CBRE Group, Inc. (NYSE:CBG) today reported financial results for
the first quarter ended March 31, 2012.
First-Quarter 2012 Results
- Revenue for the quarter totaled $1.35
billion, an increase of 14% from $1.2 billion in the first quarter
of 2011.
- Excluding selected charges1, net
income2 totaled $45.9 million, or $0.14 per diluted share, for the
current-year quarter, up 13% and 8%, respectively, from $40.6
million, or $0.13 per diluted share, in the first quarter of 2011.
Selected charges, primarily related to the ING REIM businesses
acquired in 2011, totaled $18.9 million, net of income taxes, for
the quarter.
- On a U.S. GAAP basis, net income
totaled $27.0 million, or $0.08 per diluted share, for the first
quarter of 2012 compared with $34.4 million, or $0.11 per diluted
share, for the first quarter of 2011.
- Excluding selected charges, Earnings
Before Interest Taxes Depreciation and Amortization (EBITDA) 3
increased 25% to $150.5 million in the current period from $120.6
million in the first quarter of 2011. EBITDA3 (including selected
charges) rose 24% to $140.5 million for the first quarter of 2012,
from $113.0 million for the same period a year earlier. Selected
charges, primarily related to the integration of the ING REIM
businesses acquired in 2011, reduced EBITDA by $10.0 million for
the current-year period.
Management Commentary
“We are very pleased with our performance in the seasonally
slower first quarter,” said Brett White, chief executive officer of
CBRE. “We delivered solid, double-digit top-line growth – and even
stronger normalized EBITDA growth -- despite the challenges
presented by the on-going economic difficulties in Europe and
slower investment activity in Asia Pacific. Our performance against
this backdrop underscores the strength and diversity of our
platform, and our ability to effectively calibrate operating costs
to an uncertain market environment.”
CBRE’s growth for the quarter was driven by the Americas Region
(primarily the U.S.), which accounted for approximately 60% of
total Company revenue and nearly 70% of total Company normalized
EBITDA. “In the U.S., we have built -- and continually enhance -- a
robust, highly integrated services platform that we believe has
made us the first choice for property occupiers and investors,” Mr.
White said. “Our leading market position in the U.S. is a crucial
advantage in what continues to be an uneven global economic
recovery.”
The benefits of CBRE’s platform diversity were also evident in
the strong performance of its Global Investment Management
business. The first quarter of 2012 was the first full period in
which all three ING REIM businesses (acquired in July and October
2011) were operating together with CBRE’s existing investment
management business. The combined entity accounted for
approximately 10% of the Company’s total revenue and 30% of the
Company’s total normalized EBITDA in the quarter.
“The two investment management platforms have meshed very well,”
Mr. White said. “Our deep experience as a strategic acquirer is
facilitating a smooth integration, and the team from ING REIM has
added considerably to our existing leadership talent and spectrum
of investment programs. Over time, we see significant growth
opportunities for this business.”
The Company’s capital markets business continued to exhibit
solid growth during the first quarter of 2012, driven by strength
in the Americas. Revenue from global property sales rose by
double-digits for the 10th consecutive quarter, as a 33%
improvement in the Americas more than offset declines in other
parts of the world. Revenue grew 46% in commercial mortgage
brokerage, as Americas loan origination activity increased nearly
50% compared with the first quarter of 2011, reflecting broader
availability of debt capital in the U.S. investment market.
Outsourcing notched its 6th consecutive quarter of double-digit
revenue growth, with positive contributions across all regions.
CBRE expanded its client base at an aggressive pace, signing 58
total long-term contracts, including 21 with new clients – both new
quarterly records for the Company. The Company’s focus on the
health care, government and education vertical markets resulted in
11 total contracts in those sectors, including those with Adventist
Health System, the Pennsylvania Higher Education Assistance Agency,
Public Works of Canada, Sutter Health, Tenet Healthcare, and the
University of Cincinnati. In addition, CBRE was awarded expanded
facilities management contracts with Microsoft (U.S. and Canada)
and NYSE Euronext (U.S.).
Despite sluggish market conditions around the world, global
leasing revenue also improved modestly, fueled by growth in Asia
Pacific and the Americas.
“We continue to be cautiously optimistic about our business, and
we maintain our full-year 2012 earnings outlook, which we announced
in early February,” Mr. White said. “Clearly, lagging economic
growth and weak job creation have inhibited the market rebound
compared with previous cycles. Nevertheless, our diverse platform,
premier brand and global footprint position us to capture increased
opportunities as the recovery cycle advances.”
