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 JUNE 30, 1998
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 August 4, 1998
----- --------------
Common Stock ($0.01 par value) 16,230,358
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . 22
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 23
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . 23
Item 5. Other Matters . . . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 24
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
($ in thousands, except share data)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
--------- -----------
ASSETS
- ------
Current assets:
Cash and cash equivalents . . . . . . . . $ 11,684 30,660
Trade receivables, net. . . . . . . . . . 72,516 80,565
Other receivables . . . . . . . . . . . . 7,732 9,395
Prepaid expenses. . . . . . . . . . . . . 1,422 2,055
Deferred tax benefit. . . . . . . . . . . 5,104 5,104
---------- ---------
Total current assets. . . . . . . 98,458 127,779
Property and equipment, at cost,
less accumulated depreciation of
$32,068 and $28,993 in 1998
and 1997, respectively. . . . . . . . . . 19,631 16,098
Intangibles resulting from
business acquisitions, net of
accumulated amortization of $7,896
and $5,698 in 1998 and 1997,
respectively. . . . . . . . . . . . . . . 53,959 50,366
Investments in real estate ventures . . . . 41,578 18,080
Long-term receivables, net. . . . . . . . . 6,826 6,607
Other assets, net . . . . . . . . . . . . . 2,059 957
-------- ----------
$222,511 219,887
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and
accrued liabilities . . . . . . . . . . $ 27,659 25,781
Accrued compensation. . . . . . . . . . . 23,638 40,163
Other liabilities . . . . . . . . . . . . 8,383 6,100
-------- ----------
Total current liabilities . . . . 59,680 72,044
Long-term credit facility . . . . . . . . . 9,776 --
Other long-term liabilities . . . . . . . . 1,088 946
Commitments and contingencies
-------- ----------
Total liabilities . . . . . . . . 70,544 72,990
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED BALANCE SHEETS - CONTINUED
JUNE 30, 1998 AND DECEMBER 31, 1997
($ in thousands, except share data)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1998 1997
---------- -----------
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
16,229,815 shares issued and
outstanding . . . . . . . . . . . . . . 162 162
Additional paid-in capital. . . . . . . . 122,680 121,778
Retained earnings . . . . . . . . . . . . 28,197 24,327
Accumulated other comprehensive
income. . . . . . . . . . . . . . . . . 928 630
-------- ----------
Total stockholders' equity. . . . 151,967 146,897
-------- ----------
$222,511 219,887
======== ==========
See accompanying notes to consolidated and combined financial statements.
<PAGE>
<TABLE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
($ in thousands, except share data)
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1998 1997 1998 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue:
Fee-based services. . . . . . . . . . . . . . . . . $ 72,554 57,251 122,456 87,387
Equity in earnings from
unconsolidated ventures . . . . . . . . . . . . . 1,182 345 1,874 1,739
Other income. . . . . . . . . . . . . . . . . . . . 476 322 947 498
---------- -------- -------- --------
Total revenue . . . . . . . . . . . . . . . . 74,212 57,918 125,277 89,624
Operating expenses:
Compensation and benefits . . . . . . . . . . . . . 41,683 33,016 79,036 56,597
Operating, administrative and other . . . . . . . . 17,347 13,519 33,792 23,142
Depreciation and amortization . . . . . . . . . . . 2,962 2,180 5,578 3,954
---------- -------- -------- --------
Total operating expenses. . . . . . . . . . . 61,992 48,715 118,406 83,693
---------- -------- -------- --------
Operating income. . . . . . . . . . . . . . . 12,220 9,203 6,871 5,931
Interest expense. . . . . . . . . . . . . . . . . . . 335 1,881 579 3,576
---------- -------- -------- --------
Earnings before provision
for income taxes. . . . . . . . . . . . . . 11,885 7,322 6,292 2,355
Net provision for income taxes. . . . . . . . . . . . 4,575 382 2,422 134
---------- -------- -------- --------
Net earnings. . . . . . . . . . . . . . . . . $ 7,310 6,940 3,870 2,221
========== ======== ======== ========
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME - CONTINUED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1998 1997 1998 1997
--------- -------- --------- --------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments. . . . . . $ 3 (82) 298 (565)
---------- -------- ---------- --------
Comprehensive income. . . . . . . . . . . . . . . . . $ 7,313 6,858 4,168 1,656
