UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
| ¨ | 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 organization) | (I.R.S. Employer Identification Number) | |
| 865 South Figueroa Street, Suite 3400 Los Angeles, California |
90017 | |
| (Address of principal executive offices) | (Zip Code) | |
| (213) 613-3226 | ||
| (Registrant’s telephone number, including area code) | (Former name, former address and former fiscal year if changed since last report) | |
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 x No ¨.
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x.
The number of shares of Class A common stock outstanding at October 29, 2004 was 70,438,865.
FORM 10-Q
September 30, 2004
2
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 147,925 | $ | 163,881 | ||||
| Restricted cash |
10,614 | 14,899 | ||||||
| Receivables, less allowance for doubtful accounts of $15,557 and $16,181 at September 30, 2004 and December 31, 2003, respectively |
276,343 | 322,416 | ||||||
| Warehouse receivable |
111,840 | 230,790 | ||||||
| Prepaid expenses |
24,308 | 22,854 | ||||||
| Deferred tax assets, net |
62,832 | 57,681 | ||||||
| Other current assets |
41,539 | 26,461 | ||||||
| Total Current Assets |
675,401 | 838,982 | ||||||
| Property and equipment, net |
128,076 | 113,569 | ||||||
| Goodwill |
830,723 | 819,558 | ||||||
| Other intangible assets, net of accumulated amortization of $89,113 and $73,449 at September 30, 2004 and December 31, 2003, respectively |
117,295 | 131,731 | ||||||
| Deferred compensation assets |
79,461 | 76,389 | ||||||
| Investments in and advances to unconsolidated subsidiaries |
83,537 | 68,361 | ||||||
| Deferred tax assets, net |
30,636 | 32,179 | ||||||
| Other assets, net |
62,218 | 132,712 | ||||||
| Total Assets |
$ | 2,007,347 | $ | 2,213,481 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ | 170,130 | $ | 189,787 | ||||
| Compensation and employee benefits payable |
156,233 | 148,874 | ||||||
| Accrued bonus and profit sharing |
143,585 | 200,343 | ||||||
| Short-term borrowings: |
||||||||
| Warehouse line of credit |
111,840 | 230,790 | ||||||
| Other |
26,396 | 39,347 | ||||||
| Total short-term borrowings |
138,236 | 270,137 | ||||||
| Current maturities of long-term debt |
13,021 | 11,285 | ||||||
| Other current liabilities |
13,470 | 12,991 | ||||||
| Total Current Liabilities |
634,675 | 833,417 | ||||||
| Long-Term Debt: |
||||||||
| 11 1/4% senior subordinated notes, net of unamortized discount of $2,397 and $2,827 at September 30, 2004 and December 31, 2003, respectively |
204,972 | 226,173 | ||||||
| Senior secured term loan |
268,200 | 287,500 | ||||||
| 9 3/4% senior notes |
130,000 | 200,000 | ||||||
| 16% senior notes, net of unamortized discount of $2,844 at December 31, 2003 |
— | 35,472 | ||||||
| Other long-term debt |
877 | 42,275 | ||||||
| Total Long-Term Debt |
604,049 | 791,420 | ||||||
| Deferred compensation liability |
146,709 | 138,037 | ||||||
| Pension liability |
36,565 | 35,998 | ||||||
| Other liabilities |
100,434 | 75,024 | ||||||
| Total Liabilities |
1,522,432 | 1,873,896 | ||||||
| Minority interest |
6,667 | 6,656 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Class A common stock; $0.01 par value; 325,000,000 shares authorized; 70,195,909 and 7,176,396 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
702 | 72 | ||||||
| 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 September 30, 2004 |
— | 534 | ||||||
| Additional paid-in capital |
509,288 | 359,334 | ||||||
| Notes receivable from sale of stock |
(5,058 | ) | (4,680 | ) | ||||
| Accumulated (deficit) earnings |
(259 | ) | 1,449 | |||||
| Accumulated other comprehensive loss |
(26,425 | ) | (23,780 | ) | ||||
| Total Stockholders’ Equity |
478,248 | 332,929 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 2,007,347 | $ | 2,213,481 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||||
