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, 1997
OR
[ ] 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 1-13145
LASALLE PARTNERS INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-4150422
----------------------------------------------------------
(State or other jurisdic-(IRS Employer Identification No.)
tion of incorporation or
organization)
200 East Randolph Drive, Chicago, IL 60601
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/782-5800
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class November 12, 1997
----- -----------------
Common Stock ($0.01 par value) 16,200,000
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . 17
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds. . 24
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 24
Item 5. Other Matters. . . . . . . . . . . . . . . . 25
Item 6. Exhibits and Reports on Form 8-K . . . . . . 25
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(in thousands)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents. . . . . .$ 15,917 7,207
Trade receivables, net . . . . . . . 61,165 87,283
Other receivables. . . . . . . . . . 3,523 3,005
Prepaid expenses . . . . . . . . . . 1,562 1,228
Deferred tax benefit . . . . . . . . 6,155 --
---------- ---------
Total current assets . . . . 88,322 98,723
Property and equipment, at cost,
less accumulated depreciation of
$27,716 and $23,310 in 1997 and 1996,
respectively . . . . . . . . . . . . 14,687 14,549
Intangibles resulting from
business acquisitions, net of
accumulated amortization of $4,620
and $2,287 in 1997 and 1996,
respectively . . . . . . . . . . . . 50,638 23,735
Investments in real estate ventures. . 17,285 13,687
Long-term receivables, net . . . . . . 8,301 5,052
Other assets, net. . . . . . . . . . . 1,502 868
---------- ----------
$ 180,735 156,614
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Accounts payable and
accrued liabilities. . . . . . . .$ 23,509 34,228
Accrued compensation . . . . . . . . 26,070 26,016
Borrowings under short-term
credit facility. . . . . . . . . . -- 6,500
Current maturities of long-term
notes payable. . . . . . . . . . . -- 9,064
---------- ----------
Total current liabilities. . 49,579 75,808
Long-term notes payable:
Subordinated loans, less current
maturities . . . . . . . . . . . . -- 34,106
Long-term credit facility,
less current maturities. . . . . . -- 21,445
---------- ----------
-- 55,551
Other long-term liabilities. . . . . . 618 1,008
---------- ----------
Commitments and contingencies
Total liabilities. . . . . . 50,197 132,367
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED BALANCE SHEETS - CONTINUED
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(in thousands)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -----------
Stockholders' equity:
Predecessor partnerships' partners'
capital. . . . . . . . . . . . . . -- 23,148
Preferred stock, $.01 par value per
share, 10,000,000 shares authorized;
no shares issued and outstanding . -- --
Common stock, $.01 par value per share,
100,000,000 shares authorized;
16,200,000 shares issued and
outstanding. . . . . . . . . . . . 162 --
Additional paid-in capital . . . . . 122,012 --
Retained earnings. . . . . . . . . . 8,318 --
Cumulative effect of translation
adjustment . . . . . . . . . . . . 46 1,099
---------- ----------
Total stockholders' equity . 130,538 24,247
---------- ----------
$ 180,735 156,614
========== ==========
See accompanying notes to consolidated and combined financial statements.
<PAGE>
<TABLE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF EARNINGS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands except share data)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------ ------------------------
1997 1996 1997 1996
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue:
Fee based services . . . . . . . . . . . . . . $ 59,479 38,654 156,262 98,725
Equity in earnings from unconsolidated ventures 109 184 1,848 1,080
Construction operations, net . . . . . . . . . 225 311 635 933
Other income . . . . . . . . . . . . . . . . . 439 26 937 453
-------- -------- -------- --------
Total revenue. . . . . . . . . . . . . . 60,252 39,175 159,682 101,191
Expenses:
Compensation and benefits. . . . . . . . . . . 37,649 24,995 103,207 72,668
Operating, administration and other. . . . . . 14,111 10,088 38,098 26,971
Depreciation and amortization. . . . . . . . . 2,541 1,169 6,495 3,414
-------- -------- -------- --------
Total expenses . . . . . . . . . . . . . 54,301 36,252 147,800 103,053
-------- -------- -------- --------
Operating profits (loss) . . . . . . . . 5,951 2,923 11,882 (1,862)
Interest expense . . . . . . . . . . . . . . . . 283 1,944 3,859 3,985
-------- -------- -------- --------
Earnings (loss) before income tax
provision (benefit). . . . . . . . . . 5,668 979 8,023 (5,847)
Net provision (benefit) for income taxes . . . . (1,942) 56 (1,808) (333)
-------- -------- -------- --------
Net earnings (loss). . . . . . . . . . . $ 7,610 923 9,831 (5,514)
======== ======== ======== ========
Earnings per common share (1). . . . . . . . . . $ 0.51 0.51
======== ========
Shares used in computation of per share data . .16,200,000 16,200,000
========== ==========
<FN>
(1) Earnings per share is calculated based on earnings for the period from incorporation, July 22, 1997
through September 30, 1997.
See accompanying notes to consolidated and combined financial statements.
</TABLE>
<PAGE>
<TABLE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIODS ENDED SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(in thousands)
(UNAUDITED)
<CAPTION>
Partners'
Capital Effect of
Common Stock Additional Retained (Deficit) Cumulative
------------------- Paid-In Earnings Predecessor Translation
Shares Amount Capital (Deficit) Partnerships Adjustment Total
---------- ------ ---------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996 . . . . . . . . -- -- -- -- 14,997 -- 14,997
Net earnings. . . . 19,964 19,964
Distributions . . . (11,813) (11,813)
Other . . . . . . . 1,099 1,099
---------- ------ -------- ------ ------- ------ --------
Balance at December 31,
1996 . . . . . . . . -- -- -- -- 23,148 1,099 24,247
Net earnings (through
July 21, 1997) . . 1,513 -- 1,513
Distributions . . . (14,835) (14,835)
Acquisition of
Galbreath common
stock. . . . . . . 29,292 29,292
Effect of the
reorganization . . 12,200,000 $ 122 38,996 (39,118) --
Net proceeds from the
initial Offering . 4,000,000 40 83,016 83,056
Other . . . . . . . (1,053) (1,053)
---------- ------ -------- ------ ------- ------ --------
Balances after the
reorganization and
initial Offering . . 16,200,000 162 122,012 -- -- 46 122,220
Net earnings (July 22,
1997 through
September 30, 1997) 8,318 -- 8,318
---------- ------ -------- ------ ------- ------ --------
Balances at September 30,
1997 . . . . . . . . 16,200,000 $ 162 122,012 8,318 -- 46 130,538
========== ====== ======== ====== ======= ====== ========
<FN>
See accompanying notes to consolidated and combined financial statements.