========== ======== ========== ========
Basic earnings per common share (1) . . . . . . . . . $ 0.45 $0.24
========== ==========
Weighted average shares outstanding . . . . . . . . . 16,200,000 16,200,000
========== ==========
Diluted earnings per common share (1) . . . . . . . . $ 0.45 $ 0.24
========== ==========
Diluted weighted average shares outstanding . . . . . 16,392,626 16,374,883
========== ==========
<FN>
(1) Earnings per share has not been presented for the three and six months ended June 30, 1997 as the
Company's conversion to corporate form did not occur until July 22, 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 JUNE 30, 1998 AND DECEMBER 31, 1997
($ in thousands, except share data)
(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>
Balances at January 1,
1997. . . . . . . . . . . -- -- -- -- $ 23,148 1,099 24,247
Net earnings (through
July 21, 1997). . . . . -- -- -- -- 1,513 -- 1,513
Distributions. . . . . . -- -- -- -- (14,835) -- (14,835)
Acquisition of the
Galbreath Company
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 82,782 -- -- -- 82,822
Other. . . . . . . . . . -- -- -- -- -- (565) (565)
---------- ------ -------- ------ ------- ------ --------
Balances after the
reorganization and
initial Offering. . . . .16,200,000 162 121,778 -- -- 534 122,474
Net earnings (July 22,
1997 through
December 31, 1997) . . -- -- -- 24,327 -- -- 24,327
Other. . . . . . . . . . -- -- -- -- -- 96 96
---------- ------ -------- ------ ------- ------ --------
Balances at December 31,
1997. . . . . . . . . . .16,200,000 162 121,778 24,327 -- 630 146,897
Net earnings . . . . . . -- -- -- 3,870 -- -- 3,870
Shares issued under
stock purchase plan. . 29,815 -- 902 -- -- -- 902
Other. . . . . . . . . . -- -- -- -- -- 298 298
---------- ------ -------- ------ ------- ------ --------
Balances at June 30,
1998. . . . . . . . . . .16,229,815 $ 162 122,680 28,197 -- 928 151,967
========== ====== ======== ====== ======= ====== ========
<FN>
See accompanying notes to consolidated and combined financial statements.
</TABLE>
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
($ in thousands)
(UNAUDITED)
1998 1997
-------- --------
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . $ 3,870 2,221
Reconciliation of net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . 5,578 3,954
Equity in earnings from unconsolidated
ventures. . . . . . . . . . . . . . . . . . (1,874) (1,739)
Provision for loss on receivables and
other assets. . . . . . . . . . . . . . . . 2,103 1,497
Operating distributions from real
estate ventures . . . . . . . . . . . . . . 1,744 1,569
Foreign exchange loss . . . . . . . . . . . . 106 --
Gain on disposition of property
and equipment . . . . . . . . . . . . . . . (79) (14)
Changes in:
Receivables . . . . . . . . . . . . . . . . . 3,333 39,744
Prepaid expenses and other assets . . . . . . 461 (934)
Accounts payable, accrued liabilities and
accrued compensation. . . . . . . . . . . . (11,381) (36,311)
-------- --------
Net cash provided by
operating activities. . . . . . . . . . 3,861 9,987
Cash flows provided by (used in) investing
activities:
Net capital additions - property and
equipment . . . . . . . . . . . . . . . . . . (6,667) (2,004)
Acquisition of business-Satulah Group, Inc. . . (5,465) --
Proceeds from disposition of property
and equipment . . . . . . . . . . . . . . . . 170 33
Cash balances assumed in Galbreath
acquisition . . . . . . . . . . . . . . . . . -- 3,209
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures. . . . . . . . . . . . (21,286) (2,305)
Distributions, repayments of advances
and sale of investments . . . . . . . . . . 619 2,777
-------- --------
Net cash provided by (used in)
investing activities. . . . . . . . . . (32,629) 1,710
Cash flows provided by (used in) financing
activities:
Net borrowings under credit facility. . . . . . 9,776 6,301
Distributions to partners . . . . . . . . . . . -- (12,336)
-------- --------
Net cash provided by (used in)
financing activities. . . . . . . . . . 9,776 (6,035)
Effects of foreign currency translation
on cash balances. . . . . . . . . . . . . . . . 16 6
-------- --------
Net increase (decrease) in cash
and cash equivalents. . . . . . . . . . . . . . (18,976) 5,668
Cash and cash equivalents, January 1. . . . . . . 30,660 7,207
-------- --------
Cash and cash equivalents, June 30. . . . . . . . $ 11,684 12,875
======== ========
<PAGE>
LA SALLE PARTNERS INCORPORATED
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
Supplemental disclosure of cash flow information:
Combined interest paid was $530 and $1,325 for the periods ended June 30,
1998 and 1997, respectively.
