obligations with respect to the 9¾% senior notes in connection with the Insignia Acquisition. The 9¾% senior notes are unsecured obligations of CBRE, senior to all of its current and future unsecured indebtedness, but subordinated to all of CBREs current and future secured indebtedness. The 9¾% senior notes are jointly and severally guaranteed on a senior basis by us and substantially all of our domestic subsidiaries. Interest accrues at a rate of 9¾% per year and is payable semi-annually in arrears on May 15 and November 15. The 9¾% senior notes are redeemable at our option, in whole or in part, on or after May 15, 2007 at 104.875% of par on that date and at declining prices thereafter. In addition, before May 15, 2006, we are permitted to redeem up to 35.0% of the originally issued amount of the 9¾% senior notes at 109¾% of par, plus accrued and unpaid interest, solely with the net cash proceeds from public equity offerings. In the event of a change of control (as defined in the indenture governing our 9¾% senior notes), we are obligated to make an offer to purchase the 9¾% senior notes at a redemption price of 101.0% of the principal amount, plus accrued and unpaid interest. The amount of the 9¾% senior notes included in the accompanying consolidated balance sheets was $200.0 million as of June 30, 2004 and December 31, 2003.
In June 2001, in connection with the 2001 Merger, Blum CB issued $229.0 million in aggregate principal amount of 11¼% senior subordinated notes due June 15, 2011 for approximately $225.6 million, net of discount. CBRE assumed all obligations with respect to the 11¼% senior subordinated notes in connection with the 2001 Merger. The 11¼% senior subordinated notes are unsecured senior subordinated obligations of CBRE and rank equally in right of payment with any of CBREs existing and future senior subordinated unsecured indebtedness but are subordinated to any of CBREs existing and future senior indebtedness. The 11¼% senior subordinated notes are jointly and severally guaranteed on a senior subordinated basis by us and substantially all of our domestic subsidiaries. The 11¼% senior subordinated notes require semi-annual payments of interest in arrears on June 15 and December 15 and are redeemable in whole or in part on or after June 15, 2006 at 105.625% of par on that date and at declining prices thereafter, which we did not do. In addition, before June 15, 2004, we were permitted to redeem up to 35.0% of the originally issued amount of the notes at 111¼% of par, plus accrued and unpaid interest, solely with the net cash proceeds from public equity offerings. In the event of a change of control (as defined in the indenture governing our 11¼% senior subordinated notes), we are obligated to make an offer to purchase the 11¼% senior subordinated notes at a redemption price of 101.0% of the principal amount, plus accrued and unpaid interest. In May and June 2004, we repurchased $21.6 million in aggregate principal amount of our 11¼% senior subordinated notes in the open market. We paid an aggregate of $3.1 million of premiums in connection with these
14
purchases. The amount of the 11¼% senior subordinated notes included in the accompanying consolidated balance sheets, net of unamortized discount, was $204.9 million and $226.2 million as of June 30, 2004 and December 31, 2003, respectively.
Also in connection with the 2001 Merger, we issued $65.0 million in aggregate principal amount of 16% senior notes due July 20, 2011. The 16% senior notes are unsecured obligations, senior to all of our current and future unsecured indebtedness but subordinated to all of our current and future secured indebtedness. Interest accrues at a rate of 16.0% per year and is payable quarterly in arrears. Interest may be paid in kind to the extent our ability to pay cash dividends is restricted by the terms of our Credit Agreement. Additionally, interest in excess of 12.0% may, at our option, be paid in kind through July 2006. In the event of a change in control (as defined in the indenture governing our 16% senior notes), we are obligated to make an offer to purchase all of our outstanding 16% senior notes at 101.0% of par. In addition, under the terms of the indenture governing the 16% senior notes and subject to the restrictions set forth in the Credit Agreement, the notes are redeemable at our option, in whole or in part, at 116.0% of par commencing on July 20, 2001 and at declining prices thereafter. The amount of the 16% senior notes included in the accompanying consolidated balance sheets, net of unamortized discount, was $35.8 million and $35.5 million as of June 30, 2004 and December 31, 2003, respectively.