First-Quarter 2012 Segment
Results
Americas Region (U.S., Canada and
Latin America)
- Revenue rose 13% to $845.3 million,
compared with $750.1 million for the first quarter of 2011.
- EBITDA totaled $101.2 million, up 30%
from $78.1 million in last year’s first quarter.
- Operating income rose 29% to $80.8
million from $62.5 million for the prior-year first quarter.
EMEA Region (primarily Europe)
- Revenue totaled $197.4 million,
compared with $205.0 million for the first quarter of 2011. The
slight revenue decline reflected the impact of Europe’s continuing
weak economic growth, which resulted in lower sales and leasing
activity market-wide. Revenue grew modestly in the Netherlands and
the United Kingdom, but this was offset by reduced revenue in other
countries in the region, most notably in France, which had a
particularly strong first quarter in 2011.
- In line with the revenue trend, the
region reported an EBITDA loss of $7.1 million compared with
positive EBITDA of $3.0 million in the prior year first
quarter.
- Operating loss totaled $11.3 million,
compared with operating income of $0.7 million for the same period
in 2011.
Asia Pacific Region (Asia,
Australia and New Zealand)
- Revenue rose 4% to $167.2 million from
$160.5 million for the first quarter of 2011. The increase reflects
improved overall performance in several countries, particularly
Australia, China and India. However, the investment markets in the
region saw decidedly less activity than in the prior-year
period.
- EBITDA totaled $2.3 million, compared
with $12.4 million for last year’s first quarter, driven by the
reduced revenue from higher-margin investment sales, investment in
the China operations and a notable bonus accrual reversal in last
year’s first quarter, which did not recur this year.
- Operating loss totaled $0.4 million,
compared with operating income of $11.3 million for the first
quarter of 2011.
Global Investment Management
Business (investment management operations in the U.S.,
Europe and Asia)
- Revenue increased 149% to $125.2
million from $50.3 million in the first quarter of 2011.
- EBITDA, before selected charges,
totaled $44.6 million compared with $13.4 million in the prior-year
first quarter. Including these charges, EBITDA totaled $34.6
million in the first quarter of 2012 compared with $6.0 million in
the first quarter of 2011.
- Operating income totaled $11.4 million,
compared with operating income of $1.3 million for the first
quarter of 2011.
- The improved revenue, EBITDA and
operating performance were driven by contributions from the ING
REIM businesses acquired in the second half of 2011.
- Assets under management totaled $95.9
billion at the end of the first quarter, representing a 2% increase
from year-end 2011.
Development Services (real estate
development and investment activities primarily in the U.S.)
- Revenue totaled $14.9 million, compared
with $19.2 million for the first quarter of 2011. The lower revenue
in the current-year period was attributable to a decrease in
incentive fees and lower rental revenue driven by property
dispositions in the later quarters of 2011.
- Operating loss totaled $4.4 million as
compared with an operating loss of $2.6 million for the same period
in 2011.
- EBITDA totaled $9.5 million, compared
with $13.5 million in the prior-year period. The decrease was
largely driven by lower equity earnings associated with gains on
property sales in the current-year period, and the aforementioned
decline in incentive fees. Equity earnings from unconsolidated
subsidiaries are included in the calculation of EBITDA, but not in
revenue or operating loss.
- Development projects in process totaled
$4.8 billion and the inventory of pipeline deals totaled $1.3
billion. These totals are relatively flat as compared to year-end
2011.
Conference Call Details
The Company’s first-quarter earnings conference call will be
held on Tuesday, April 24, 2012 at 5:00 p.m. Eastern Time. A
webcast will be accessible through the Investor Relations section
of the Company’s Web site at www.cbre.com/investorrelations.
The direct dial-in number for the conference call is
800-230-1059 for U.S. callers and 612-234-9959 for international
callers. A replay of the call will be available starting at 10 p.m.
Eastern Time on April 24, 2012, and ending at midnight Eastern Time
on April 30, 2012. 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 244860. A transcript of
the call will be available on the Company’s Investor Relations Web
site at www.cbre.com/investorrelations.
About CBRE Group, Inc.
CBRE 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 2011 revenue).
The Company has approximately 34,000 employees (excluding
affiliates), and serves real estate owners, investors and occupiers
through more than 300 offices (excluding affiliates) worldwide.
CBRE 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.