See accompanying notes to consolidated and combined financial statements.
<PAGE>
LA SALLE PARTNERS INCORPORATED
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
($ in thousands, except share data)
(UNAUDITED)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1997, which are
included in the Company's 1997 Form 10-K, filed with the Securities and
Exchange Commission, as certain footnote disclosures which would substan-
tially duplicate those contained in such audited financial statements have
been omitted from this report.
(1) ORGANIZATION
LaSalle Partners Incorporated [successor to LaSalle Partners Limited
Partnership and LaSalle Partners Management Limited Partnership
(collectively, the "Predecessor Partnerships"] was incorporated in Maryland
on April 15, 1997, (collectively referred to as the "Company"). On
July 22, 1997, the Company completed an initial public offering (the
"Offering") of 4,000,000 shares of LaSalle Partners Incorporated common
stock, $.01 par value 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 $82,822, 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.
(2) INTERIM INFORMATION
The consolidated and combined financial statements as of June 30,
1998 and for the three and six month periods ended June 30, 1998 and 1997
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 periods
ended June 30, 1998 and 1997 are not necessarily indicative of the results
to be obtained for the full fiscal year.
(3) 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.
<PAGE>
FOOTNOTE 3 - CONTINUED
For the period prior to the incorporation of the Predecessor
Partnerships, the accompanying Consolidated and Combined Statements of
Earnings and Comprehensive Income 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.
(4) EARNINGS PER SHARE
Basic earnings per share was based on weighted average shares
outstanding of 16,200,000 for both the three and six month periods ended
June 30, 1998. Diluted earnings per share was based on weighted average
shares outstanding of 16,392,626 and 16,374,883 for the three and six month
periods ended June 30, 1998, respectively, which reflects an increase of
192,626 and 174,883 shares representing the dilutive effect of outstanding
stock options whose exercise price was less than the average market price
of the Company's stock for the period.
(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 and facility management and
leasing for property owners; (ii) development management for both investors
and real estate users seeking to develop new buildings or renovate existing
facilities; and (iii) project management of tenant improvements in both
owner-occupied and leased space. 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 acquisition services for owners and users of land.
The Investment Management segment provides real estate investment
management services to institutional investors, corporations and high net
worth individuals.
Total revenue by industry 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 segments.
Summarized unaudited financial information by business segment for
the three and six month periods ended June 30, 1998 and 1997 is as follows:
<PAGE>
<TABLE>
<CAPTION>
SEGMENT OPERATING RESULTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1998 1997 1998 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Management Services:
Revenue:
Property and facility management fees . . . . . . $ 11,061 10,510 21,352 17,653
Leasing fees. . . . . . . . . . . . . . . . . . . 9,126 4,826 10,939 5,999
Development management. . . . . . . . . . . . . . 1,977 1,633 4,195 2,744
Project management. . . . . . . . . . . . . . . . 4,144 1,788 8,000 3,096
Intersegment revenue. . . . . . . . . . . . . . . 135 25 206 50
Other income. . . . . . . . . . . . . . . . . . . 162 82 352 129
--------- ------- ------- -------
26,605 18,864 45,044 29,671
Operating expenses:
Compensation, operating and administrative
expenses . . . . . . . . . . . . . . . . . . . . 25,456 18,970 51,373 31,512
Depreciation and amortization . . . . . . . . . . 1,191 929 2,617 1,441
--------- ------- ------- -------
Operating loss. . . . . . . . . . . . . . . . . $ (42) (1,035) (8,946) (3,282)
========= ======= ======= =======
Corporate and Financial Services:
Revenue:
Tenant representation . . . . . . . . . . . . . . $ 6,713 7,508 10,181 10,484
Investment banking. . . . . . . . . . . . . . . . 9,526 5,300 14,554 5,912
Land fees . . . . . . . . . . . . . . . . . . . . 2,067 1,091 2,608 1,792
Construction operations . . . . . . . . . . . . . 307 205 557 410
Equity in earnings from unconsolidated ventures . (1) 182 (6) 182
Intersegment revenue. . . . . . . . . . . . . . . 100 392 100 392
Other income. . . . . . . . . . . . . . . . . . . 82 53 158 86
--------- ------- ------- -------
18,794 14,731 28,152 19,258
Operating expenses:
Compensation, operating and administrative
expenses . . . . . . . . . . . . . . . . . . . . 15,081 9,745 27,069 17,741
Depreciation and amortization . . . . . . . . . . 320 329 610 547
--------- ------- ------- -------
Operating income. . . . . . . . . . . . . . . . $ 3,393 4,657 473 970
========= ======= ======= =======
<PAGE>
SEGMENT OPERATING RESULTS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
1998 1997 1998 1997
