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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 18, 1999
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TRAMMELL CROW COMPANY
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
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DELAWARE 1-13531 75-2721454
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
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2001 ROSS AVENUE,
SUITE 3400 75201
DALLAS, TEXAS (Zip code)
(Address of principal
executive offices)
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Registrant's telephone number, including area code: (214) 863-3000
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
RECENT DEVELOPMENTS
On February 18, 1999, Trammell Crow Company (the "Company") reported
its results of operations for the fourth quarter and year ended December 31,
1998. The data set forth below has been derived from the historical consolidated
financial statements of the Company:
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<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED DECEMBER 31,
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1997 1998 1997 1998
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(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Property management services $ 87,756 $ 116,784 $ 22,701 $ 34,887
Brokerage services 91,053 152,154 29,361 51,340
Infrastructure management services 68,719 105,129 20,765 31,121
Development and construction services 40,054 65,942 12,592 23,810
Retail services 5,318 19,700 3,406 8,213
Income (loss) from unconsolidated subsidiaries 512 18,438 (955) 11,287
Gain on disposition of real estate 10,241 31,658 8,675 8,203
Other 9,986 7,718 3,855 1,706
Total revenues 313,639 517,523 100,400 170,567
Salaries, wages and benefits 161,425 269,780 47,419 89,271
Non-recurring compensation costs 33,085 -- 33,085 --
Commissions 39,121 67,508 13,742 23,700
General and administrative 55,884 78,344 22,105 26,973
Profit sharing 23,514 -- 8,097 --
Other 17,997 25,766 7,940 7,387
Operating costs and expenses 331,026 441,398 132,388 147,331
Income (loss) before income taxes (17,387) 76,125 (31,988) 23,236
Income tax expense (benefit) (3,367) 29,674 (9,114) 8,249
Net income (loss) $ (14,020) $ 46,451 $ (22,874) $ 14,987
EARNINGS (LOSS) PER SHARE(1):
Basic $ (.42) $ 1.36 $ (.68) $ 0.44
Diluted $ (.42) $ 1.28 $ (.68) $ 0.41
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING(1):
Basic 33,583,467 34,059,155 33,583,467 34,280,642
Diluted 33,583,467 36,216,352 33,583,467 36,241,036
OTHER DATA:
EBITDA, as adjusted(2) $ 59,522 $ 96,811 $ 19,727 $ 29,245
(4,978) 7,677 5,222 (13,186)
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities (21,322) (105,694) 4,484 (104,218)
Net cash provided by financing activities 64,542 89,216 49,581 97,128
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Summarized operating data by business line for the year ended
December 31, 1998 (in thousands):
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<CAPTION>
DEVELOPMENT
PROPERTY INFRASTRUCTURE AND
MANAGEMENT BROKERAGE MANAGEMENT INVESTMENT RETAIL TOTAL
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<S> <C> <C> <C> <C> <C> <C>
Service revenues $116,784 $152,154 $105,129 $ 65,942 $19,700 $459,709
Income from unconsolidated -- -- -- 18,438 -- 18,438
subsidiaries
Gain on disposition of real estate -- -- -- 29,411 2,247 31,658
Other 6,059 637 190 756 76 7,718
Total revenues 122,843 152,791 105,319 114,547 22,023 517,523
Operating costs and expenses 108,913 141,254 96,211 75,589 19,431 441,398
Income before income taxes $ 13,930 $ 11,537 $ 9,108 $ 38,958 $ 2,592 $ 76,125
$ 17,394 $ 16,881 $ 10,910 $ 47,424 $ 4,202 $ 96,811
EBITDA, as adjusted(2)
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(1) The weighted average shares outstanding used to calculate basic and
diluted earnings per share for 1997 include the shares issued in the
Company's initial public offering which closed on December 1, 1997,
and in the related reincorporation transactions, as if they were
outstanding for the entire period.