</TABLE>
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(in thousands)
(UNAUDITED)
1997 1996
-------- --------
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . $ 9,831 (5,514)
Reconciliation of net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization. . . . . 6,495 3,414
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . . . (1,848) (1,080)
Provision for loss on receivables and
other assets . . . . . . . . . . . . 1,659 345
Distributions from real estate ventures 2,562 2,236
Loss (gain) on disposition of property
and equipment. . . . . . . . . . . . (196) 173
Tax benefit on SFAS No. 109 Conversion (5,037) --
Changes in:
Receivables. . . . . . . . . . . . . . 29,366 16,820
Prepaid expenses and other assets. . . (268) (261)
Accounts payable, accrued liabilities and
accrued compensation . . . . . . . . (25,428) (17,193)
-------- --------
Net cash provided by (used in)
operating activities . . . . . . 17,136 (1,060)
Cash flows provided by (used in) investing
activities:
Capital additions - property and equipment (3,376) (9,294)
Proceeds from dispositions - property
and equipment . . . . . . . . . . . . . 224 91
Cash balances assumed in Galbreath
acquisition. . . . . . . . . . . . . . 1,008 --
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures . . . . . . . . (9,002) (5,103)
Distributions, repayments of advances
and sale of investments. . . . . . . 5,800 366
-------- --------
Net cash used in investing activities (5,346) (13,940)
Cash flows provided by (used in) financing
activities:
Net borrowings under short-term credit
facility . . . . . . . . . . . . . . . (6,500) 17,400
Net borrowings under long-term credit
facility . . . . . . . . . . . . . . . (64,615) 6,002
Distributions to partners. . . . . . . . (14,835) (11,813)
Net proceeds from the initial offering . 83,056 --
-------- --------
Net cash provided by (used in)
financing activities . . . . . . (2,894) 11,589
Effects of foreign currency translation
on cash balances . . . . . . . . . . . . (186) --
-------- --------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . 8,710 (3,415)
Cash and cash equivalents, beginning of period 7,207 8,322
-------- --------
Cash and cash equivalents, end of period . $ 15,917 4,907
======== ========
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
Supplemental disclosure of cash flow information:
Combined interest paid was $4,058 and $906
for the periods ended September 30, 1997 and 1996, respectively.
On April 22, 1997, the Company acquired the common stock of Galbreath
(note 3) in exchange for a 17.5% limited partnership interest valued at
$29,292. Identifiable operating assets and liabilities and investments in
real estate ventures totaled $10,864, $13,721 and $1,500, respectively, in
addition to cash of $1,008 as of the acquisition date. The Company
incurred transaction related expenses of $619. The increase in these
assets and liabilities, excluding cash acquired, and the resulting goodwill
of $30,261 have not been reflected in the changes in cash flow above.
See accompanying notes to consolidated and combined financial statements.
<PAGE>
LA SALLE PARTNERS INCORPORATED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
(in thousands)
(UNAUDITED)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1996, which are
included in the Prospectus which constitutes a part of the Registrant's
Registration Statement on form S-1 (333-25741) filed with the Securities
and Exchange Commission, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial
statements have been omitted from this report.
(1) ORGANIZATION
LaSalle Partners Incorporated (the "Company") (successor to LaSalle
Partners Limited Partnership ("LPL") and LaSalle Partners Management
Limited Partnership ("LPML") (collectively, the "Predecessor
Partnerships")) was incorporated in Maryland on April 15, 1997. On July
22, 1997, the Company completed an initial public offering (the "Offering")
of 4,000,000 shares of LaSalle Partners Incorporated common stock, par
value $.01 per share (the "Common Stock"). In addition, all of the
partnership interests held in the Predecessor Partnerships were contributed
to the Company, pursuant to agreements among the general and limited
partners, in exchange for an aggregate of 12,200,000 shares of common
stock. The contribution occurred immediately prior to the closing of the
Offering. The 4,000,000 shares were offered at $23 per share, aggregating
$83,056, net of offering costs, of which $63,490 was used to retire long-
term debt and related interest.
The Predecessor Partnerships were subject to a reorganization as part
of the incorporation of the Company. Due to the existence of a paired
share arrangement between the Predecessor Partnerships and between the
former general partners of the Predecessor Partnerships, as well as the
existence of identical ownership before and after the incorporation of the
Predecessor Partnerships, such transactions were accounted for in a manner
similar to the accounting used for a pooling of interests. Thus, the
Company's financial statements include the financial positions and results
of operations of the Predecessor Partnerships at their historical basis.
In connection with the Offering, the Company issued 725,000 stock
options at an exercise price of $23 per share.
(2) INTERIM INFORMATION
The consolidated and combined financial statements as of September
30, 1997 and for the three and nine month periods ended September 30, 1997
and 1996 are unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the consolidated and combined financial
statements for these interim periods have been included. The results for
the interim periods ended September 30, 1997 and 1996 are not necessarily
indicative of the results to be obtained for the full fiscal year.
<PAGE>
(3) ACQUISITION
On April 22, 1997, the Company acquired all of the common stock of
Galbreath, a property management, facility management and development
management company. In consideration for the stock, the Company issued a
17.5% limited partnership interest in the Company to the former
stockholders of Galbreath. The acquisition was accounted for as a purchase
and accordingly, operating results of this business subsequent to the date
of acquisition are included in the accompanying Consolidated and Combined
Statements of Earnings. The excess purchase price over the fair value of
the identifiable assets and liabilities acquired was $30,261, including
transaction costs, of which $6,052 was allocated to management contracts
which are being amortized on a straight line basis over 8 years and $24,209
was allocated to goodwill which is being amortized on a straight line basis
over 40 years based on the Company's estimate of useful lives.