| Revenue |
$ | 574,999 | $ | 423,376 | $ | 1,566,907 | $ | 1,008,817 | |||||||
| Costs and expenses: |
|||||||||||||||
| Cost of services |
300,711 | 207,820 | 797,544 | 484,485 | |||||||||||
| Operating, administrative and other |
213,226 | 180,676 | 643,016 | 444,272 | |||||||||||
| Depreciation and amortization |
12,340 | 41,071 | 40,001 | 53,571 | |||||||||||
| Merger-related charges |
4,040 | 16,485 | 25,574 | 19,795 | |||||||||||
| Operating income (loss) |
44,682 | (22,676 | ) | 60,772 | 6,694 | ||||||||||
| Equity income from unconsolidated subsidiaries |
4,826 | 2,318 | 10,120 | 9,182 | |||||||||||
| Interest income |
672 | 1,373 | 2,303 | 2,624 | |||||||||||
| Interest expense |
14,919 | 21,000 | 52,138 | 51,739 | |||||||||||
| Loss on extinguishment of debt |
17,066 | 6,840 | 21,075 | 6,840 | |||||||||||
| Income (loss) before provision (benefit) for income taxes |
18,195 | (46,825 | ) | (18 | ) | (40,079 | ) | ||||||||
| Provision (benefit) for income taxes |
6,300 | (18,380 | ) | 1,690 | (15,459 | ) | |||||||||
| Net income (loss) |
$ | 11,895 | $ | (28,445 | ) | $ | (1,708 | ) | $ | (24,620 | ) | ||||
| Basic income (loss) per share |
$ | 0.17 | $ | (0.49 | ) | $ | (0.03 | ) | $ | (0.52 | ) | ||||
| Weighted average shares outstanding for basic income (loss) per share |
71,446,359 | 57,486,405 | 66,006,231 | 46,995,364 | |||||||||||
| Diluted income (loss) per share |
$ | 0.16 | $ | (0.49 | ) | $ | (0.03 | ) | $ | (0.52 | ) | ||||
| Weighted average shares outstanding for diluted income (loss) per share |
75,184,418 | 57,486,405 | 66,006,231 | 46,995,364 | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (1,708 | ) | $ | (24,620 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
40,001 | 53,571 | ||||||
| Amortization and write-off of deferred financing costs |
10,094 | 10,176 | ||||||
| Amortization and write-off of long-term debt discount |
3,274 | 378 | ||||||
| Deferred compensation deferrals |
12,764 | 7,836 | ||||||
| Write-off of impaired investments |
2,990 | — | ||||||
| Gain on sale of servicing rights, property held for sale and other assets |
(5,789 | ) | (3,417 | ) | ||||
| Equity income from unconsolidated subsidiaries |
(10,120 | ) | (9,182 | ) | ||||
| Provision for doubtful accounts |
2,304 | 3,598 | ||||||
| Deferred income tax benefit |
(190 | ) | (13,600 | ) | ||||
| Decrease in receivables |
37,465 | 23,253 | ||||||
| Increase in deferred compensation assets |
(3,072 | ) | (6,435 | ) | ||||
| Decrease (increase) in prepaid expenses and other assets |
14,172 | (14,237 | ) | |||||
| Decrease in compensation and employee benefits payable and accrued bonus and profit sharing |
(41,843 | ) | (45,269 | ) | ||||
| Decrease in accounts payable and accrued expenses |
(22,185 | ) | (22,089 | ) | ||||
| Decrease in income tax payable |
(7,861 | ) | (29,134 | ) | ||||
| Increase (decrease) in other liabilities |
6,946 | (1,540 | ) | |||||
| Other operating activities, net |
1,363 | (3 | ) | |||||
| Net cash provided by (used in) operating activities |
38,605 | (70,714 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Proceeds from sale of servicing rights and other assets |
5,607 | 1,922 | ||||||
| Proceeds from sale of property held for sale |
50,401 | — | ||||||
| Capital expenditures, net of concessions received |
(27,455 | ) | (8,185 | ) | ||||
| Acquisition of businesses including net assets acquired, intangibles and goodwill, net of cash acquired |
(16,784 | ) | (243,847 | ) | ||||
| Other investing activities, net |
(2,948 | ) | (2,574 | ) | ||||
| Net cash provided by (used in) investing activities |
8,821 | (252,684 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from revolver and swingline credit facility |
186,750 | 152,850 | ||||||
| Repayment of revolver and | ||||||||