Our Credit Agreement and the indentures governing our 16% senior notes, our 9¾% senior notes and our 11¼% senior subordinated notes each contain numerous restrictive covenants that, among other things, limit our ability to incur additional indebtedness, pay dividends or make distributions to stockholders, repurchase capital stock or debt, make investments, sell assets or subsidiary stock, engage in transactions with affiliates, enter into sale/leaseback transactions, issue subsidiary equity and enter into consolidations or mergers. Our Credit Agreement also currently requires us to maintain a minimum coverage ratio of interest and certain fixed charges and a maximum leverage and senior secured leverage ratio of EBITDA (as defined in the Credit Agreement) to funded debt.
Since 2001, a joint venture that we consolidate has incurred non-recourse debt to acquire a real estate investment in Japan. The debt is secured by a mortgage on the acquired real estate asset. During the second quarter of 2004, the joint venture elected to extend the short-term maturities of this debt to the existing long-term maturity date of July 31, 2008, as allowed under the provisions of the debt agreement. In our accompanying consolidated balance sheets, this debt comprised $2.0 million of our other short-term borrowings at December 31, 2003, and comprised $42.6 million and $41.8 million of our other long-term debt as of June 30, 2004 and December 31, 2003, respectively.
We had short-term borrowings of $248.6 million and $270.1 million as of June 30, 2004 and December 31, 2003, respectively, both with a weighted average interest rate of 2.7%.
Our wholly owned subsidiary, L.J. Melody & Company (L.J. Melody), has a credit agreement with Residential Funding Corporation (RFC) for the purpose of funding mortgage loans that will be resold. On September 26, 2003, we entered into a Fourth Amended and Restated Warehousing Credit and Security Agreement. The agreement provides for a revolving line of credit of up to $200.0 million, bears interest at one-month LIBOR plus 1.0% and expires on August 31, 2004. By amendment on November 14, 2003, the agreement was modified to provide a revolving line of credit increase of $50.0 million that resulted in a total line of credit equaling $250.0 million, which expires on August 31, 2004. On May 12, 2004, L.J. Melody further modified its credit agreement with RFC to provide a temporary revolving line of credit increase of $100.0 million that resulted in a total line of credit under the agreement equaling $350.0 million. This increase became effective on May 30, 2004 and expires 90 days after the effective date.
During the quarter ended June 30, 2004, we had a maximum of $219.9 million revolving line of credit principal outstanding with RFC. At June 30, 2004 and December 31, 2003 we had a $219.9 million and a $230.8 million warehouse line of credit outstanding, respectively, which are included in short-term borrowings in the accompanying consolidated balance sheets. Additionally, we had a $219.9 million and a $230.8 million of mortgage loans held for sale (warehouse receivable), which represented mortgage loans funded through the line of credit that, while committed to be purchased, had not yet been purchased as of June 30, 2004 and December 31, 2003, respectively, which are also included in the accompanying consolidated balance sheets.
15
In connection with our acquisition of Westmark Realty Advisors in 1995, we issued approximately $20.0 million in aggregate principal amount of senior notes. The Westmark senior notes are secured by letters of credit equal to approximately 50% of the outstanding balance at December 31, 2003. The Westmark senior notes are redeemable at the discretion of the note holders and have final maturity dates of June 30, 2008 and June 30, 2010. During the year ended December 31, 2002, all of the Westmark senior notes bore interest at 9.0%. On January 1, 2003, the interest rate on some of these notes was converted to varying rates equal to the interest rate in effect with respect to amounts outstanding under our Credit Agreement. On January 1, 2005, the interest rate on all of the other Westmark senior notes will be adjusted to equal the interest rate then in effect with respect to amounts outstanding under our Credit Agreement. The amount of the Westmark senior notes included in short-term borrowings in the accompanying consolidated balance sheets was $12.1 million as of June 30, 2004 and December 31, 2003.
Insignia, which we acquired in July 2003, issued loan notes as partial consideration for previous acquisitions of businesses in the U.K. The acquisition loan notes are payable to the sellers of the previously acquired U.K. businesses and are secured by restricted cash deposits in approximately the same amount. The acquisition loan notes are redeemable semi-annually at the discretion of the note holder and have a final maturity date of April 2010. As of June 30, 2004 and December 31, 2003, $10.1 million and $12.2 million of the acquisition loan notes were outstanding, respectively, which are included in short-term borrowings in the accompanying consolidated balance sheets.