(4) INCOME TAXES
The Company accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are determined based on
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates and laws applicable to the years in
which the differences are expected to reverse. Valuation allowances, if
any, are established when necessary to reduce deferred tax assets to the
amount that is more likely than not to be realized. Income tax expense is
comprised of the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
For the period prior to the incorporation of the Predecessor
Partnerships, the accompanying Consolidated and Combined Statements of
Earnings include a federal and state income tax provision for wholly-owned
corporate subsidiaries and a state tax provision for certain states which
require partnerships to pay income taxes. No other provision for income
taxes was made for those periods as the liability for such taxes would have
been that of the respective partners. As a result of the Company's
conversion from partnership to corporate form, a tax benefit of $5,037 was
recognized related to deferred tax assets recorded in accordance with SFAS
No. 109 arising from temporary differences between the book and tax basis
of the Company's assets and liabilities at the date of incorporation.
(5) BUSINESS SEGMENTS
The Company's operations have been classified into three business
segments: Management Services, Corporate and Financial Services and
Investment Management. The Management Services segment provides three
primary service capabilities: (i) property management and leasing for
property owners, (ii) facility management for properties occupied by
corporate owners and users; and (iii) development management for both
investors and real estate users seeking to develop new buildings or
renovate existing facilities. The Corporate and Financial Services segment
provides transaction and advisory services through three primary service
capabilities, including: (i) tenant representation for corporations and
professional services firms; (ii) investment banking services to address
the financing, acquisition and disposition needs of real estate owners; and
(iii) land acquisitions and development services for owners, users and
developers of land. The Investment Management segment provides real estate
investment management services to institutional investors, corporations and
high net worth individuals.
Total revenue by business segment includes revenue derived from
services provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. The Company allocates
all expenses, other than interest and income taxes, as substantially all
expenses incurred benefit one or more of the business segments.
<PAGE>
<TABLE>
<CAPTION>
FOOTNOTE 5 - CONTINUED
Summarized unaudited financial information by business segment for the three and nine month periods ended
September 30, 1997 and 1996 is as follows:
SEGMENT OPERATING RESULTS
--------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MANAGEMENT SERVICES:
Segment revenue:
Property management fees . . . . $ 12,807 8,832 33,346 25,850
Leasing fees . . . . . . . . . . 10,590 4,119 18,003 6,802
Facility management fees . . . . 3,786 4,007 10,950 9,404
Development management fees. . . 2,148 1,561 4,891 3,621
Intersegment sales . . . . . . . 25 50 75 150
Other income . . . . . . . . . . 157 (35) 286 152
-------- -------- -------- --------
29,513 18,534 67,551 45,979
Operating expenses:
Operating and administrative
expenses . . . . . . . . . . . 28,667 15,273 67,804 42,709
Depreciation and
amortization . . . . . . . . . 961 455 2,402 1,121
-------- -------- -------- --------
Operating income (loss). . . $ (115) 2,806 (2,655) 2,149
======== ======== ======== ========
CORPORATE & FINANCIAL SERVICES:
Segment revenue:
Tenant representation. . . . . . $ 8,336 4,200 19,839 11,308
Investment banking . . . . . . . 3,678 3,062 9,590 4,126
Land fees. . . . . . . . . . . . 1,147 960 2,942 2,453
Construction operations. . . . . 225 311 635 933
Equity in earnings (losses) . . 249 183 431 635
Intersegment sales . . . . . . . -- -- 392 --
Other income . . . . . . . . . . 97 (4) 183 102
-------- -------- -------- --------
13,732 8,712 34,012 19,557
<PAGE>
FOOTNOTE 5 - CONTINUED
SEGMENT OPERATING RESULTS
--------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1997 1996 1997 1996
-------- -------- -------- --------
Operating expenses:
Operating and administrative
expenses . . . . . . . . . . . 10,662 8,180 30,167 23,014
Depreciation and
amortization . . . . . . . . . 323 111 870 555
-------- -------- -------- --------
Operating income (loss). . . $ 2,747 421 2,975 (4,012)
======== ======== ======== ========
INVESTMENT MANAGEMENT:
Segment revenue:
Advisory fees. . . . . . . . . . $ 15,749 11,267 54,799 33,454
Acquisition fees . . . . . . . . 1,238 646 1,902 1,707
Equity in income (losses). . . . (140) 24 1,417 445
Other income . . . . . . . . . . 185 42 468 199
-------- -------- -------- --------
17,032 11,979 58,586 35,805
Operating expenses:
Operating and administrative
expenses . . . . . . . . . . . 12,456 11,680 43,801 34,066
Depreciation and
amortization . . . . . . . . . 1,257 603 3,223 1,738
-------- -------- -------- --------
Operating income (loss). . . $ 3,319 (304) 11,562 1
======== ======== ======== ========
Total segment revenue. . . . . . . . $ 60,277 39,225 160,149 101,341
Intersegment revenue
eliminations . . . . . . . . . . . (25) (50) (467) (150)
-------- -------- -------- --------
Total revenue. . . . . . . . $ 60,252 39,175 159,682 101,191
======== ======== ======== ========
Total segment operating expenses . . $ 54,326 36,302 148,267 103,203
Intersegment operating
expense eliminations . . . . . . . (25) (50) (467) (150)
-------- -------- -------- --------
Total operating expenses . . $ 54,301 36,252 147,800 103,053
======== ======== ======== ========
Total operating income (loss) $ 5,951 2,923 11,882 (1,862)
======== ======== ======== ========
</TABLE>
<PAGE>
(6) PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated and combined statements of
earnings give effect to the acquisition of the common stock of Galbreath,
the incorporation of the Company and the initial public offering, including
the receipt and application of the net proceeds therefrom to repay long-
term indebtedness and related interest, as if these events occurred on
January 1, 1997.
The pro forma adjustments are based upon available information and
certain assumptions that management of the Company believes are reasonable.
The pro forma consolidated and combined financial statements are not
necessarily indicative of what the actual results of operations would have
been for the three and nine month periods ended September 30, 1997 had the
Company completed the acquisition of the Galbreath common stock and
consummated the incorporation and offering transactions as of the dates
indicated nor does it purport to represent the future financial position or
results of operations of the Company.