--------- -------- --------- --------
Investment Management:
Revenue:
Advisory fees . . . . . . . . . . . . . . . . . . $ 25,907 24,231 47,392 38,633
Acquisition fees. . . . . . . . . . . . . . . . . 1,727 159 2,679 664
Equity in earnings from unconsolidated ventures . 1,183 163 1,880 1,557
Other income. . . . . . . . . . . . . . . . . . . 231 187 436 283
--------- ------- ------- -------
29,048 24,740 52,387 41,137
Operating expenses:
Compensation, operating and administrative expenses 18,728 18,237 34,692 30,928
Depreciation and amortization . . . . . . . . . . . 1,451 922 2,351 1,966
--------- ------- ------- -------
Operating income. . . . . . . . . . . . . . . . $ 8,869 5,581 15,344 8,243
========= ======= ======= =======
Total segment revenue . . . . . . . . . . . . . . . . $ 74,447 58,335 125,583 90,066
Intersegment revenue eliminations . . . . . . . . . . (235) (417) (306) (442)
--------- ------- ------- -------
Total revenue . . . . . . . . . . . . . . . . . $ 74,212 57,918 125,277 89,624
========= ======= ======= =======
Total segment operating expenses. . . . . . . . . . . $ 62,227 49,132 118,712 84,135
Intersegment operating expense eliminations . . . . . (235) (417) (306) (442)
--------- ------- ------- -------
Total operating expenses. . . . . . . . . . . . $ 61,992 48,715 118,406 83,693
========= ======= ======= =======
Total operating income. . . . . . . . . . . . . $ 12,220 9,203 6,871 5,931
========= ======= ======= =======
</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,
as adjusted for the Tenant Representation and Investment Banking units
which were not acquired, the provision for income taxes as though the
Company and Galbreath were taxable entities at an effective tax rate of
38.5%, the conversion of the Company to corporate form 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 six month periods ended June 30, 1997 had the
Company completed the acquisition of the Galbreath common stock and
consummated its conversion to corporate form and the Offering transactions
as of the dates indicated nor does it purport to represent the future
financial position or results of operations of the Company. The three and
six month periods ended June 30, 1998 represent the Company's actual
results of operations.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ ------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
1998 1997 1998 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue:
Fee-based services. . . . . . . . . . . . . . . . . $ 72,554 58,729 122,456 95,238
Equity in earnings from unconsolidated ventures . . 1,182 345 1,874 1,812
Other income. . . . . . . . . . . . . . . . . . . . 476 443 947 785
---------- ---------- ---------- ----------
Total revenue . . . . . . . . . . . . . . . . . . 74,212 59,517 125,277 97,835
Operating expenses:
Compensation and benefits . . . . . . . . . . . . . 41,683 34,285 79,036 61,681
Operating, administrative and other . . . . . . . . 17,347 14,360 33,792 25,881
Depreciation and amortization . . . . . . . . . . . 2,962 2,331 5,578 4,617
---------- ---------- ---------- ----------
Total operating expenses. . . . . . . . . . . . . 61,992 50,976 118,406 92,179
---------- ---------- ---------- ----------
Operating income. . . . . . . . . . . . . . . . . 12,220 8,541 6,871 5,656
Interest expense. . . . . . . . . . . . . . . . . . . 335 464 579 729
---------- ---------- ---------- ----------
Earnings before provision for income taxes. . . . 11,885 8,077 6,292 4,927
Net provision for income taxes. . . . . . . . . . . . 4,575 3,109 2,422 1,896
---------- ---------- ---------- ----------
Net income. . . . . . . . . . . . . . . . . . . . $ 7,310 4,968 3,870 3,031
========== ========== ========== ==========
Basic earnings per common share . . . . . . . . . . . $ 0.45 0.31 0.24 0.19
========== ========== ========== ==========
Weighted average shares outstanding . . . . . . . . . 16,200,000 16,200,000 16,200,000 16,200,000
========== ========== ========== ==========
Diluted earnings per common share . . . . . . . . . . $ 0.45 0.30 0.24 0.19
========== ========== ========== ==========
Diluted weighted average shares outstanding . . . . . 16,392,626 16,328,999 16,374,883 16,328,999
========== ========== ========== ==========
</TABLE>
<PAGE>
FOOTNOTE 6 - CONTINUED
Pro forma total revenue and operating expenses for Galbreath include
activities such as property management and leasing, facility management and
development management. Additional adjustments to operating expenses were
made for estimated incremental general and administrative costs associated
with operations as a public company totaling $188 and $376 for the three
and six month periods ended June 30, 1997, respectively. As a result of
the repayment of the Company's long-term notes payable out of the proceeds
of the Offering, the related actual interest expense totaling $1,417 and
$2,847 for the three and six month periods ended June 30, 1997,
respectively, has been eliminated in the pro forma results. The pro forma
results further include an additional provision for income taxes totaling
$2,727 and $1,762 for the three and six month periods ended June 30, 1997,
respectively, giving effect to the conversion of the Company and Galbreath
to taxable entities.
