Skip Ribbon Commands Skip to main content

CB Richard Ellis Group, Inc. Reports Second Quarter 2009 Financial Results

Los Angeles, CA – July 29, 2009 CB Richard Ellis Group, Inc. (NYSE:CBG) today reported adjusted earnings per share of $0.04 for the second quarter of 2009 on revenue of $955.7 million. 

 

On a U.S. GAAP basis, the Company reported a net loss for the quarter of $6.6 million, or $0.02 per diluted share. Excluding one-time charges1, net income2 for the second quarter would have totaled $9.7 million, or $0.04 per diluted share. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)3 for the second quarter totaled $68.4 million, which was adversely impacted by the inclusion of $22.5 million4 of one-time charges, mostly related to cost-containment actions.

 

These results compared with second-quarter 2008 revenue of $1.3 billion; net income of $16.6 million, or $0.08 per diluted share, on a U.S. GAAP basis; adjusted net income (excluding one-time charges) of $33.2 million, or $0.16 per diluted share; and EBITDA of $99.0 million.  Second-quarter 2008 EBITDA included $15.5 million5 of one-time charges.

 

Despite continued weakness in sales and leasing markets globally, second-quarter 2009 results showed better quarter-over-quarter performance than the quarter-over-quarter performance for the first quarter of 2009. Specifically, the second-quarter 2009 EBITDA margin, excluding one-time charges, was 9.5%, versus 8.7% for the same period in the prior year, despite considerably lower revenue.

 

“Our second quarter results were in line with expectations,” said Brett White, president and chief executive officer of CB Richard Ellis.  “Despite the ongoing global economic difficulties, we produced significantly higher normalized EBITDA margins compared with the year-earlier second quarter and once again saw operating expense reductions (29.9%) outpace the decline in revenue (27.3%).  This is a direct result of the aggressive actions we began taking more than 18 months ago to lower expense levels to address the current market environment.

 

“During the quarter we also raised $600 million in new capital, which we are using to lower our secured bank debt, obtain loan amortization and maturity extensions and ensure our financial strength throughout this economic downturn.  At the same time, we continue to capitalize on our position as the commercial real estate industry’s largest, most profitable and most diversified services firm to grow our client roster and seize marketplace opportunities.”

 

CB Richard Ellis had a strong quarter for signing up corporate and government outsourcing contracts and expanding its pipeline of distressed asset advisory work.  In its outsourcing business, the Company procured seven new clients, expanded its service offering for six clients and renewed nine existing clients during the quarter.  New outsourcing clients include Ontario Realty Corporation, a government agency that committed to one of the largest outsourcing contracts ever awarded in Canada. Among its existing clients, CB Richard Ellis achieved a significant renewal and expansion with Bank of America Corporation, adding responsibility for the Bank’s EMEA, Asia Pacific and Latin America portfolio to its work in the U.S. Outsourcing revenue, however, declined modestly compared with a year ago due to corporate clients’ on-going efforts to restrain spending.  Meanwhile, in the U.S. alone, the Company’s Restructuring Services professionals have been awarded more than $2.25 billion of distressed properties to market for sale.

 

In a challenged market, CB Richard Ellis continued its leadership of key market segments in the first half of 2009, including: 

 

    • the New York City leasing market, where it was responsible for 22 of the 50 largest leases, more than any other firm, according to Crain's New York Business.

 

    • the U.S. investment sales market, where it attained the highest market share, 18.6%, and exceeded the share attributable to the number two and three firms combined, according to Real Capital Analytics.

 

    • the Central London leasing market, where it recorded the highest market share, 22%, according to Estates Gazette.

 

Mr. White added: “While remaining keenly focused on helping our clients to succeed in the current weak environment, we continue to position CB Richard Ellis for an inevitable rebound in the global commercial real estate market.  When the recovery comes, the moves we have made to streamline our operations and improve efficiencies while preserving our essential geographic platform and broad service offering will enable us to capture disproportionate market share and provide substantial operating leverage to drive bottom line earnings.”