<PAGE>
FOOTNOTE 6 - CONTINUED
CONSOLIDATED AND COMBINED STATEMENT OF EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------
INCORPOR-
ATION OFFERING
ADJUST- ADJUST-
ACTUAL MENTS (1) MENTS PRO FORMA
--------- ---------- -------------------
Revenue:
Fee based services. .$ 59,479 59,479
Equity in earnings
from unconsolidated
ventures . . . . . . 109 109
Construction opera-
tions, net. . . . . 225 225
Other income . . . . 439 439
-------- -------- ------ --------
Total revenue. . . 60,252 60,252
Expenses:
Compensation and
benefits. . . . . . 37,649 -- 37,649
Operating, administra-
tion and other. . . 14,111 187 (2) 14,298
Depreciation and
amortization. . . . 2,541 -- 2,541
-------- -------- ------ --------
Total expenses . . 54,301 187 54,488
-------- -------- ------ --------
Operating profits. 5,951 (187) 5,764
Interest expense . . . 283 (148)(3) 135
-------- -------- ------ --------
Earnings before
income tax
provision
(benefit) . . . . 5,668 (39) 5,629
Net provision (benefit)
for income taxes. . . (1,942) 4,124 (15)(1) 2,167
-------- -------- ------ --------
Net earnings
(benefit) . . . .$ 7,610 (4,124) (24) 3,462
======== ======== ====== ========
Earnings (loss)
per common share. . . $ 0.21
========
Shares used in
computation of
earnings (loss)
per share . . . . . . 16,200,000
==========
<PAGE>
<TABLE>
<CAPTION>
FOOTNOTE 6 - CONTINUED
CONSOLIDATED AND COMBINED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------------------------------------
INCORPOR-
ATION OFFERING
GALBREATH ADJUST- ADJUST-
ACTUAL MERGER (4) MENTS (1) MENTS PRO FORMA
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue:
Fee based services . . . . . . . . $156,262 8,259 164,521
Equity in earnings from unconsolidated
ventures . . . . . . . . . . . . 1,848 73 1,921
Construction operations, net . . . 635 -- 635
Other income . . . . . . . . . . . 937 787 1,724
-------- -------- -------- ------ --------
Total revenue. . . . . . . . . . 159,682 9,119 -- -- 168,801
Expenses:
Compensation and benefits. . . . . 103,207 5,993 -- 109,200
Operating, administration and other 38,098 2,363 563 (2) 41,024
Depreciation and amortization. . . 6,495 663 -- 7,158
-------- -------- -------- ------ --------
Total expenses . . . . . . . . . 147,800 9,019 563 157,382
-------- -------- -------- ------ --------
Operating profits. . . . . . . . 11,882 100 (563) 11,419
Interest expense . . . . . . . . . . 3,859 -- (2,995)(3) 864
-------- -------- -------- ------ --------
Earnings before provision for
income taxes . . . . . . . . . 8,023 100 2,432 10,555
Net provision for income taxes . . . (1,808) 33 4,902 935 (1) 4,063
-------- -------- -------- ------ --------
Net earnings . . . . . . . . . . $ 9,831 67 (4,902) 1,497 6,492
======== ======== ======== ====== ========
Earnings (loss) per common share . . $ 0.40
========
Shares used in computation of
earnings (loss) per share. . . . . 16,200,000
==========
<PAGE>
FOOTNOTE 6 - CONTINUED
<FN>
(1) The adjustment gives effect to the provision (benefit) for income taxes as though the Company and
Galbreath were taxable entities as of January 1, 1997 at an effective tax rate of 38.5%.
(2) The adjustment gives effect to the estimated incremental general and administrative costs associated with
operations as a public company as if the initial public offering occurred on January 1, 1997.
(3) The adjustment gives effect to the repayment of the Company's long-term notes payable, including interest
thereon, out of the proceeds of the initial public offering as if the initial public offering occurred on January
1, 1997.
(4) These adjustments give effect to the merger of Galbreath with the Company on April 22, 1997, as adjusted
for the tenant representation and investment banking units which were not acquired, as if the merger occurred on
January 1, 1997.
</TABLE>
<PAGE>
(7) HISTORICAL EARNINGS PER SHARE
Earnings per share is calculated based on earnings of $8,318 and the
average shares outstanding of 16,200,000 for the period from incorporation,
July 22, 1997, through September 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company completed its initial public offering ("Offering") on July
22, 1997, raising net proceeds of $83.1 million. A substantial block of
the Company's stock, approximately 44.5%, is owned by employees, of which
approximately 20.2% is owned by senior management. The proceeds of the
Offering were used primarily to repay the Company's long-term debt and
related interest of $63.5 million. At September 30, 1997, the Company had
approximately $15.9 million in cash and cash equivalents, an increase of
$8.7 million over December 31, 1996, and had no outstanding debt.
The Company is pursuing a growth strategy which capitalizes on
existing client relationships and emerging industry trends. The key
components of the growth strategy include expanding client relationships to
increase the range of services provided to current clients and develop new
client relationships, broadening its international presence and selectively
pursuing strategic acquisitions and co-investment opportunities.
The Company has completed three strategic acquisitions since late 1994
and continues to consider potential acquisition candidates during this time
of industry consolidation which have both a strong strategic and cultural
fit. Potential candidates will primarily be in the management services
segment, for enhanced geographic exposure, and in the international markets
to complete the Company's global initiative. Completed acquisitions
include Alex. Brown Kleinwort Benson Realty Advisors Corporation, a real
estate investment advisor including real estate securities, in November
1994, CIN Property Management, a London based investment advisor, in
October 1996, and The Galbreath Company, a property and development
management company, in April 1997.
As a result of the substantial goodwill associated with acquisitions
of service companies and the related amortization, the Company believes
that EBITDA (earnings before interest, income taxes, depreciation and
amortization) is the most appropriate measure of operating performance,
cash generation and comparability among real estate service companies.
EBITDA, however, should not be considered as an alternative to either (i)
net income determined in accordance with GAAP or (ii) operating cash flow
determined in accordance with GAAP.
The Company's EBITDA increased $4.4 million to $8.5 million for the
quarter and $16.8 million to $18.4 million for the nine months ended
September 30, 1997, in comparison to comparable periods in 1996. Calculated
on a pro forma basis, EBITDA was $8.3 million and $18.6 million for the
three and nine months ended September 30, 1997.