(7) DEBT
CREDIT FACILITY
In November 1997, the Company replaced its $70 million credit
agreement, which consisted of a short-term revolving line of credit and a
long-term facility, with a $150 million, five year unsecured revolving
credit facility. The facility is guaranteed by certain of the Company's
subsidiaries and is available for working capital, co-investment and
acquisitions. The Company must maintain a certain level of consolidated
net worth and ratio of funded debt to earnings before interest expense,
income taxes, depreciation and amortization expense, and must meet a
minimum fixed charge coverage ratio. The Company is restricted from
incurring certain levels of indebtedness to lenders outside of the
facility, disposing of a significant portion of its assets, and is subject
to lender approval on certain levels of co-investment. The facility bears
variable rates of interest based on market rates and requires the Company
to pay a commitment fee of .15% per annum on the unused portion of the
commitment. The Company's effective interest rate was 6.09% and 6.67% for
the six months ended June 30, 1998 and 1997, respectively. The Company had
$9,776 of outstanding debt on the facility at June 30, 1998 compared with
no outstanding debt at December 31, 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
LaSalle Partners Incorporated is a leading full-service real estate
firm that provides management services, corporate and financial services
and investment management services to corporations and other real estate
owners and investors worldwide. The Company has grown by expanding both
its client base and its range of services and products in anticipation of
client needs. The Company completed its initial public offering
("Offering") on July 22, 1997, raising net proceeds of $82.8 million which
were used primarily to repay the Company's long-term debt and related
interest of $63.5 million. A substantial block of the Company's stock,
approximately 43.0%, is owned by employees, of which approximately 20.0% is
owned by senior management.
The Company continues to pursue a growth strategy that 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 developing
new client relationships, broadening its international presence and
selectively pursuing strategic acquisitions and co-investment
opportunities.
The Company has completed the following four strategic acquisitions
since late 1994: Alex. Brown Kleinwort Benson Realty Advisors Corporation,
a real estate investment advisor, in November 1994; CIN Property
Management, a London-based investment advisor, in October 1996; The
Galbreath Company, a property and development management company, in April
1997; and the project management business of Satulah Group Inc., a project
management/facilities conversion company, in January 1998.
The Company intends to continue to increase its co-investment with its
investment management clients. This strategy should serve to grow the
assets under management, generate returns on investment and create
potential opportunities to provide services related to the acquisition,
financing, property management, leasing and disposition of such
investments. As of June 30, 1998, the Company had a total investment of
$41.6 million in 37 separate property or fund co-investments with
additional capital commitments of $7.1 million for future fundings of co-
investments.
Included in the investments noted above, is an $18.8 million
investment in LaSalle Hotel Properties (LHO), a real estate investment
trust, which completed its initial public offering in April 1998. LHO was
formed to own hotel properties and to continue and expand the hotel
investment activities of the Company by investing particularly in upscale
and luxury full service hotels located primarily in major business and
urban, resort and convention markets. The Company provides advisory,
acquisition and administrative services to LHO for which it receives a base
advisory fee calculated as a percentage of net operating income, as well as
performance fees based on growth in funds from operations on a per share
basis. Such performance fees, if any, will be paid in the form of LHO
common stock or units, at the option of the Company. LHO was formed with
10 hotels, nine of which the Company had a nominal co-investment in and
acted as the investment advisor for. In accordance with the individual
investment advisory agreements, the Company earned and received performance
fees totaling $15.2 million on the disposition of certain of the assets
which were shared between the Company's Investment Management and
Investment Banking units. The Company contributed its ownership interests
in the hotels as well as the related performance fees to LHO for an
effective ownership interest of 6.0%.