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 future growth momentum, operations, financial
performance, business outlook, and ability to successfully
integrate the ING REIM businesses and capture resultant new growth
opportunities. 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,
including the impact of the European sovereign debt crisis; 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 leverage our platform to grow
revenues and capture market share; continued growth in trends
toward use of outsourced real estate services; our ability to
control costs relative to revenue growth and expand EBITDA margins;
our ability to retain and incentivize producers; our ability to
identify, acquire and integrate synergistic and accretive
businesses; expected levels of interest, depreciation and
amortization expense resulting from completed acquisitions;
realization of values in investment funds to offset related
incentive compensation expense; a decline in asset values in, or a
reduction in earnings or cash flow from, our investment programs,
as well as related litigation, liabilities and reputational harm;
and our ability to comply with laws and regulations related to our
international operations, including the anti-corruption laws of the
U.S. and other countries.
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, 2011 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 written request from the CBRE Investor
Relations Department at investorrelations@cbre.com.
1 Selected charges include integration and other costs related
to acquisitions and amortization expense related to incentive fees
and customer relationships acquired in the ING REIM and Trammell
Crow Company (TCC) acquisitions.
2 A reconciliation of net income attributable to CBRE Group,
Inc. to net income attributable to CBRE Group, Inc., as adjusted
for selected charges, is provided in the section of this press
release entitled “Non-GAAP Financial Measures.”
3 EBITDA represents earnings before net interest expense,
write-off of financing costs, income taxes, depreciation and
amortization, while amounts shown for EBITDA, as adjusted (or
normalized EBITDA), remove the impact of certain cash and non-cash
charges related to acquisitions. Our management believes that both
of these measures are useful in evaluating our operating
performance compared to that of other companies in our industry
because the calculations of EBITDA and EBITDA, as adjusted,
generally eliminate the effects of financing and income taxes and
the accounting effects of capital spending and acquisitions, which
would include impairment charges of goodwill and intangibles
created from acquisitions. Such items may vary for different
companies for reasons unrelated to overall operating performance.
As a result, our management uses these measures to evaluate
operating performance and for other discretionary purposes,
including as a significant component when measuring our operating
performance under our employee incentive programs. Additionally, we
believe EBITDA and EBITDA, as adjusted, are useful to investors to
assist them in getting a more complete picture of our results from
operations.
However, EBITDA and EBITDA, as adjusted, are not recognized
measurements under U.S. generally accepted accounting principles,
or GAAP, and when analyzing our operating performance, readers
should use EBITDA and EBITDA, as adjusted, in addition to, and not
as an alternative for, net income as determined in accordance with
GAAP. Because not all companies use identical calculations, our
presentation of EBITDA and EBITDA, as adjusted, may not be
comparable to similarly titled measures of other companies.
Furthermore, EBITDA and EBITDA, as adjusted, are not intended to be
measures of free cash flow for our management’s discretionary use,
as they do not consider certain cash requirements such as tax and
debt service payments. The amounts shown for EBITDA and EBITDA, as
adjusted, also differ from the amounts calculated under similarly
titled definitions in our 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 our
ability to engage in certain activities, such as incurring
additional debt and making certain restricted payments.
For a reconciliation of EBITDA and EBITDA, as adjusted to net
income attributable to CBRE Group, Inc., the most comparable
financial measure calculated and presented in accordance with GAAP,
see the section of this press release titled “Non-GAAP Financial
Measures.”
CBRE GROUP, INC.
OPERATING RESULTS
FOR THE THREE MONTHS ENDED MARCH 31,
2012 AND 2011
(Dollars in thousands, except share
data)
(Unaudited)
Three Months Ended
March 31,
2012 2011 Revenue $ 1,349,989 $ 1,185,105
Costs and expenses: Cost of services 787,556 713,755
Operating, administrative and other 440,722 377,025 Depreciation
and amortization 46,457 23,178 Total costs and
expenses 1,274,735 1,113,958 Gain on disposition of real
estate 809 1,972 Operating income 76,063 73,119
Equity income from unconsolidated subsidiaries 14,386 15,179
Other income 6,588 - Interest income 2,303 2,668 Interest expense
43,981 33,718 Income from continuing operations
before provision for income taxes 55,359 57,248 Provision for
income taxes 25,413 23,406 Income from continuing
operations 29,946 33,842 Income from discontinued operations, net
of income taxes - 10,644 Net income 29,946 44,486
Less: Net income attributable to non-controlling interests
2,971 10,117 Net income attributable to CBRE Group, Inc. $
26,975 $ 34,369
Basic income per share attributable to
CBRE Group, Inc. shareholders
Income from continuing operations attributable to CBRE Group, Inc.