The Company intends to accelerate its strategy of co-investing with
its investment management clients to take advantage of recovering real
estate markets. This strategy is intended to increase the growth of assets
under management, generate return on investment and create potential
opportunities to provide services related to acquisition, financing,
property management, leasing and disposition of such investments. As of
September 30, 1997, the Company had a total net investment of $17.3 million
in 38 separate property or fund co-investments with additional capital
commitments of $7.6 million for future fundings of co-investments.
<PAGE>
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1997 Compared to the Three
and Nine Months Ended September 30, 1996
CONSOLIDATED RESULTS
The Company's total revenue grew $21.1 million, or 53.8%, to $60.3
million for the three months ended September 30, 1997 and grew $58.5
million, or 57.8%, to $159.7 million for the nine months ended September
30, 1997 from the prior year periods. The increases are attributable to
the continued improvement in real estate market conditions which resulted
in significant performance fees being generated by the Investment
Management segment in the second quarter of 1997 on the disposition of
certain assets and a higher level of transactions in the Corporate and
Financial Services segment for both periods, as well as to the acquisition
of CIN Property Management in October 1996 and the acquisition of Galbreath
in April 1997.
The Company's operating expenses increased $18.0 million, or 49.8%, to
$54.3 million for the three months ended September 30, 1997 and increased
$44.8 million, or 43.4%, to $147.8 million for the nine months ended
September 30, 1997 from the prior year periods. These increases are
attributable to the acquisitions of CIN Property Management and The
Galbreath Company, increased staffing levels and additional bonus accruals
in connection with increased revenue generation. In addition, increased
corporate overhead and infrastructure costs of approximately $1.4 million
and $3.4 million for the three and nine month periods ended September 30,
1997, have been incurred in excess of the prior year periods as a result of
new accounting systems implementation, increased staffing to meet expanded
business needs and public company reporting requirements, and firmwide
technology services and system enhancements. These costs are allocated to
the segments based on a combination of headcount and usage factors.
The Company continues its migration to a centralized client billing
and receivable system. The new system provides management with additional
resources to monitor and analyze the client billing cycle and related
client accounts. In connection with the system conversion, the Company
recognized charges of $1.5 million of non-billable fees and commissions,
$.4 million of uncollectible accounts and $.5 million of non-billable
expenses during the second quarter of 1997.
The Company's operating profits increased $3.0 million to $6.0 million
for the three months ended September 30, 1997 and increased $13.7 million
to $11.9 million for the nine months ended September 30, 1997 compared to
the prior year periods.
Interest expense decreased $1.7 million to $.3 million for the three
months ended September 30, 1997 and decreased $.1 million to $3.9 million
for the nine months ended September 30, 1997 from the prior year periods.
These decreases are substantially a result of the repayment of the
Company's long-term debt from the net proceeds of the Offering and the
subsequent repayment of outstanding debt under its working capital facility
in July 1997, offset by increased borrowings under the long-term facility
to fund the CIN Property Management acquisition, technology and
infrastructure investments and co-investments.
The provision for income taxes increased $3.0 million for the three
months ended September 30, 1997 and increased $3.5 million for the nine
months ended September 30, 1997 compared to the prior year periods as a
result of the conversion from partnership to corporate form in July 1997
and resulting provision for income taxes at an effective tax rate of 38.5%.
This increase was offset by the recognition of a $5.0 million tax benefit,
in accordance with SFAS No. 109, as a result of the Company recording a
deferred tax asset arising from temporary differences between the book and
tax basis of its consolidated assets and liabilities at the date of
incorporation.
<PAGE>
Net earnings increased $6.7 million to $7.6 million for the three
months ended September 30, 1997 and increased $15.3 million to $9.8 million
from a loss of $5.5 million for the nine months ended September 30, 1997
from the prior year periods. Earnings per share, based on net earnings
from the date of incorporation of $8.3 million, were $.51 for the three and
nine months ended September 30, 1997.
SEGMENT OPERATING RESULTS
MANAGEMENT SERVICES. The Management Services segment revenues
represented 49.0% and 42.2% of the Company's total revenue for the three
and nine months ended September 30, 1997, respectively. Segment revenues
increased $11.0 million to $29.5 million for the three months ended
September 30, 1997 and increased $21.6 million to $67.6 million for the
nine months ended September 30, 1997 from the prior year periods. The
increases are primarily related to the acquisition of Galbreath in April
1997 with approximately 71.3 million square feet under management. To a
lesser extent, segment revenues increased for the nine months ended
September 30, 1997 over the prior year period as a result of approximately
$6.1 million additional square feet under management, excluding the
Galbreath portfolio. These increases for the nine months ended September
30, 1997 were offset, in part, by the one time charge for non-billable
property management and leasing fees of $1.3 million taken in the second
quarter of 1997 in conjunction with the implementation of a centralized
client billing and receivable system as discussed above.
Operating expenses increased $13.9 million to $29.6 million for the
three months ended September 30,1997 and $26.4 million to $70.2 million for
the nine months ended September 30, 1997 from the prior year periods. The
increases are primarily attributable to the acquisition of Galbreath common
stock, including personnel costs, amortization of intangibles resulting
from the acquisitions and transition and integration costs. In addition,
employment levels have increased for the nine months ended September 30,
1997 from the prior year period to support additional square feet under
management, new business and technology initiatives and to enhance
resources for future assignments, resulting in increased personnel and
travel expenses. Corporate infrastructure costs of approximately $.7
million for the three months ended September 30, 1997 and $1.7 million for
the nine months ended September 30, 1997 were also incurred in excess of
the prior year periods as a result of increased staffing and technology
enhancements discussed under Consolidated Results. Year to date expenses
were further impacted by one time charges of $.5 million taken in the
second quarter of 1997 related to the implementation of the centralized
client billing and receivable system.
The Management Services segment's operating results decreased $2.9
million to a loss of $.1 million for the three months ended September 30,
1997 and decreased $4.8 million to a loss of $2.7 million for the nine
months ended September 30, 1997 from the prior year periods.
CORPORATE AND FINANCIAL SERVICES. The Corporate and Financial
Services segment revenues represented 22.8% and 21.2% of the Company's
total revenue for the three and nine months ended September 30, 1997.
