cbre-10q_20190630.htm

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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Class A common stock outstanding at July 31, 2019 was 336,335,679.

	June 30,			December 31,
	2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	535,618		$	777,219
Restricted cash		77,607			86,725
Receivables, less allowance for doubtful accounts of $68,991 and $60,348 at June 30, 2019 and December 31, 2018, respectively		4,001,003			3,668,591
Warehouse receivables		1,365,928			1,342,468
Contract assets		323,247			307,020
Prepaid expenses		290,254			254,892
Income taxes receivable		53,764			71,684
Other current assets		237,796			245,611
Total Current Assets		6,885,217			6,754,210
Property and equipment, net		746,490			721,692
Goodwill		3,663,789			3,652,309
Other intangible assets, net of accumulated amortization of $1,270,236 and $1,180,393 at June 30, 2019 and December 31, 2018, respectively		1,331,281			1,441,308
Operating lease assets		949,216			—
Investments in unconsolidated subsidiaries		307,308			216,174
Deferred tax assets, net		83,015			51,703
Other assets, net		752,819			619,397
Total Assets	$	14,719,135		$	13,456,793
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	2,063,845		$	1,919,827
Compensation and employee benefits payable		1,086,973			1,121,179
Accrued bonus and profit sharing		704,730			1,189,395
Operating lease liabilities		173,496			—
Contract liabilities		109,511			82,227
Income taxes payable		37,735			68,100
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)		1,349,988			1,328,761
Revolving credit facility		230,000			—
Total short-term borrowings		1,579,988			1,328,761
Current maturities of long-term debt		2,258			3,146
Other current liabilities		128,913			90,745
Total Current Liabilities		5,887,449			5,803,380
Long-term debt, net of current maturities		1,766,564			1,767,260
Non-current operating lease liabilities		996,228			—
Non-current tax liabilities		178,990			172,626
Deferred tax liabilities, net		51,588			107,425
Other liabilities		447,786			596,200
Total Liabilities		9,328,605			8,446,891
Commitments and contingencies		—			—
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 336,329,975 and 336,912,783 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		3,363			3,369
Additional paid-in capital		1,162,002			1,149,013
Accumulated earnings		4,898,932			4,504,684
Accumulated other comprehensive loss		(717,660	)		(718,269	)
Total CBRE Group, Inc. Stockholders’ Equity		5,346,637			4,938,797
Non-controlling interests		43,893			71,105
Total Equity		5,390,530			5,009,902
Total Liabilities and Equity	$	14,719,135		$	13,456,793

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
Revenue	$	5,714,073		$	5,111,434	$	10,849,583	$	9,785,386
Costs and expenses:
Cost of services		4,445,790			3,958,748		8,467,824		7,578,709
Operating, administrative and other		877,397			826,282		1,670,273		1,558,517
Depreciation and amortization		106,479			113,399		212,302		221,564
Intangible asset impairment		—			—		89,037		—
Total costs and expenses		5,429,666			4,898,429		10,439,436		9,358,790
Gain on disposition of real estate		10			12,311		19,257		12,329
Operating income		284,417			225,316		429,404		438,925
Equity income from unconsolidated subsidiaries		21,773			96,021		94,437		136,200
Other income (loss)		4,369			4,009		25,222		(271	)
Interest expense, net of interest income		24,600			25,396		45,792		50,633
Write-off of financing costs on extinguished debt		—			—		2,608		27,982
Income before provision for income taxes		285,959			299,950		500,663		496,239
Provision for income taxes		62,521			70,319		106,399		116,483
Net income		223,438			229,631		394,264		379,756
Less: Net (loss) income attributable to non-controlling interests		(293	)		964		6,124		801
Net income attributable to CBRE Group, Inc.	$	223,731		$	228,667	$	388,140	$	378,955
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.67		$	0.67	$	1.15	$	1.12
Weighted average shares outstanding for basic income per share		336,222,471			339,081,556		336,122,100		338,986,354
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.66		$	0.67	$	1.14	$	1.10
Weighted average shares outstanding for diluted income per share		340,508,931			343,471,513		340,334,315		343,031,189