$ 0.08 $ 0.11 Income from discontinued operations attributable to
CBRE Group, Inc. - - Net income attributable CBRE
Group, Inc. $ 0.08 $ 0.11 Weighted average shares
outstanding for basic income per share
320,671,395
316,563,392
Diluted income per share attributable to CBRE Group, Inc.
shareholders Income from continuing operations attributable to CBRE
Group, Inc. $ 0.08 $ 0.11 Income from discontinued operations
attributable to CBRE Group, Inc. - - Net income
attributable to CBRE Group, Inc. $ 0.08 $ 0.11 Weighted
average shares outstanding for diluted income per share
325,738,859 322,920,829 EBITDA (1) $ 140,523 $
113,044
__________________________(1) Includes EBITDA related to
discontinued operations of $1.0 million for the three months ended
March 31, 2011.
CBRE GROUP, INC.
SEGMENT RESULTS
FOR THE THREE MONTHS ENDED MARCH 31,
2012 AND 2011
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2012 2011
Americas
Revenue $ 845,326 $ 750,115 Costs and expenses: Cost of services
542,400 477,329 Operating, administrative and other 203,837 197,417
Depreciation and amortization 18,326 12,831
Operating income $ 80,763 $ 62,538 EBITDA $
101,237 $ 78,128
EMEA
Revenue $ 197,386 $ 204,968 Costs and expenses: Cost of services
130,132 131,273 Operating, administrative and other 75,266 70,782
Depreciation and amortization 3,291 2,262
Operating (loss) income $ (11,303 ) $ 651 EBITDA $
(7,097 ) $ 3,006
Asia
Pacific
Revenue $ 167,201 $ 160,500 Costs and expenses: Cost of services
115,024 105,153 Operating, administrative and other 49,824 42,104
Depreciation and amortization 2,739 1,983
Operating (loss) income $ (386 ) $ 11,260 EBITDA $
2,283 $ 12,442
Global Investment
Management
Revenue $ 125,200 $ 50,322 Costs and expenses: Operating,
administrative and other 94,575 45,556 Depreciation and
amortization 19,225 3,495 Operating
income $ 11,400 $ 1,271 EBITDA(1) $ 34,593 $
5,990
Development
Services
Revenue $ 14,876 $ 19,200 Costs and expenses: Operating,
administrative and other 17,220 21,166 Depreciation and
amortization 2,876 2,607 Gain on disposition of real estate
809 1,972 Operating loss $ (4,411 ) $ (2,601 )
EBITDA $ 9,507 $ 13,478
_________________________
(1) Includes EBITDA related to discontinued operations of $1.0
million for the three months ended March 31, 2011.
Non-GAAP Financial
Measures
The following measures are considered “non-GAAP financial
measures” under SEC guidelines:
(i) Net income attributable to CBRE Group,
Inc., as adjusted for selected charges
(ii) Diluted income per share attributable to
CBRE Group, Inc, as adjusted for selected charges
(iii) EBITDA and EBITDA, as adjusted for
selected charges
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 selected charges 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 selected charges that may obscure
trends in the underlying performance of its business.
Net income attributable to CBRE Group, Inc., as adjusted for
selected charges and diluted net income per share attributable to
CBRE Group, Inc. shareholders, as adjusted for selected charges are
calculated as follows (dollars in thousands, except per share
data):
Three Months Ended
March 31,
2012 2011 Net income attributable to
CBRE Group, Inc. $ 26,975 $ 34,369
Amortization expense related to ING REIM
and TCC incentive fees and customer relationships acquired, net of
tax
11,455 1,764 Integration and other costs related to acquisitions,
net of tax
7,483
4,469
Net income attributable to CBRE Group, Inc., as adjusted $ 45,913 $
40,602 Diluted income per share attributable to CBRE Group,
Inc. shareholders, as adjusted $ 0.14 $ 0.13 Weighted
average shares outstanding for
diluted income per share
325,738,859
322,920,829
EBITDA and EBITDA, as adjusted for selected charges are
calculated as follow (dollars in thousands):
Three Months Ended
March 31,
2012 2011 Net income attributable to
CBRE Group, Inc. $ 26,975 $ 34,369 Add: Depreciation and
amortization(1) 46,457 23,469 Interest expense(2) 43,981 34,468
Provision for income taxes 25,413 23,406 Less: Interest income
2,303 2,668 EBITDA(3) $ 140,523 $ 113,044
Adjustments: Integration and other costs related to
acquisitions 9,965 7,511 EBITDA, as adjusted
(3) $ 150,488 $ 120,555
(1) Includes depreciation and amortization expense related to
discontinued operations of $0.3 million for the three months ended
March 31, 2011.(2) Includes interest expense related to
discontinued operations of $0.7 million for the three months ended
March 31, 2011.(3) Includes EBITDA related to discontinued
operations of $1.0 million for the three months ended March 31,
2011.