 

Expense Reduction Target Raised

During the second quarter, management increased its cost containment target by an additional $100 million of annual operating cost savings, as the Company continued to outperform against its previous targets.  The Company has now eliminated or targeted for elimination between $575 million and $600 million of operating costs.  These operating cost reductions are in addition to very substantially reduced variable commission and compensation expense that results from lower transaction revenue.

 

In conjunction with the implementation of cost-savings actions, the Company incurred one-time expenses consisting of severance and office consolidation costs totaling $17 million in the second quarter of 2009. 

 

Successful Capital Raising Efforts

Following the successful amendment to its Credit Agreement in the first quarter of 2009, which gave the Company increased flexibility, it raised $150 million of equity and $450 million of senior subordinated notes during the second quarter of 2009. In addition, the Company launched a loan modification program designed to provide additional flexibility relative to bank loan amortization and maturity schedules. All of these actions result in a more favorable overall capital structure.

 

Americas Segment Results

Revenue for the Americas region, including the U.S., Canada and Latin America, was $601.6 million for the second quarter of 2009, compared with $785.5 million for the second quarter of 2008.  Operating income for the Americas region was $26.5 million for the second quarter of 2009, compared with $47.2 million for the same period of 2008.  EBITDA totaled $42.6 million for the second quarter of 2009, compared with $64.2 million in last year’s second quarter. While market conditions remained weak, operating expenses for this segment declined by 25% compared with a year ago.

 

EMEA Segment Results

Revenue for the EMEA region, which mainly consists of operations in Europe, was $176.6 million for the second quarter of 2009, compared with $299.7 million for the second quarter of 2008.  The EMEA region reported operating income of $3.4 million for the second quarter of 2009, compared with $27.2 million for the same period in 2008.  EMEA reported EBITDA of $5.9 million for the second quarter of 2009, compared with $31.4 million for last year’s second quarter.  Offsetting the revenue decrease was a 42% reduction in operating expenses, compared to the prior-year period.

 

Asia Pacific Segment Results

In the Asia Pacific region, which includes operations in Asia, Australia and New Zealand, revenue totaled $122.7 million for the second quarter of 2009, compared with $155.7 million for the second quarter of 2008.  Operating income for the Asia Pacific region was $10.9 million for the second quarter of 2009, compared with $21.7 million for the same period of 2008.  EBITDA totaled $12.2 million for the second quarter of 2009, compared with $21.8 million for last year’s second quarter.  For the quarter, operating expenses across Asia Pacific were down by 18% compared with the prior-year period.

 

Global Investment Management Segment Results

In the Global Investment Management segment, which consists of investment management operations in the U.S., Europe and Asia, revenue totaled $32.6 million for the second quarter of 2009, compared with $42.7 million in the second quarter of 2008.  The second-quarter revenue decline was attributable to lower asset management and acquisition fees than achieved in the second quarter of 2008.  Operating income for the second quarter improved to $4.5 million from $0.9 million for the same period in 2008, while second-quarter EBITDA totaled $2.2 million, a reversal from negative $15.5 million of  EBITDA in the year-earlier second quarter.  EBITDA includes the net, non-cash write-downs of $2.6 million and $11.9 million for the second quarter of 2009 and 2008, respectively. These write-downs are not included in operating income.  Global Investment Management reduced operating expenses by 34% for the second quarter compared with the prior-year period.

 

Assets under management totaled $36.4 billion at the end of the second quarter, down 5% from year-end 2008, but up $0.4 billion from the first quarter of 2009. 

 

Development Services Segment Results

In the Development Services segment, which consists of real estate development and investment activities primarily in the U.S., revenue totaled $22.2 million for the second quarter of 2009, compared with $31.2 million for the second quarter of 2008.  Operating expenses for the quarter fell by 34% from a year earlier. Excluding non-controllable property-level expenses, operating expenses fell by 46% from a year earlier. Development Services posted an operating loss of $6.4 million for the second quarter of 2009, an improvement from the $9.1 million operating loss for the same period in 2008,   Second-quarter 2009 EBITDA totaled $5.5 million, an improvement from negative EBITDA of $3.0 million in last year’s second quarter.  The operating loss for the second quarter of 2009 includes the gross, non-cash write-down of real estate assets of $2.7 million, but not the offsetting portion attributable to non-controlling interests of $1.5 million.  EBITDA includes both items and was also positively impacted by higher equity earnings.