Segment revenues increased $5.0 million to $13.7 million for the three
months ended September 30, 1997 and increased $14.5 million to $34.0
million for the nine months ended September 30, 1997 from the prior year
periods. The increase is attributable to an increased level of
transactions in each of the tenant representation and investment banking
units.
<PAGE>
Operating expenses for the Corporate and Financial Services segment
increased $2.7 million to $11.0 million for the three months ended
September 30, 1997 and increased $7.5 million to $31.0 million for the nine
months ended September 30, 1997 from the prior year periods. These
increases in operating expenses primarily represent an increased accrual
for anticipated year end bonuses for the tenant representation and
investment banking units, which is consistent with increased levels of
revenue generated, and increased staffing levels in the Company's tenant
representation unit. Increased corporate infrastructure costs of
approximately $.3 million for the three months ended September 30, 1997 and
$.7 million for the nine months ended September 30, 1997 were also incurred
as a result of increased staffing and technology enhancements discussed
under Consolidated Results. During the second quarter of 1997, the segment
took a $.4 million charge associated with the implementation of a
centralized client billing and receivable system, as discussed earlier.
The Corporate and Financial Services segment's operating income
increased $2.3 million to $2.7 million for the three months ended September
30, 1997 and increased $7.0 million to $3.0 million for the nine months
ended September 30, 1997 from the prior year periods.
INVESTMENT MANAGEMENT. The Investment Management segment revenues
represented 28.2% and 36.6% of the Company's total revenue for the three
and nine months ended September 30, 1997. Segment revenues increased $5.1
million to $17.0 million for the three months ended September 30, 1997 and
increased $22.8 million to $58.6 million for the nine months ended
September 30, 1997 from the prior year periods. The increases are
primarily attributable to the acquisition of CIN Property Management in
October 1996 and, to a lesser extent, to increased acquisition activity
over the prior year periods. Additionally, performance fees generated on
the disposition of certain assets under management totaling $1.2 million
and $9.7 million were recognized in the third and second quarters of 1997,
respectively.
Operating expenses increased $1.4 million to $13.7 million for the
three months ended September 30, 1997 and increased $11.2 million to $47.0
million for the nine months ended September 30, 1997 from the prior year
periods. These increases are primarily attributable to the additional
compensation, other direct operating expenses and amortization of the
intangibles resulting from the acquisition of CIN Property Management for
the three and nine months ended September 30, 1997. Increased corporate
infrastructure costs of approximately $.4 million for the three months
ended September 30, 1997 and $1.0 million for the nine months ended
September 30, 1997 were also incurred as a result of increased staffing and
technology enhancements discussed under Consolidated Results. Operating
expenses for the nine months ended September 30, 1997 were additionally
impacted by an increased accrual for anticipated year end bonuses
recognized in the second quarter of 1997 consistent with the increased
levels of revenue generated compared with the prior year period. These
increases in operating expenses have been offset by reduced staffing levels
and related personnel, travel and occupancy costs and lower relocation
expenses compared to the three and nine month periods in 1996.
The Investment Management segment's operating income increased $3.6
million to $3.3 million for the three months ended September 30, 1997 and
increased $11.6 million from break even for the nine months ended September
30, 1997 from the prior year periods.
PRO FORMA RESULTS
The Company experienced a significant amount of change in 1997. It
acquired The Galbreath Company in April 1997, converted from partnership to
corporate form in July 1997 and completed its initial public offering, the
proceeds of which were partly used to repay long-term debt and related
interest, also in July 1997. Pro forma results give effect to these
transactions as if they occurred on January 1, 1997 and provide for future
comparability.
<PAGE>
On a pro forma basis, the Company's total revenue for the three months
ended September 30, 1997 was $60.3 million compared to actual results for
the same period of $60.3 million. Pro forma total revenue for the nine
months ended September 30, 1997 was $168.8 million compared to actual
results for the same period of $159.7 million. Pro forma total revenue of
Galbreath includes fees generated primarily from management services
activities, such as property management and leasing, facility management
and development management assignments, consistent with the Company's
Management Services segment.
Pro forma operating profits for the three months ended September 30,
1997 were $5.8 million compared to actual results for the same period of
$6.0 million. Pro forma operating profits for the nine months ended
September 30, 1997 were $11.4 million compared to actual results for the
same period of $11.9 million. These decreases in operating profits on a
pro forma basis, are a result of pro forma operating losses for Galbreath
for the period through the acquisition date and incremental expenses
associated with public ownership for the three and nine months ended
September 30, 1997.
Pro forma net earnings for the three months ended September 30, 1997
were $3.5 million compared to actual net earnings for the same period of
$7.6 million. Pro forma net earnings for the nine months ended September
30, 1997 were $6.5 million compared to actual net earnings for the same
period of $9.8 million. The pro forma net earnings reflect the decrease in
net operating profits discussed above, the decrease in interest expense as
a result of the repayment of the Company's long-term debt out of the
proceeds of the initial public offering and the effect of income taxes as
though the Company and Galbreath were taxable entities for the entire
period. The tax benefit recognized at the time of incorporation, in
accordance with the provisions of SFAS No. 109, is not recognized on a pro
forma basis, as the temporary difference identified between book and tax
basis resulting in the deferred tax asset, arose out of the mid-year
incorporation and did not exist at January 1, 1997.
Pro forma earnings per share were $.21 and $.40 for the three and nine
month periods ended September 30, 1997 based on 16,200,000 shares
outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operations totaled $17.1 million for the
nine months ended September 30, 1997 compared to cash flows used in
operations of $1.1 million for the prior year period. The $18.2 million
increase is primarily attributable to the stronger earnings experienced in
the nine months ended September 30, 1997 as discussed in the Results of
Operations above, in addition to the collection of net working capital
related to the construction operations which were sold on December 31,
1996.
The Company continues to pursue co-investment opportunities with its
investment management clients for which the holding period typically ranges
from three to seven years. Such co-investments are typically represented
by non-controlling general partner and limited partner interests. The
equity earnings from these co-investments have had a relatively small
impact on the Company's current earnings and cash flow. However, the
Company's increased participation as a principal in real estate investments
could increase fluctuations in the Company's net earnings and cash flow as
a result of the timing and magnitude of the gains or losses and potential
incentive participation fees, if any, to be recognized on the disposition
of the assets. In certain of these investments, the Company will not have
complete discretion over the timing of the disposition of such investments.