EBITDA and EBITDA, as adjusted for selected charges for segments
are calculated as follows (dollars in thousands):
Three Months Ended
March 31,
2012 2011
Americas
Net income attributable to CBRE Group, Inc. $ 33,567 $ 29,509 Add:
Depreciation and amortization 18,326 12,831 Interest expense 35,601
25,832 Royalty and management service income (6,617 ) (6,620 )
Provision for income taxes 21,753 18,376 Less: Interest income
1,393 1,800 EBITDA $ 101,237 $ 78,128
Integration and other costs related to acquisitions -
53 EBITDA, as adjusted $ 101,237 $ 78,181
EMEA
Net loss attributable to CBRE Group, Inc. $ (9,376 ) $ (149 ) Add:
Depreciation and amortization 3,291 2,262 Interest expense 2,468
139 Royalty and management service expense 2,608 2,731 Benefit of
income taxes (1,410 ) (1,460 ) Less: Interest income 4,678
517 EBITDA $ (7,097 ) $ 3,006
Asia
Pacific
Net (loss) income attributable to CBRE Group, Inc. $ (3,135 ) $
2,901 Add: Depreciation and amortization 2,739 1,983 Interest
expense 861 420 Royalty and management service expense 3,962 3,607
(Benefit of) provision for income taxes (1,999 ) 3,790 Less:
Interest income 145 259 EBITDA $ 2,283
$ 12,442
Global Investment
Management
Net income (loss) attributable to CBRE Group, Inc. $ 3,591 $ (2,455
) Add: Depreciation and amortization(1) 19,225 3,786 Interest
expense(2) 6,359 4,590 Royalty and management service expense 47
282 Provision for (benefit of) income taxes 5,652 (160 ) Less:
Interest income 281 53 EBITDA(3) $
34,593 $ 5,990 Integration and other costs related to acquisitions
9,965 7,458 EBITDA, as adjusted(3) $
44,558 $ 13,448
Development
Services
Net income attributable to CBRE Group, Inc. $ 2,328 $ 4,563 Add:
Depreciation and amortization 2,876 2,607 Interest expense 2,972
3,487 Provision for income taxes 1,417 2,860 Less: Interest income
86 39 EBITDA $ 9,507 $ 13,478
(1) Includes depreciation and amortization expense related to
discontinued operations of $0.3 million for the three months ended
March 31, 2011.(2) Includes interest expense related to
discontinued operations of $0.7 million for the three months ended
March 31, 2011.(3) Includes EBITDA related to discontinued
operations of $1.0 million for the three months ended March 31,
2011.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
2012 2011 Assets: Cash and cash equivalents (1) $
703,937 $ 1,093,182 Restricted cash 60,873 67,138 Receivables, net
1,075,495 1,135,371 Warehouse receivables (2) 418,111 720,061 Real
estate assets (3) 487,448 464,468 Goodwill and other intangibles,
net 2,634,216 2,622,732
Investments in and advances to
unconsolidated subsidiaries
186,875 166,832 Other assets, net 972,602 949,359
Total assets $ 6,539,557 $ 7,219,143
Liabilities:
Current liabilities, excluding debt $ 1,307,940 $ 1,688,034
Warehouse lines of credit (2) 410,259 713,362 Revolving credit
facility 34,906 44,825 Senior secured term loans 1,675,256
1,683,561 Senior subordinated notes, net 439,376 439,016 Senior
notes 350,000 350,000 Other debt 105 125 Notes payable on real
estate (4) 391,588 372,912 Other long-term liabilities
527,784 510,145 Total liabilities 5,137,214 5,801,980
CBRE Group, Inc. stockholders’ equity 1,212,227 1,151,481
Non-controlling interests 190,116 265,682 Total
equity 1,402,343 1,417,163 Total liabilities and
equity $ 6,539,557 $ 7,219,143
(1) Includes $96.6 million and $208.1
million of cash in consolidated funds and other entities not
available for Company use at March 31, 2012 and December 31, 2011,
respectively.
(2) Represents loan receivables, the
majority of which are offset by the related non-recourse warehouse
line of credit facility.
(3) Includes real estate and other assets held for sale, real
estate under development and real estate held for investment. (4)
Represents notes payable on real estate of which $13.6 million are
recourse to the Company as of March 31, 2012 and December 31, 2011,
respectively.
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