A significant number of our subsidiaries in Europe have had a Euro cash pool loan since 2001, which is used to fund their short-term liquidity needs. The Euro cash pool loan is an overdraft line for our European operations issued by HSBC Bank. The Euro cash pool loan has no stated maturity date and bears interest at varying rates based on a base rate as defined by the bank plus 2.5%. The amount of the Euro cash pool loan included in short-term borrowings in the accompanying consolidated balance sheets was $5.4 million and $11.5 million at June 30, 2004 and December 31, 2003, respectively.
11. Commitments and Contingencies
We are a party to a number of pending or threatened lawsuits arising out of, or incident to, our ordinary course of business. Our management believes that any liability imposed upon us that may result from disposition of these lawsuits will not have a material effect on our consolidated financial position or results of operations.
In connection with the sale of real estate investment assets by Insignia to Island Fund I LLC (Island) on July 23, 2003, Insignia agreed to maintain letter of credit support for real estate investment assets that were subject to the purchase agreement until the earlier of (1) the third anniversary of the completion of the sale, (2) the date on which the letter of credit is no longer required pursuant to the applicable real estate investment asset agreement or (3) the completion of a sale of the relevant underlying real estate investment asset. As of June 30, 2004, an aggregate of approximately $9.2 million of this letter of credit support remained outstanding under the purchase agreement. Also in connection with the sale, Insignia agreed to maintain a $1.3 million guarantee of a repayment obligation with respect to one of the real estate investment assets. Island agreed to reimburse us for 50% of any draws against these letters of credit or the repayment guarantee while they are outstanding and delivered a letter of credit to us in the amount of approximately $2.9 million as security for Islands reimbursement obligation. As a result of this reimbursement obligation, we effectively retain potential liability for 50% of any future draws against these letters of credit and the repayment guarantee. However, there can be no assurance that Island will be able to reimburse us in the event of any draws against the letters of credit or the repayment guarantee or that Islands future reimbursement obligations will not exceed the amount of the letter of credit provided to us by Island.
L.J. Melody previously executed an agreement with the Federal National Mortgage Association (Fannie Mae) to initially fund the purchase of a commercial mortgage loan portfolio using proceeds from its RFC line of credit. Subsequently, a 100% participation in the loan portfolio was sold to Fannie Mae and we retained the credit risk on the first 2% of losses incurred on the underlying portfolio of commercial mortgage loans. The current loan portfolio balance is $91.2 million and we have collateralized a portion of our obligations to cover the first 1% of losses through a letter of credit in favor of Fannie Mae for a total of approximately $1.0 million. The other 1% is covered in the form of a guarantee to Fannie Mae.
16
We had outstanding letters of credit totaling $23.2 million as of June 30, 2004, excluding letters of credit related to our subsidiaries outstanding indebtedness. Approximately $13.0 million of these letters of credit secure certain office leases and are outstanding pursuant to the revolving credit facility under our Credit Agreement and a reimbursement agreement with the Bank of Nova Scotia. An additional $9.2 million of these letters of credit were issued pursuant to the terms of the purchase agreement with Island described above and are outstanding pursuant to the reimbursement agreement with the Bank of Nova Scotia. Under the agreement with the Bank of Nova Scotia, we may issue up to a maximum of approximately $11.0 million of letters of credit at any one time and these outstanding letters of credit are secured by the same assets of ours that secure our Credit Agreement. The remaining outstanding letter of credit is the Fannie Mae letter of credit described above, which was issued pursuant to a credit agreement with Wells Fargo Bank. Under this agreement, we may issue up to a maximum of $8.0 million of letters of credit, and these outstanding letters of credit are secured by the same assets of ours that secure our Credit Agreement. The outstanding letters of credit as of June 30, 2004 expire at varying dates through March 31, 2005. However, we are obligated to renew the letters of credit related to certain office leases until as late as 2023, the letters of credit related to the Island purchase agreement until as late as July 23, 2006 and the Fannie Mae letter of credit until our obligation to cover potential credit losses is satisfied.