<PAGE>
Net cash used in investing activities was $5.3 million for the nine
months ended September 30, 1997 compared to $13.9 million for the prior
year period. The decrease in net cash used in investing activities is
primarily attributable to the installation of furniture and fixtures at the
Company's new corporate headquarters in early 1996. The Company continues
to expand its commitment to technology enhancements and capabilities as a
means toward improving productivity and its competitive advantage in the
market. Investments made in real estate ventures for the nine months ended
September 30, 1997, which totaled $9.0 million, were $3.9 million higher
than those made in the prior year period. In addition, the Company had
committed $7.6 million of capital for future fundings of co-investments as
of September 30, 1997. The increased investment over the prior year period
was offset by increased cash flows related to dispositions of coinvestments
of $5.4 million in 1997.
Historically, the Company has financed its operations, acquisitions
and co-investments with internally generated funds, partnership equity and
borrowings under revolving credit facilities. In September 1996, the
Company replaced its $30 million revolving line of credit with a $70
million credit agreement terminating on September 6, 1999. The agreement,
as amended, consists of a working capital facility and a long-term facility
totaling $30 million and $40 million, respectively. The agreement is
secured by certain of the Company's receivables. The agreement requires
that the Company maintain a certain level of net worth and meet earnings
before interest, taxes, depreciation and amortization targets. The Company
is further prohibited, without the lenders' approval, from making
additional investments above specified limits, incurring certain
indebtedness, guaranteeing certain obligations or disposing of a
significant portion of its assets. The facilities bear variable rates of
interest based on market rates. The Company is in the process of
negotiating a new facility through its existing and new lenders. There can
be no assurance as to the terms and conditions of such new facility.
The working capital facility is a revolving line of credit which must
be paid down annually for a 30-consecutive-day period and is restricted as
to use for general business purposes. The long-term facility is limited in
use to investments in real estate ventures, business acquisitions and
certain capital expenditures, subject to lender approval. Principal
payments on borrowings under the long-term facility are payable annually on
June 15 for amounts outstanding as of March 31 based on a defined
amortization schedule. Principal payments made on June 15 of each year
increase the available balance on the facility from which to borrow. The
Company had no outstanding debt at September 30, 1997.
Prior to the Offering, the Company also had outstanding $37.2 million
in subordinated debt owned to DSA in the form of $6.2 million in Class A
Notes and $31 million in Class B Notes (the "Dai-ichi Notes"), each bearing
interest at 10% payable annually on December 31st. Principal payments on
the Class B Notes were due in ten equal payments of $3.1 million on June
30th of each year beginning in 1999. The Dai-ichi Notes, which were
prepayable without penalty, were repaid from the proceeds of the offering.
Net cash used in financing activities was $2.9 million for the nine
months ended September 30, 1997 compared to net cash provided of $11.6
million for the prior year period. The change is primarily attributable to
the net proceeds from the Offering of $83.1 million of which $63.5 million
was used to repay long-term debt and related interest and $14.5 million was
used to repay short-term indebtedness. Increased cash flow provided by
operations resulted in an additional decrease in borrowing needs, both
long-term and short-term, of $16.5 million. Distributions to partners
increased by $3.0 million in 1997 compared to 1996. Consistent with prior
practice, the Company made distributions to its partners to cover the
partners' estimated tax payment obligations, in accordance with the
Partnership agreements. The increase in distributions is a result of
increased earnings for the period January 1, 1997 through July 21, 1997
over the prior year period.
<PAGE>
Subsequent to September 30, 1997, the Company advanced $17.5 million
to an unconsolidated affiliate as interim bridge financing on a co-
investment opportunity. The loan is anticipated to be repaid in the fourth
quarter. The Company plans to increase its long-term debt periodically in
order to continue to pursue international expansion, strategic acquisitions
and co-investments. The Company believes, based on its current operating
plans, that cash generated from operations and available borrowings,
together with cash currently on hand, will be sufficient to meet its
capital and liquidity requirements for at least the next two years.
DISPOSITION
On December 31, 1996, the Company completed the sale of its
construction management business to a former member of the Company's
management. This business, which specialized in the interior build-out of
office and retail space for tenants in the Chicago and Los Angeles markets,
had 1996 revenue, which is shown net of related expenses on the Company's
combined statements of earnings, of $1.3 million. The business was sold in
exchange for a note of $9.1 million. The note, which is secured by the
current and future assets of the business, is due December 31, 2006. For
financial reporting purposes, the Company has not treated the transaction
as a divestiture. Principal and interest to be received under the note
will be recognized as income as they are received, with a reserve
established, if necessary, for any anticipated financial exposure under the
terms of the asset purchase agreement.
SEASONALITY
Historically, the Company's revenue, operating income and net earnings
in the first three calendar quarters are substantially lower than in the
fourth quarter. This seasonality is due to a calendar year-end focus on
the completion of transactions, which is consistent with the real estate
industry generally. In addition, an increasing percentage of the Company's
management contracts contain clauses providing for fees to be received if
the Company achieves certain performance targets. Such incentive payments
are generally earned in the fourth quarter or when an asset is sold. In
contrast, the Company's non-variable operating expenses, which are treated
as expenses when incurred during the year, are relatively constant on a
quarterly basis. Therefore, the Company typically sustains a loss in the
first quarter of each calendar year, reports a small profit or loss in the
second and third quarters and records a substantial majority of the
Company's earnings in the fourth calendar quarter. Results for the nine
months ended September 30, 1997 were unusually strong compared to the prior
year period as a result of performance fees recognized by the Investment
Management segment in the second quarter on the disposition of certain
assets under management as well as a higher level of transactions completed
by the tenant representation and investment banking units as compared to
the prior year.
INFLATION
The Company's operations are directly affected by various national and
local economic conditions, including interest rates, the availability of
credit to finance real estate transactions and the impact of tax laws. To
date, the Company does not believe that general inflation has had a
material impact on its operations, as revenue, commissions and other
variable costs related to revenue are primarily impacted by real estate
supply and demand rather than general inflation.