<PAGE>
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE AND
SIX MONTHS ENDED JUNE 30, 1997
REVENUE
The Company's total revenue, after elimination of intersegment
revenue, grew $16.3 million, or 28.1%, to $74.2 million for the three
months ended June 30, 1998 and grew $35.7 million, or 39.8%, to $125.3
million for the six months ended June 30, 1998 from the prior year periods.
Increased revenues were driven in part, by the acquisition of Galbreath and
Satulah, the completion of the LHO initial public offering and also by four
additional factors: the strong U.S. economy; increased inflow of capital to
the real estate market; an ongoing trend toward consolidation in many
financial services businesses; and the Company's ability to cross-market
real estate services to its clients. The strong economy has led to job
growth, which has fueled increased demand for real estate of all types.
This increased demand has produced rising rental rates and higher
investment returns for owners, thereby attracting investment capital to the
market. The inflow of capital has led to a high level of transaction
activity, including disposition, acquisition, and financing of real estate.
The consolidation among the financial service industries has encouraged
demand for national real estate and strategic planning services, including
lease negotiation, space planning, move management, and tenant
construction. The result has been increased activity in all of the
Company's major businesses. The Company's ability to cross-market all of
these services to its clients has augmented the increased revenue generated
by favorable market conditions.
These increases have been partially offset by a decline in property
management, disposition, leasing and investment management fees from four
multiple investor funds ("Commingled Funds") formed by the Company in the
1980s. The decline is a result of the current and continuing disposition of
the funds' assets, in accordance with the strategic plan. These asset
dispositions are expected to be completed by the end of 1998. Revenue
generated from these funds compared with total revenue was approximately 1%
for the three and six months ended June 30, 1998 and approximately 6% for
the prior year periods.
Revenue for the Company's Management Services segment, which
represented 36.0% of the Company's total revenue for the three and six
months ended June 30, 1998, increased $7.7 million, or 41.0%, to $26.6
million for the three months ended June 30, 1998 and increased $15.4
million, or 51.8%, to $45.0 million for the six months ended June 30, 1998
from the prior year periods. Increases in revenue were primarily a result
of higher volumes of leasing activity and the acquisition of Galbreath and
Satulah and, to a lesser extent, to both an increase in strategic alliance
clients formed by the Project Management business and a higher level of
development projects being managed by the Development Management business.
These increases were partially offset by a decline in revenue related to
the sale of the Commingled Fund properties discussed previously.
The Company's Corporate and Financial Services segment revenue, which
represented 25% and 22%, respectively, of the Company's total revenue for
the three and six months ended June 30, 1998, increased $4.1 million, or
27.6%, to $18.8 million for the three months ended June 30, 1998 and
increased $8.9 million, or 46.2%, to $28.2 million for the six months ended
June 30, 1998 over the prior year periods. The increase in revenue for the
three months ended June 30, 1998 was primarily attributable to performance
fees generated on the disposition of hotel properties previously discussed
and, to a lesser extent, to a higher volume of transactions completed by
the land unit. In addition to the disposition related fees, June year-to-
date revenue growth is a result of increased transaction volume experienced
by the Company's Investment Banking and Land units. These increases were
partially offset by a decline in revenue related to the sale of the
Commingled Fund properties discussed previously.
<PAGE>
The Company's Investment Management segment revenue, which represented
39% and 42%, respectively, of the Company's total revenue for the three
and six months ended June 30, 1998, increased $4.3 million, or 17.4%, to
$29.0 million for the three months ended June 30, 1998 and increased $11.3
million, or 27.3%, to $52.4 million for the six months ended June 30, 1998
from the prior year periods. The gain in revenue was primarily attributable
to performance fees generated on the disposition of certain assets under
management including the hotels discussed previously, and, to a lesser
extent, to acquisition fees generated on international fund activity and
the continued volume of activity performed by the securities unit. These
increases were partially offset by a decline in revenue from four of the
Company's Commingled Funds discussed previously. During the third quarter
of 1998, the Company will be transitioning approximately $1 billion in
office assets under management out of its portfolio as a result of a change
in investment advisors by one of its clients. Revenue on this portfolio
represented 4% of the segment's revenue for the six months ended June 30,
1998.
OPERATING EXPENSE
The Company's operating expenses, after elimination of intersegment
expense, increased $13.3 million, or 27.3%, to $62.0 million for the three
months ended June 30, 1998 and increased $34.7 million, or 41.5%, to $118.4
million for the six months ended June 30, 1998 from the prior year periods.