We had guarantees totaling $11.5 million as of June 30, 2004, which consisted primarily of guarantees of property debt as well as the obligations to Island and Fannie Mae discussed above. Approximately $4.8 million of the guarantees are related to investment activity that is scheduled to expire in October 2008. Approximately $3.4 million of guarantees are related to office leases in Europe and Asia. These guarantees will expire at the end of the lease terms. The guarantee obligation related to the agreement with Fannie Mae discussed above will expire in December 2004. The guarantee related to the Island purchase agreement will expire on the August 30, 2004 maturity date of the underlying loan agreement, unless such loan is renewed, modified or extended prior to such date to provide for a later maturity date. Renewals, modifications and extensions of such loan may be made without our consent, but the Insignia $1.3 million amount of our guarantee related to such loan may not be increased without our consent in connection with any such renewal, modification or extension.
An important part of the strategy for our investment management business involves investing our capital in certain real estate investments with our clients. As of June 30, 2004 we had committed $17.1 million to fund future co-investments. In addition to required future capital contributions, some of the co-investment entities may request additional capital from us and our subsidiaries holding investments in those assets and the failure to provide these contributions could have adverse consequences to our interests in these investments.
12. Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). In the accompanying consolidated balance sheets, accumulated other comprehensive loss consists of foreign currency translation adjustments and minimum pension liability adjustments. Foreign currency translation adjustments exclude any income tax effect given that the earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
The following table provides a summary of comprehensive income (loss) (dollars in thousands):
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
2,965 |
|
$ |
5,172 |
|
$ |
(13,603 |
) |
$ |
3,825 |
|
Foreign currency translation gain (loss) |
|
1,686 |
|
(3,395 |
) |
(2,801 |
) |
(3,274 |
) |
||||
Comprehensive income (loss) |
|
$ |
4,651 |
|
$ |
1,777 |
|
$ |
(16,404 |
) |
$ |
551 |
|
17
13. Per Share Information
Basic income (loss) per share was computed by dividing the net income (loss) by the weighted average number of common shares outstanding of 63,990,494 and 41,683,699 for the three months ended June 30, 2004 and 2003, respectively, and 63,256,275 and 41,667,644 for the six months ended June 30, 2004 and 2003, respectively.
Diluted income per share for the three months ended June 30, 2004 included the dilutive effect of potential common shares of 5,385,435. As a result of operating losses incurred for the six months ended June 30, 2004, dilutive weighted average shares outstanding did not give effect to potential common shares, as to do so would have been anti-dilutive. Dilutive income per share for the three and six months ended June 30, 2003 included the dilutive effect of potential common shares of 840,194 and 795,157, respectively.
14. Fiduciary Funds
The accompanying consolidated balance sheets do not include the net assets of escrow, agency and fiduciary funds, which amounted to $714.8 million and $626.3 million at June 30, 2004 and December 31, 2003, respectively.
15. Pensions
Net periodic pension cost consisted of the following (dollars in thousands):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Service cost |
|
$ |
1,470 |
|
$ |
1,419 |
|
$ |
3,130 |
|
$ |
2,838 |
|
Interest cost |
|
2,781 |
|
1,392 |
|
5,618 |
|
2,784 |
|
||||
Expected return on plan assets |
|
(3,123 |
) |
(1,587 |
) |
(6,307 |
) |
(3,175 |
) |
||||
Amortization of prior service costs |
|
(53 |
) |
|
|
(106 |
) |
|
|
||||
Amortization of unrecognized net gain |
|
414 |
|
497 |
|
835 |
|
994 |
|
||||
Net periodic pension cost |
|
$ |
1,489 |
|
$ |
1,721 |
|
$ |
3,170 |
|
$ |
3,441 |
|
We contributed an additional $1.3 million and $2.3 million to fund our pension plan during the three and six months ended June 30, 2004. We expect to contribute a total of $4.5 million to fund our pension plan for the year ended December 31, 2004.