 

Development projects in process as of June 30, 2009 totaled $5.2 billion, down slightly from year-end 2008. The inventory of pipeline deals as of June 30, 2009 stood at $1.5 billion, down 40% from year-end 2008.   

 

Six-Month Results

For the six months ended June 30, 2009, the Company reported a net loss of $43.3 million, or $0.16 per diluted share, on a U.S. GAAP basis, compared with net income of $37.0 million, or $0.18 per diluted share, in 2008. Adjusted net income2 totaled $2.2 million, or $0.01 per diluted share, for the six-month period, on revenue of $1.8 billion.  For the same period in 2008, adjusted net income totaled $64.9 million, or $0.31 per diluted share, on $2.5 billion of revenue.  EBITDA for the current year-to-date period totaled $106.8 million versus $187.5 million for the same period last year.  The one-time charges that negatively impacted EBITDA totaled $38.2 million6 in 2009 and $31.7 million7 in 2008.

 

Conference Call Details

The Company’s second-quarter earnings conference call will be held on Thursday, July 30, 2009 at 10:30 a.m. Eastern Daylight Time (EDT).  A live webcast will be accessible through the Investor Relations section of the Company’s Web site at www.cbre.com.

 

The direct dial-in number for the conference call is 800-288-8961 for U.S. callers and 612-234-9960 for international callers.  A replay of the call will be available starting at 2:00 p.m. EDT on July 30, 2009, and ending at midnight EDT on August 6, 2009. The dial-in number for the replay is 800-475-6701 for U.S. callers and 320-365-3844 for international callers.  The access code for the replay is 106777.  A transcript of the call will be available on the Company’s Investor Relations Web site. 

 

About CB Richard Ellis

CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2008 revenue).  The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company and Fortune 100 fastest growing company two years in a row. Please visit our Web site at www.cbre.com.

 

Note:  This release contains forward-looking statements within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our growth momentum in 2009, future operations and future financial performance.  These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this release.  Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, the Company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events.  If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements.  Factors that could cause results to differ materially include, but are not limited to: general conditions of financial liquidity for real estate transactions; a protraction or worsening of the economic slow-down or recession we are currently experiencing in our principal operating regions; our leverage and our ability to perform under our credit facilities; commercial real estate vacancy levels; employment conditions and their effect on vacancy rates; property values; rental rates; interest rates; our ability to reduce expenditures to help offset lower revenues; realization of values in investment funds to offset related incentive compensation expense; our ability to leverage our platform to grow revenues and capture market share; our ability to retain and incentivize producers; the integration of our acquisitions and the level of synergy savings achieved as a result; and our ability to maintain or enhance our operating leverage.

 

Additional information concerning factors that may influence the Company's financial information is discussed under “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Quantitative and Qualitative Disclosures About Market Risk” and “Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2008, and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Quantitative and Qualitative Disclosures About Market Risk” and “Forward-Looking Statements” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, as well as in the Company’s press releases and other periodic filings with the Securities and Exchange Commission.  Such filings are available publicly and may be obtained on the Company’s Web site at www.cbre.com or upon request from the CB Richard Ellis Investor Relations Department at investorrelations@cbre.com. 

 

1One-time charges include a tax true-up related to the write-off of financing costs incurred in connection with the credit agreement amendment entered into on March 24, 2009, amortization expense related to customer relationships resulting from acquisitions, integration costs related to acquisitions, cost-containment expenses and the write-down of impaired assets.   

 

2A reconciliation of net (loss) income attributable to CB Richard Ellis Group, Inc. to net income attributable to CB Richard Ellis Group, Inc., as adjusted for one-time items, is provided in the section of this release entitled “Non-GAAP Financial Measures.” 

 

3The Company’s management believes that EBITDA is useful in evaluating its operating performance compared to that of other companies in its industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which items may vary for different companies for reasons unrelated to overall operating performance.  As a result, the Company’s management uses EBITDA as a measure to evaluate the operating performance of various business segments and for other discretionary purposes, including as a significant component when measuring its operating performance under its employee incentive programs. Additionally, we believe EBITDA is useful to investors to assist them in getting a more accurate picture of our results from operations.