(2) EBITDA, as adjusted, represents earnings before interest, income
taxes, depreciation and amortization, royalty and consulting fees,
profit sharing, the non-cash, non-recurring charge to income related
to the stock options granted under the 1997 Stock Option Plan and
the non-recurring charge to income resulting from the settlement of
claims by certain former employees arising out of a terminated stock
appreciation rights plan. Management believes that EBITDA, as
adjusted, can be a meaningful measure of the Company's operating
performance, cash generation and ability to service debt. However,
EBITDA, as adjusted, should not be considered as an alternative either
to: (i) net earnings (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii)
liquidity. The Company's calculation of EBITDA, as adjusted, may
differ from similarly titled items reported by other companies.
For the year ended December 31, 1998, the Company's total revenues
were $517.5 million, an increase of 65.0% from $313.6 million in 1997.
EBITDA, as adjusted, for the year increased 62.7% to $96.8 million, compared
with $59.5 million in 1997. Acquisitions contributed 31.1% of the Company's
revenue growth and 18.2% of the Company's growth in EBITDA, as adjusted, for
1998. The Company's net income for 1998 was $46.5 million, as compared to a
net loss in 1997 of $14.0 million. The net loss in 1997 was primarily due to
$37.5 million of non-recurring charges related to an option plan and a
terminated stock appreciation rights plan.
For the three months ended December 31, 1998, the Company's total
revenues were $170.6 million, an increase of 69.9% from $100.4 million for
the three months ended December 31, 1997. EBITDA, as adjusted, for the fourth
quarter of 1998 increased 48.2% to $29.2 million from $19.7 million in the
fourth quarter of 1997. Acquisitions contributed 49.4% of the Company's
revenue growth and 23.6% of the Company's growth in EBITDA, as adjusted, for
the period. Net income for the fourth quarter of 1998 was $15.0 million, as
compared to a net loss in the fourth quarter of 1997 of $22.9 million. The
net loss in the fourth quarter of 1997 was primarily due to $37.5 million on
non-recurring charges related to an option plan and a terminated stock
appreciation rights plan.
As anticipated, the Company recognized a high percentage of its
income in the third and fourth quarters of 1998 due to the closing in those
quarters of a disproportionate number of development and investment
transactions (which typically generate higher margins than transactions in
the Company's other business lines). Specifically, one atypically
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large and profitable transaction that closed in the fourth quarter
contributed approximately $10.1 million of revenues, $10.1 million of EBITDA,
as adjusted, and $6.2 million of net income. Primarily because this
transaction was atypically large and profitable, the Company believes that in
1999 its margins on this business activity will be lower than the margins in
1998.
The Company's positive third and fourth quarter results were
partially offset by an increase in operating expenses. This increase in
operating expenses was attributable in part to expenses incurred in
connection with the integration into the Company's business of the operations
acquired in July, 1998, when the Company acquired a portion of the businesses
of Faison & Associates ("Faison") and Faison Enterprises, Inc., which are
engaged in the development, leasing and management of office and retail
properties located primarily in the Mid-Atlantic and Southeast regions of the
United States. The Company expects to continue to incur increased expenses
associated with the Faison integration in 1999, primarily in the first and
second quarters. Operating expenses also increased in the third and fourth
quarters of 1998 due to expenses incurred in connection with several
initiatives begun in those quarters and intended to increase revenues and
income in future periods. These initiatives include upgrading the Company's
management information systems and making targeted investments to enhance its
development and investment, infrastructure management and brokerage business.
These investments are expected to exceed $10.0 million in 1999.
As in 1998, the Company anticipates that a disproportionately high
percentage of 1999 transactions in its development and investment business
(which typically generate higher margins than transactions in the Company's
other business lines) will close in the third and fourth quarters. Because of
this anticipated concentration of higher margin development and investment
activity in late 1999 and the increased level of expenses the Company expects
to continue to incur in early 1999 in connection with the Faison integration
and the other initiatives described above, the Company expects to recognize a
greater percentage of its 1999 income in the fourth quarter than was the case
in 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAMMELL CROW COMPANY
By: /s/ DEREK R. MCCLAIN
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Name: Derek R. McClain
Title: Executive Vice President
Date: March 18, 1999