18
16. Merger-Related Charges
We recorded merger-related charges of $11.6 million and $21.5 million for the three and six months ended June 30, 2004 in connection with the Insignia Acquisition. These charges primarily related to the exit of facilities that were occupied by us prior to the Insignia Acquisition as well as the termination of employees, both of which became duplicative as a result of the Insignia Acquisition. We recorded charges for the exit of these facilities as premises were vacated and for redundant employees as these employees were severed, both in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Additionally, during the three and six months ended June 30, 2004, we recorded consulting costs, which represented fees paid to outside parties for nonrecurring services relating to the combination of Insignias financial systems and businesses with ours. Our merger-related charges consisted of the following (dollars in thousands):
|
|
2003 Charge |
|
2004 |
|
Utilized To |
|
To be Utilized |
|
||||
Lease termination costs |
|
$ |
15,805 |
|
$ |
16,208 |
|
$ |
(3,522 |
) |
$ |
28,491 |
|
Severance |
|
7,042 |
|
2,061 |
|
(9,103 |
) |
|
|
||||
Change of control payments |
|
6,525 |
|
|
|
(6,525 |
) |
|
|
||||
Consulting costs |
|
2,738 |
|
1,527 |
|
(4,265 |
) |
|
|
||||
Other |
|
4,707 |
|
1,738 |
|
(6,045 |
) |
400 |
|
||||
Total merger-related charges |
|
$ |
36,817 |
|
$ |
21,534 |
|
$ |
(29,460 |
) |
$ |
28,891 |
|
17. Guarantor and Nonguarantor Financial Statements
The 9¾% senior notes are jointly and severally guaranteed on a senior basis by us and substantially all of our domestic subsidiaries. In addition, the 11¼% senior subordinated notes are jointly and severally guaranteed on a senior subordinated basis by us and substantially all of our domestic subsidiaries. (See Note 10 to the consolidated financial statements for additional information on the 9¾% senior notes and the 11¼% senior subordinated notes).
The following condensed consolidating financial information includes:
(1) Condensed consolidating balance sheets as of June 30, 2004 and December 31, 2003; condensed consolidating statements of operations for the three and six months ended June 30, 2004 and 2003; and condensed consolidating statements of cash flows for the six months ended June 30, 2004 and 2003, of (a) CB Richard Ellis Group as the parent, (b) CBRE as the subsidiary issuer, (c) the guarantor subsidiaries, (d) the nonguarantor subsidiaries and (e) CB Richard Ellis Group on a consolidated basis; and
(2) Elimination entries necessary to consolidate CB Richard Ellis Group as the parent, with CBRE and its guarantor and nonguarantor subsidiaries.
Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and inter-company balances and transactions. The preliminary purchase accounting adjustments associated with the Insignia Acquisition have been recorded in the accompanying consolidated financial statements. The condensed consolidated balance sheets as of June 30, 2004 and December 31, 2003, reflect the allocation of goodwill based upon the estimated fair value of Insignias acquired reporting units (See Note 3 to the consolidated financial statements for additional information).
19
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2004
(Dollars in thousands)
|
|
Parent |
|
CBRE |
|
Guarantor |
|
Nonguarantor |
|
Elimination |
|
Consolidated |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
$ |
817 |
|
$ |
1,764 |
|
$ |
147,018 |
|
$ |
29,993 |
|
$ |
|
|
$ |
179,592 |
|
Restricted cash |
|
|
|
|
|
10,096 |
|
1,948 |
|
|
|
12,044 |
|
||||||
Receivables, less allowance for doubtful accounts |
|
21 |
|
17 |
|
126,560 |
|
168,658 |
|
|
|
295,256 |
|
||||||
Warehouse receivable (a) |
|
|
|
|
|
219,935 |
|
|
|
|
|
219,935 |
|
||||||