 

However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles (GAAP), and when analyzing the Company’s operating performance, readers should use EBITDA in addition to, and not as an alternative for, net income determined in accordance with GAAP.  Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies.  Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments.  The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in the Company’s debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and the Company’s ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

 

For a reconciliation of EBITDA with the most comparable financial measures calculated and presented in accordance with GAAP, see the section of this press release titled “Non-GAAP Financial Measures.”

 

4Includes cost-containment expenses of $17.0 million, impairment of assets of $3.7 million, net of non-controlling interests (minority interest), and integration costs related to acquisitions of $1.8 million, the majority of which related to the Trammell Crow Company acquisition.

 

5Includes impairment of assets of $11.9 million and integration costs related to acquisitions of $3.6 million, the majority of which related to the Trammell Crow Company acquisition.

 

6Includes cost-containment expenses of $24.9 million, impairment of assets of $9.8 million, net of non-controlling interests (minority interest), and integration costs related to acquisitions of $3.5 million, the majority of which related to the Trammell Crow Company acquisition.

 

7Includes impairment of assets of $22.5 million and integration costs related to acquisitions of $9.2 million, the majority of which related to the Trammell Crow Company acquisition.



 

Non-GAAP Financial Measures

 

The following measures are considered “non-GAAP financial measures” under SEC guidelines:

 

(i)                  Net income attributable to CB Richard Ellis Group, Inc., as adjusted for one-time items

 

(ii)                Diluted earnings per share attributable to CB Richard Ellis Group, Inc, as adjusted for one-time items

 

(iii)               EBITDA

                 

The Company believes that these non-GAAP financial measures provide a more complete understanding of ongoing operations and enhance comparability of current results to prior periods as well as presenting the effects of one-time items in all periods presented.  The Company believes that investors may find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of one-time items that may obscure trends in the underlying performance of its business.


Net income attributable to CB Richard Ellis Group, Inc., as adjusted for one-time items and diluted net income per share attributable to CB Richard Ellis Group, Inc. shareholders, as adjusted for one-time items are calculated as follows (dollars in thousands, except per share data):

 

 

Three Months Ended

 June 30,

 

Six Months Ended

June 30,

 

 2009

 2008

 

 2009

 2008

 

 

 

 

 

 

Net (loss) income attributable to CB Richard Ellis Group, Inc.

$(6,637)

$16,563

 

$(43,326)

$37,017

Cost containment expenses, net of tax

10,630

-

 

15,471

-

Amortization expense related to customer relationships acquired, net of tax

1,871

2,515

 

 

3,679

 

4,264

Integration costs related to acquisitions, net of         tax

 

1,123

 

2,168

 

2,162

5,461

Write-down of impaired assets, net of tax

2,369

11,957

 

6,061

18,167

Write-off of financing costs, net of tax 

308

-

 

18,153

-

Net income, as adjusted

$9,664   

$33,203   

 

$2,200   

$64,909   

 

 

 

 

 

 

Diluted income per share attributable to CB Richard Ellis Group, Inc. shareholders, as adjusted

$0.04   

$0.16   

 

$0.01

$0.31

 

 

 

 

 

 

Weighted average shares outstanding for

diluted income per share

 

268,132,723

 

208,388,563

 

 

265,908,443

 

208,059,701

 

            EBITDA for the Company is calculated as follows (dollars in thousands):

 

 

Three Months Ended

 June 30,

 

Six Months Ended

June 30,

 

2009

2008

 

2009

2008

 

 

 

 

 

 

Net (loss) income attributable to CB Richard Ellis Group, Inc.