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	223,438		$	229,631		$	394,264		$	379,756
Other comprehensive (loss) income:
Foreign currency translation loss		(2,532	)		(165,926	)		(1,595	)		(99,894	)
Adoption of Accounting Standards Update 2016-01, net of tax		—			—			—			(3,964	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax		425			628			835			1,383
Unrealized (losses) gains on interest rate swaps, net of tax		(52	)		214			(111	)		817
Unrealized holding gains (losses) on available for sale debt securities, net of tax		705			(122	)		1,460			(627	)
Other, net		—			—			1			5,528
Total other comprehensive (loss) income		(1,454	)		(165,206	)		590			(96,757	)
Comprehensive income		221,984			64,425			394,854			282,999
Less: Comprehensive (loss) income attributable to non-controlling interests		(256	)		480			6,105			122
Comprehensive income attributable to CBRE Group, Inc.	$	222,240		$	63,945		$	388,749		$	282,877

The accompanying notes are an integral part of these consolidated financial statements.

	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	394,264		$	379,756
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		212,302			221,564
Amortization and write-off of financing costs on extinguished debt		5,705			31,646
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets		(114,283	)		(98,707	)
Intangible asset impairment		89,037			—
Gains on disposition of real estate held for investment		—			(3,197	)
Net realized and unrealized (gains) losses from investments		(25,222	)		271
Provision for doubtful accounts		11,438			11,809
Compensation expense for equity awards		65,580			61,675
Equity income from unconsolidated subsidiaries		(94,437	)		(136,200	)
Distribution of earnings from unconsolidated subsidiaries		97,561			131,395
Proceeds from sale of mortgage loans		10,099,268			7,019,614
Origination of mortgage loans		(10,090,347	)		(7,552,229	)
Increase in warehouse lines of credit		21,227			560,825
Tenant concessions received		12,931			16,130
Purchase of equity securities		(70,221	)		(41,389	)
Proceeds from sale of equity securities		38,495			37,715
Increase in receivables, prepaid expenses and other assets (including contract and lease assets)		(462,346	)		(197,768	)
Increase in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities)		163,502			9,543
Decrease in compensation and employee benefits payable and accrued bonus and profit sharing		(552,302	)		(496,292	)
Increase in income taxes receivable/payable		(97,260	)		(41,830	)
Other operating activities, net		(21,724	)		(6,393	)
Net cash used in operating activities		(316,832	)		(92,062	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(100,674	)		(107,482	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		(2,142	)		(264,702	)
Contributions to unconsolidated subsidiaries		(35,187	)		(21,042	)
Distributions from unconsolidated subsidiaries		10,273			28,235
Net proceeds from disposition of real estate held for investment		—			14,174
Purchase of equity securities		(5,601	)		(13,718	)
Proceeds from sale of equity securities		9,869			8,889
Purchase of available for sale debt securities		(2,812	)		(18,723	)
Proceeds from the sale of available for sale debt securities		1,466			4,121
Other investing activities, net		224			(6,384	)
Net cash used in investing activities		(124,584	)		(376,632	)

The accompanying notes are an integral part of these consolidated financial statements.

	Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		300,000			550,000
Repayment of senior term loans		(300,000	)		—
Proceeds from revolving credit facility		1,596,000			2,000,000
Repayment of revolving credit facility		(1,366,000	)		(1,402,000	)
Repayment of 5.00% senior notes (including premium)		—			(820,000	)
Proceeds from notes payable on real estate		4,165			1,153
Repayment of notes payable on real estate		—			(16,019	)
Repurchase of common stock		(45,088	)		—
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)		(28,517	)		(11,183	)
Repayment of debt assumed in acquisition of FacilitySource		—			(26,295	)

Delaware		94-3391143
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

400 South Hope Street, 25th Floor Los Angeles, California		90071
(Address of principal executive offices)		(Zip Code)

(213) 613-3333		Not applicable
(Registrant's telephone number, including area code)		(Former name, former address and former fiscal year, if changed since last report)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	“CBRE”	New York Stock Exchange

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	1

	Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018	2

	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018	3

	Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	4

	Consolidated Statements of Equity for the three and six months ended June 30, 2019 and 2018	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	52

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 6.	Exhibits	54

Signatures		55

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