Prepaid expenses other current assets |
|
80,838 |
|
926 |
|
21,228 |
|
24,136 |
|
|
|
127,128 |
|
||||||
Total Current Assets |
|
81,676 |
|
2,707 |
|
524,837 |
|
224,735 |
|
|
|
833,955 |
|
||||||
Property and equipment, net |
|
|
|
|
|
77,457 |
|
45,927 |
|
|
|
123,384 |
|
||||||
Goodwill |
|
|
|
|
|
573,101 |
|
251,955 |
|
|
|
825,056 |
|
||||||
Other intangible assets, net |
|
|
|
|
|
95,224 |
|
26,014 |
|
|
|
121,238 |
|
||||||
Deferred compensation assets |
|
|
|
79,094 |
|
|
|
|
|
|
|
79,094 |
|
||||||
Investments in and advances to unconsolidated subsidiaries |
|
|
|
5,261 |
|
55,725 |
|
15,007 |
|
|
|
75,993 |
|
||||||
Investments in consolidated subsidiaries |
|
279,288 |
|
207,403 |
|
137,742 |
|
|
|
(624,433 |
) |
|
|
||||||
Inter-company loan receivable |
|
107,603 |
|
788,493 |
|
|
|
|
|
(896,096 |
) |
|
|
||||||
Deferred tax assets, net |
|
35,442 |
|
|
|
|
|
|
|
|
|
35,442 |
|
||||||
Other assets, net |
|
2,225 |
|
31,708 |
|
33,601 |
|
57,380 |
|
|
|
124,914 |
|
||||||
Total Assets |
|
$ |
506,234 |
|
$ |
1,114,666 |
|
$ |
1,497,687 |
|
$ |
621,018 |
|
$ |
(1,520,529 |
) |
$ |
2,219,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Accounts payable and accrued expenses |
|
$ |
3,923 |
|
$ |
6,619 |
|
$ |
81,173 |
|
$ |
89,816 |
|
$ |
|
|
$ |
181,531 |
|
Inter-company payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation and employee benefits payable |
|
|
|
|
|
95,733 |
|
50,927 |
|
|
|
146,660 |
|
||||||
Accrued bonus and profit sharing |
|
|
|
|
|
58,081 |
|
68,422 |
|
|
|
126,503 |
|
||||||
Short-term borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Warehouse line of credit (a) |
|
|
|
|
|
219,935 |
|
|
|
|
|
219,935 |
|
||||||
Other |
|
|
|
|
|
23,069 |
|
5,549 |
|
|
|
28,618 |
|
||||||
Total short-term borrowings |
|
|
|
|
|
243,004 |
|
5,549 |
|
|
|
248,553 |
|
||||||
Current maturities of long-term debt |
|
|
|
11,800 |
|
1,028 |
|
201 |
|
|
|
13,029 |
|
||||||
Other current liabilities |
|
13,314 |
|
|
|
|
|
|
|
|
|
13,314 |
|
||||||
Total Current Liabilities |
|
17,237 |
|
18,419 |
|
479,019 |
|
214,915 |
|
|
|
729,590 |
|
||||||
Long-Term Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
11¼% senior subordinated notes, net of unamortized discount |
|
|
|
204,913 |
|
|
|
|
|
|
|
204,913 |
|
||||||
Senior secured term loan |
|
|
|
268,200 |
|
|
|
|
|
|
|
268,200 |
|
||||||
9¾% senior notes |
|
|
|
200,000 |
|
|
|
|
|
|
|
200,000 |
|
||||||
16% senior notes, net of unamortized discount |
|
35,800 |
|
|
|
|
|
|
|
|
|
35,800 |
|
||||||
Inter-company loan payable |
|
|
|
|
|
750,695 |
|
145,401 |
|
(896,096 |
) |
|
|
||||||
Other long-term debt |
|
|
|
|
|
330 |
|
43,107 |
|
|
|
43,437 |
|
||||||
Total Long-Term Debt |
|
35,800 |
|
673,113 |
|
751,025 |
|
188,508 |
|
(896,096 |
) |
752,350 |
|
||||||
Deferred compensation liability |
|
|
|
143,846 |
|
|
|
|
|
|
|
143,846 |
|
||||||
Other liabilities |
|
|
|
|
|
60,240 |
|
71,690 |
|
|
|
131,930 |
|
||||||
Total Liabilities |
|
53,037 |
|
835,378 |
|
1,290,284 |
|
475,113 |
|
(896,096 |
) |
1,757,716 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Minority interest |
|
|
|
|
|
|
|
8,163 |
|
|
|
8,163 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholders Equity |
|
453,197 |
|
279,288 |
|
207,403 |
|
137,742 |
|
(624,433 |
) |
453,197 |
|
||||||
Total Liabilities and Stockholders Equity |
|
$ |
506,234 |
|
$ |
1,114,666 |
|
$ |
1,497,687 |
|
$ |
621,018 |
|
$ |
(1,520,529 |
) |
$ |
2,219,076 |
|
(a) Although L.J. Melody is included amongst our domestic subsidiaries, which jointly and severally guarantee both our 9¾% senior notes and 11¼% senior subordinated notes, all warehouse receivables funded under the RFC line of credit are pledged to RFC, and accordingly are not included as collateral for our other outstanding debt.