Operating expenses represented 83% and 95% of total revenue, respectively,
for the three and six month periods ended June 30, 1998 which is consistent
with the prior year periods. Operating expense levels reflect the accrual
for incentive compensation as a result of increased operating profits from
the prior year, additional infrastructure costs related to public reporting
and technology enhancements and the impact of goodwill amortization
associated with the recent acquisitions. All three of the Company's
segments experienced higher levels of compensation and benefits associated
with increased staffing and higher incentive compensation associated with
the Company's increased operating income as well as increased levels of
marketing and travel costs associated with new business initiatives.
Operating expenses for the Company's Management Services segment
increased $6.7 million to $26.6 million and increased $21.0 million to
$54.0 million for the three and six months ended June 30, 1998 over the
prior year periods. These increases were primarily a result of the effects
of the Galbreath and Satulah acquisitions, including personnel costs and
amortization of intangibles resulting from the acquisitions, higher
compensation and benefit costs associated with increased staffing to
support new business initiatives and incremental corporate infrastructure
costs as a result of higher staffing levels and technology enhancements.
Operating expenses for the Corporate and Financial Services segment
increased $5.3 million, or 52.9%, to $15.4 million and increased $9.4
million, or 51.4%, to $27.7 million for the three and six months ended
June 30, 1998 over the prior year periods. The increases were principally a
result of increased incentive compensation earned by the Investment Banking
unit, consistent with the increased level of operating profits generated,
in addition to higher employment levels for both the Investment Banking and
Tenant Representation units as a result of an increased demand for
services. To a lesser extent, costs associated with new international
offices in Toronto, New Delhi and Shanghai opened subsequent to the second
quarter of 1997 were incurred, in addition to corporate infrastructure
costs related to higher staffing levels and technology enhancements.
Operating expenses for the Investment Management segment increased
$1.0 million, or 5.3%, to $20.2 million and increased $4.1 million, or
12.6%, to $37.0 million for the three and six months ended June 30, 1998
over the prior year periods. The increases for the six months ended
June 30, 1998 were substantially a result of increased incentive
compensation, consistent with the increased level of operating profits
generated to date.
<PAGE>
OPERATING INCOME
As a result of the factors noted above, the Company's operating income
increased $3.0 million to $12.2 million and increased $.9 million to $6.9
million for the three and six months ended June 30, 1998 over the prior
year periods. As a percentage of total revenue, the Company's operating
income remained relatively constant at 17% and 6% for the three and six
months ended June 30, 1998 compared to the prior year periods.
INTEREST EXPENSE
Interest expense decreased $1.5 million to $.3 million and decreased
$3.0 million to $.6 million for the three and six months ended June 30,
1998 from the prior year periods, principally as a result of the repayment
of the Company's long-term debt from the net proceeds of the Offering and
the substantially lower borrowings on the Company's credit facility during
1998 as a result of capital raised from the Offering.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $4.2 million to $4.6 million
and increased $2.3 million to $2.4 million for the three and six months
ended June 30, 1998 from the prior year periods as a result of the
Company's conversion from partnership to corporate form in July 1997 and
the resulting provision for income taxes at an effective tax rate of 38.5%.
NET EARNINGS
The Company's net earnings increased $.4 million to $7.3 million and
increased $1.6 million to $3.9 million for the three and six months ended
June 30, 1998 from the prior year periods.
PRO FORMA RESULTS
Pro forma results for the three and six months ended June 30, 1997
give effect to (i) the acquisition of Galbreath, as adjusted for the Tenant
Representation and Investment Banking units which were not acquired, as if
the acquisition occurred on January 1, 1997; (ii) the provision for income
taxes as though the Company and Galbreath were both taxable entities as of
January 1, 1997 at an effective tax rate of 38.5%; and (iii) estimated
incremental general and administrative costs associated with operations as
a public company and the repayment of the Company's long-term notes payable
out of the proceeds of the Offering as if the Offering occurred on
January 1, 1997.