$(6,637)       

$16,563       

 

$(43,326)

$37,017

Add:

 

 

 

 

 

     Depreciation and amortization

24,166

25,022

 

49,558

48,824

     Interest expense

47,418

41,560

 

82,216

84,565

Write-off of financing costs

-

-

 

29,255

-

Provision (benefit) for income taxes

4,706

20,330

 

(7,341)

26,792

Less:

 

 

 

 

 

     Interest income

1,237

4,481

 

3,542

9,707

 

 

 

 

 

 

EBITDA

$68,416

$98,994

 

$106,820

$187,491

 


EBITDA for segments is calculated as follows (dollars in thousands):

 

 

 Three Months Ended

June 30,

 

 Six Months Ended

June 30,

 

2009

2008

 

2009

2008

Americas

 

 

 

 

 

Net (loss) income attributable to CB Richard Ellis Group, Inc.

$(13,383)

$11,334

 

$(30,759)

$26,289

Add:

 

 

 

 

 

   Depreciation and amortization

14,233

15,661

 

28,491

29,969

   Interest expense

39,307

32,100

 

67,007

66,905

Write-off of financing costs

-

-

 

29,255

-

 Royalty and management service income

(3,878)

(3,640)

 

(4,705)

(10,928)

   Provision (benefit) for income taxes

7,163

10,254

 

(6,090)

21,418

Less:

 

 

 

 

 

   Interest income

840

1,514

 

1,956

3,173

EBITDA

$42,602             

$44,195             

 

$81,243             

$130,480             

 

 

 

 

 

 

EMEA

 

 

 

 

 

Net income (loss) attributable to CB Richard Ellis Group, Inc.

$6,954         

$16,694         

 

$(1,428)

         $22,964         

Add:

 

 

 

 

 

   Depreciation and amortization

2,621

3,750

 

5,161

6,985

   Interest expense

481

609

 

483

967

 Royalty and management service expense

2,456

1,612

 

2,612

5,888

(Benefit) provision for income taxes

(6,488)

9,480

 

(3,688)

8,674

Less:

 

 

 

 

 

   Interest income

96

704

 

329

2,366

EBITDA

$5,928             

$31,441             

 

$2,811

$43,112             

 

 

 

 

 

 

Asia Pacific

 

 

 

 

 

Net (loss) income attributable to CB Richard Ellis Group, Inc.

$(2,022)         

$9,547         

 

$(1,535)

$13,378         

Add:

 

 

 

 

 

   Depreciation and amortization

2,128

1,872

 

4,256

3,625

   Interest expense

745

1,962

 

1,393

2,892

 Royalty and management service expense

1,220

1,660

 

1,677

4,225

   Provision for income taxes

10,293

7,103

 

8,619

12,089

Less:

 

 

 

 

 

   Interest income

145

316

 

251

699

EBITDA

$12,219

$21,828

 

$14,159             

$35,510

 

 

 

 

 

 

Global Investment Management

 

 

 

 

 

Net income (loss) attributable to CB Richard Ellis Group, Inc.

      $4,490         

    $(14,312)         

 

$ (1,011)

$(12,109)         

Add:

 

 

 

 

 

   Depreciation and amortization

1,186

848

 

2,389

1,647

   Interest expense

1,041

1,027

 

1,589

1,367

 Royalty and management service expense

202

368

 

416

815

   Benefit for income taxes

(4,703)

(2,853)

 

(1,176)

(7,771)

Less:

 

 

 

 

 

   Interest income

35

548

 

452

794

EBITDA

$2,181

$(15,470)

 

$7,755             

$(16,845)

 

 

 

 

 

 

 


 

 

 Three Months Ended

June 30,

 

 Six Months Ended

June 30,

 

2009

 

2008

 

2009

 

2008

Development Services

 

 

 

 

 

 

 

Net loss attributable to CB Richard Ellis Group, Inc.

$(2,676)         

 

$(6,700)         

 

$(8,593)         

 

$(13,505)         

Add:

 

 

 

 

 

 

 

   Depreciation and amortization

3,998

 

2,891

 

9,261

 

6,598

   Interest expense

5,844

 

5,862

 

11,744

 

12,434

Benefit for income taxes

(1,559)         

 

(3,654)         

 

(5,006)         

 

(7,618)         

Less:

 

 

 

 

 

 

 

   Interest income

121

 

1,399

 

554

 

2,675

EBITDA

$           5,486

 

$       (3,000)

 

$           6,852

 

$           (4,7

CBRE Offices Global

CBRE Offices Worldwide