20
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2003
(Dollars in thousands)
|
|
Parent |
|
CBRE |
|
Guarantor |
|
Nonguarantor |
|
Elimination |
|
Consolidated |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
$ |
3,008 |
|
$ |
17 |
|
$ |
148,752 |
|
$ |
12,104 |
|
$ |
|
|
$ |
163,881 |
|
Restricted cash |
|
|
|
|
|
12,545 |
|
2,354 |
|
|
|
14,899 |
|
||||||
Receivables, less allowance for doubtful accounts |
|
27 |
|
18 |
|
114,215 |
|
208,156 |
|
|
|
322,416 |
|
||||||
Warehouse receivable (a) |
|
|
|
|
|
230,790 |
|
|
|
|
|
230,790 |
|
||||||
Prepaid expenses other current assets |
|
63,557 |
|
42,151 |
|
18,957 |
|
22,998 |
|
(40,667 |
) |
106,996 |
|
||||||
Total Current Assets |
|
66,592 |
|
42,186 |
|
525,259 |
|
245,612 |
|
(40,667 |
) |
838,982 |
|
||||||
Property and equipment, net |
|
|
|
|
|
66,280 |
|
47,289 |
|
|
|
113,569 |
|
||||||
Goodwill |
|
|
|
|
|
572,376 |
|
247,182 |
|
|
|
819,558 |
|
||||||
Other intangible assets, net |
|
|
|
|
|
101,326 |
|
30,405 |
|
|
|
131,731 |
|
||||||
Deferred compensation assets |
|
|
|
76,389 |
|
|
|
|
|
|
|
76,389 |
|
||||||
Investments in and advances to unconsolidated subsidiaries |
|
|
|
4,973 |
|
50,732 |
|
12,656 |
|
|
|
68,361 |
|
||||||
Investments in consolidated subsidiaries |
|
321,451 |
|
252,399 |
|
199,393 |
|
|
|
(773,243 |
) |
|
|
||||||
Inter-company loan receivable |
|
|
|
787,009 |
|
|
|
|
|
(787,009 |
) |
|
|
||||||
Deferred tax assets, net |
|
32,179 |
|
|
|
|
|
|
|
|
|
32,179 |
|
||||||
Other assets, net |
|
2,555 |
|
27,819 |
|
44,779 |
|
57,559 |
|
|
|
132,712 |
|
||||||
Total Assets |
|
$ |
422,777 |
|
$ |
1,190,775 |
|
$ |
1,560,145 |
|
$ |
640,703 |
|
$ |
(1,600,919 |
) |
$ |
2,213,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Accounts payable and accrued expenses |
|
$ |
1,187 |
|
$ |
7,614 |
|
$ |
64,392 |
|
$ |
116,594 |
|
$ |
|
|
$ |
189,787 |
|
Inter-company payable |
|
40,667 |
|
|
|
|
|
|
|
(40,667 |
) |
|
|
||||||
Compensation and employee benefits payable |
|
|
|
|
|
98,160 |
|
50,714 |
|
|
|
148,874 |
|
||||||
Accrued bonus and profit sharing |
|
|
|
|
|
112,365 |
|
87,978 |
|
|
|
200,343 |
|
||||||
Short-term borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Warehouse line of credit (a) |
|
|
|
|
|
230,790 |
|
|
|
|
|
230,790 |
|
||||||
Other |
|
|
|
|
|
25,480 |
|
13,867 |
|
|
|
39,347 |
|
||||||
Total short-term borrowings |
|
|
|
|
|
256,270 |
|
13,867 |
|
|
|
270,137 |
|
||||||
Current maturities of long-term debt |
|
|
|
10,000 |
|
1,029 |
|
256 |
|
|
|
11,285 |
|
||||||
Other current liabilities |
|
12,522 |
|
|
|
|
|
469 |
|
|
|
12,991 |
|
||||||
Total Current Liabilities |
|
54,376 |
|
17,614 |
|
532,216 |
|
269,878 |
|
(40,667 |
) |
833,417 |
|
||||||
Long-Term Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
11¼% senior subordinated notes, net of unamortized discount |
|
|
|
226,173 |
|
|
|
|
|
|
|
226,173 |
|
||||||
Senior secured term loan |
|
|
|
287,500 |
|
|
|
|
|
|
|
287,500 |
|
||||||
9¾% senior notes |
|
|
|
200,000 |
|
|
|
|
|
|
|
200,000 |
|
||||||