OTHER MATTERS
The Company has evaluated the effects of the recent accounting
pronouncement, SFAS No. 128 "Earnings Per Share" which will be effective
for fiscal years ending after December 15, 1997. Based on this evaluation,
the pro forma effects are not material to the Company's presentation of
consolidated financial position, liquidity or results of operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Immediately prior to the closing of the Offering, each of the general
and limited partners of LaSalle Partners Limited Partnership and LaSalle
Partners Management Limited Partnership contributed all of their respective
general and limited partnership interests in such partnerships to the
Company in exchange for an aggregate of 12,200,000 shares of Common Stock.
The issuances of Common Stock constituted a "transaction by any issuer not
involving any public offering" and thus was exempt from the registration
requirements of the Securities Act of 1933 (the "Act") under Section 4(2)
thereof.
On July 16, 1997, the Registrant's Registration Statement on Form S-1
(333-25741) relating to 4,600,000 shares of the Registrant's common stock,
$.01 par value per share ("Common Stock"), including 600,000 shares of
Common Stock subject to an over-allotment option granted to the
underwriters by a shareholder of the Registrant, was declared effective by
the Securities and Exchange Commission. The offering of 4,600,000 shares
of Common Stock at $23.00 per share (including the 600,000 shares subject
to the over-allotment option granted by a shareholder of the Registrant)
was completed on July 22, 1997. The gross price of the Common Stock
offered and sold was $92.0 million for the account of the Registrant and
$13.8 million for the account of the selling shareholder. The Registrant
did not receive any proceeds from the sale of the shares subject to the
over-allotment option. The managing underwriters for the offering were
Morgan Stanley & Co. Incorporated, William Blair & Company and Montgomery
Securities. Total underwriting discounts and commissions paid were $6.4
million by the Registrant and $1.0 by the selling shareholder. The
Registrant incurred other costs and expenses in connection with the
offering of approximately $2.5 million. No expense payments were made,
directly or indirectly, to directors or officers of the Registrant or their
associates, persons owning ten percent or more of the Common Stock or
affiliates of the Registrant, except with respect to the registration fee
and related expenses in connection with the sale of the shares subject to
the over-allotment option. The net proceeds of the offering to the
Registrant were $83.1 million. At the closing of the offering, $63.5
million of the net proceeds were used to repay in full the Registrant's
outstanding long-term notes payable, including interest thereon.
Subsequently, the Registrant used $14.5 million to repay amounts
outstanding on its working capital line of credit. In addition,
approximately $5.1 million of the net proceeds were used for direct co-
investment in real estate. Except with respect to the repayment of the
Dai-ichi Notes (the holder of which is the owner of greater than ten
percent of the outstanding Common Stock) described in Part I, Item 2, no
proceeds were paid, directly or indirectly, to directors or officers of the
Registrant, persons owning ten percent or more of the Common Stock or
affiliates of the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Prior to the initial public offering the Registrant was a wholly-owned
subsidiary of LaSalle Partners Limited. Pursuant to a written consent
dated July 15, 1997, the sole shareholder of the Registrant took the
following actions: (i) elected Mr. Darryl Hartley-Leonard and Mr. Thomas C.
Theobald to serve as Class I and Class III Directors, respectively, (ii)
approved the Articles of Amendment and Restatement amending and restating
the Articles of Incorporation of the Corporation, and (iii) approved the
Company's 1997 Stock Award and Incentive Plan, Employee Stock Purchase Plan
and Stock Compensation Plan. The term of office of each of the other
directors (Stuart L. Scott, Robert C. Spoerri, William E. Sullivan, Daniel
W. Cummings, Charles K. Esler, Jr., Lizanne Galbreath, M.G. Rose, Lynne C.
Thurber and Earl E. Webb) continued after such consent.
<PAGE>
ITEM 5. OTHER MATTERS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995:
Certain statements in this filing and elsewhere (such as in other
filings by the Registrant with the Securities and Exchange Commission,
press releases, presentations and communications by the Registrant or its
management and written and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance, achievements, plans and objectives of the Registrant to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed in the Registrant's Registration
Statement (No. 333-25741), under "Risk Factors" and elsewhere, and in other
reports filed by the Registrant with the Securities and Exchange Commission
and include, among other things, the following: (i) the impact of general
economic conditions and the real estate economic climate on the
Registrant's business and results of operations; (ii) the risk that
property management and investment management agreements will be terminated
prior to expiration or not renewed; (iii) the dependence of the
Registrant's revenue from property management and leasing services on the
performance of the properties managed by the Registrant; (iv) the risks
inherent in pursuing a selective acquisition strategy; (v) the
concentration of the Registrant's business in properties in central
business districts; (vi) the risks associated with the co-investment
activities of the Registrant; (vii) the seasonal nature of the Registrant's
revenue, operating income and net earnings; and (viii) the competition
faced by the Registrant in a variety of business disciplines within the
commercial real estate industry. The Registrant expressly disclaims any
obligation or undertaking to update or revise any forward-looking
statements to reflect any change in Registrant expectations or results or
any changes in events.
USE OF PROCEEDS:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) A list of exhibits is set forth in the Exhibit Index which
immediately precedes the exhibits and which is incorporated by reference
herein.
(b) One report on Form 8-K, dated September 16, 1997 and reporting
the election of Mr. John R. Walter as a Class II Director, was filed during
the quarter ended September 30, 1997.
<PAGE>
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.
LASALLE PARTNERS INCORPORATED
Dated: November 12, 1997 BY: /S/ WILLIAM E. SULLIVAN
------------------------------
William E. Sullivan
Executive Vice President and
Chief Financial Officer
(Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 15,917
<SECURITIES> 0
<RECEIVABLES> 64,688
<ALLOWANCES> 2,612
<INVENTORY> 0
<CURRENT-ASSETS> 88,322
<PP&E> 14,687
<DEPRECIATION> 27,716
<TOTAL-ASSETS> 180,735
<CURRENT-LIABILITIES> 49,579
<BONDS> 0
<COMMON> 162
0
0
<OTHER-SE> 130,376
<TOTAL-LIABILITY-AND-EQUITY>180,735
<SALES> 156,262
<TOTAL-REVENUES> 159,682
<CGS> 146,141
<TOTAL-COSTS> 147,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,659
<INTEREST-EXPENSE> 3,859
<INCOME-PRETAX> 8,023
<INCOME-TAX> (1,808)
<INCOME-CONTINUING> 9,831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,831
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