16% senior notes, net of unamortized discount |
|
35,472 |
|
|
|
|
|
|
|
|
|
35,472 |
|
||||||
Inter-company loan payable |
|
|
|
|
|
726,844 |
|
60,165 |
|
(787,009 |
) |
|
|
||||||
Other long-term debt |
|
|
|
|
|
330 |
|
41,945 |
|
|
|
42,275 |
|
||||||
Total Long-Term Debt |
|
35,472 |
|
713,673 |
|
727,174 |
|
102,110 |
|
(787,009 |
) |
791,420 |
|
||||||
Deferred compensation liability |
|
|
|
138,037 |
|
|
|
|
|
|
|
138,037 |
|
||||||
Other liabilities |
|
|
|
|
|
48,356 |
|
62,666 |
|
|
|
111,022 |
|
||||||
Total Liabilities |
|
89,848 |
|
869,324 |
|
1,307,746 |
|
434,654 |
|
(827,676 |
) |
1,873,896 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Minority interest |
|
|
|
|
|
|
|
6,656 |
|
|
|
6,656 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholders Equity |
|
332,929 |
|
321,451 |
|
252,399 |
|
199,393 |
|
(773,243 |
) |
332,929 |
|
||||||
Total Liabilities and Stockholders Equity |
|
$ |
422,777 |
|
$ |
1,190,775 |
|
$ |
1,560,145 |
|
$ |
640,703 |
|
$ |
(1,600,919 |
) |
$ |
2,213,481 |
|
(a) Although L.J. Melody is included amongst our domestic subsidiaries, which jointly and severally guarantee both our 9¾% senior notes and 11¼% senior subordinated notes, all warehouse receivables funded under the RFC line of credit are pledged to RFC, and accordingly are not included as collateral for our other outstanding debt.
21
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004
(Dollars in thousands)
|
|
Parent |
|
CBRE |
|
Guarantor |
|
Nonguarantor |
|
Elimination |
|
Consolidated |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
378,174 |
|
$ |
172,742 |
|
$ |
|
|
$ |
550,916 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cost of services |
|
|
|
|
|
198,325 |
|
74,286 |
|
|
|
272,611 |
|
||||||
Operating, administrative and other |
|
354 |
|
2,116 |
|
148,138 |
|
79,931 |
|
|
|
230,539 |
|
||||||
Depreciation and amortization |
|
|
|
|
|
7,324 |
|
3,506 |
|
|
|
10,830 |
|
||||||
Merger-related charges |
|
|
|
|
|
10,605 |
|
969 |
|
|
|
11,574 |
|
||||||
Operating (loss) income |
|
(354 |
) |
(2,116 |
) |
13,782 |
|
14,050 |
|
|
|
25,362 |
|
||||||
Equity income (loss) from unconsolidated subsidiaries |
|
|
|
82 |
|
2,815 |
|
(129 |
) |
|
|
2,768 |
|
||||||
Interest income |
|
34 |
|
12,878 |
|
560 |
|
1,338 |
|
(12,860 |
) |
1,950 |
|
||||||
Interest expense |
|
1,645 |
|
19,781 |
|
11,532 |
|
3,077 |
|
(12,860 |
) |
23,175 |
|
||||||
Equity income from consolidated subsidiaries |
|
3,599 |
|
9,304 |
|
5,509 |
|
|
|
(18,412 |
) |
|
|
||||||
Income before (benefit) provision for income taxes |
|
1,634 |
|
367 |
|
11,134 |
|
12,182 |
|
(18,412 |
) |
6,905 |
|
||||||
(Benefit) provision for income taxes |
|
(1,331 |
) |
(3,232 |
) |
1,830 |
|
6,673 |
|
|
|
3,940 |
|
||||||
Net income |
|
$ |
2,965 |
|
$ |
3,599 |
|
$ |
9,304 |
|
$ |
5,509 |
|
$ |
(18,412 |
) |
$ |
2,965 |
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2003
(Dollars in thousands)
|
|
Parent |
|
CBRE |
|
Guarantor |
|
Nonguarantor |
|
Elimination |
|
Consolidated |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
|
|
$ |