The Company's revenue for the three and six months ended June 30, 1998
of $74.2 million and $125.3 million, respectively, compares to $59.5
million and $97.8 million for the prior year periods on a pro forma basis,
reflecting increases of $14.7 million, or 24.7%, and $27.4 million, or
28.0%, respectively. The Company's operating expenses for the three and
six months ended June 30, 1998 were 83.5% and 94.5% of revenue,
respectively, compared to 85.6% and 94.2%, respectively, for the prior year
periods on a pro forma basis. As a result of the factors previously
discussed, the Company's net income increased $2.3 million to $7.3 million
and increased $.8 million to $3.9 million for the three and six months
ended June 30, 1998 from the prior year periods on a pro forma basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its cash requirements primarily from operating
activities. No one client accounts for more than 10% of the Company's
total revenue. During the six months ended June 30, 1998, cash flows
provided by operating activities totaled $3.9 million, a decrease of $6.1
million over the prior year period. The decrease in operating cash flows
is primarily attributable to stronger earnings in the second and third
quarters of 1997 which resulted in cash collections being made during 1997.
Comparatively, 1996 results were heavily fourth quarter driven, consistent
<PAGE>
with the Company's historical patterns, resulting in a substantial amount
of cash collections during the first quarter of 1997. In addition,
stronger 1997 annual earnings, as compared to 1996, resulted in higher
incentive compensation which is paid each January of the following year.
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 represented by
non-controlling general partner and limited partner interests. In addition
to its share of investment returns, the Company typically earns investment
management fees, and in some cases, property management and leasing fees on
these investments. 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 to control the
timing of the disposition of such investments.
Net cash used in investing activities was $32.6 million for the six
months ended June 30, 1998 compared with cash provided by investing
activities of $1.7 million for the prior year period. The increased usage
of $34.3 million is primarily attributable to a higher level of co-
investment during 1998, including an $18.8 million investment in LHO (net
additional co-investment of $15.2 million) in April 1998. In addition, the
Company acquired the project management business of the Satulah Group Inc.
in January 1998 for $5.5 million in cash. Finally, the Company experienced
increased capital expenditures of $4.7 million primarily as a result of the
continued customization and implementation of a new property accounting and
information system by its Management Services segment and a new corporate
accounting system in addition to the on-going replacement of personal
computers. The Company anticipates that future capital expenditures will
continue to exceed prior year levels as a result of technology enhancements
that are currently in progress.
Historically, the Company has financed its operations, acquisitions
and co-investments with internally generated funds, ownership equity and
borrowings under revolving credit facilities. In November 1997, the Company
replaced its $70 million credit agreement, which consisted of a short-term
revolving line of credit and a long-term facility, with a $150 million,
five-year unsecured revolving credit facility. The facility is guaranteed
by certain of the Company's subsidiaries and is available for working
capital, co-investment, and acquisitions. The Company must maintain a
certain level of consolidated net worth and ratio of funded debt to EBITDA,
and must meet a minimum fixed charge coverage ratio. The Company is
restricted from incurring certain levels of indebtedness to lenders outside
of the facility and disposing of a significant portion of its assets, and
is subject to lender approval on certain levels of co-investment. The
facility bears variable rates of interest based on market rates. The
Company's effective interest rate was 6.09% and 6.67% for the six months
ended June 30, 1998 and 1997, respectively.
Net cash provided by financing activities was $9.8 million for the six
months ended June 30, 1998 compared with net cash used of $6.0 million in
the prior year period. The increase in financing cash flows is primarily a
result of the Company's conversion to corporate form and the elimination of
distributions which were historically made to its partners in accordance
with partnership agreements, and to a lesser extent due to increased
borrowings on the Company's credit facility to fund increased co-investment
activity and capital expenditures as previously discussed. The Company
believes, based on current operating plans, that cash generated from
operations and available borrowings will be sufficient to meet its capital
and liquidity requirements for the foreseeable future. To the extent that
the Company makes any significant acquisitions, the Company may be required
to increase its available borrowings, and incur additional indebtedness,
which could be substantial.
<PAGE>
SEASONALITY
Historically, the Company's revenue, operating profits 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 contrast, the Company's Investment Management
segment earns performance fees on client's returns on their real estate
investments. Such performance fees are generally earned when the asset is
disposed of, the timing of which the Company does not have complete
discretion over. 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, typically 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, barring the
recognition of investment generated performance fees.
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
ACCOUNTING MATTERS
In an attempt to align its operating results with those presented by
similar companies within the industry, certain amounts have been
reclassified in the Company's 1997 revenue and operating expenses to
reflect direct personnel cost reimbursements received on property or
specific client assignments on a net, rather than a gross, basis. There
was no effect on operating profits or net earnings as historically
reported.
Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" becomes effective for
fiscal years beginning after December 15, 1997 and is not expected to have
a material impact on the Company's financial statements.
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" becomes effective for all
fiscal quarters for fiscal years beginning after June 15, 1999 and is not
expected to have a material impact on the Company's financial statements.
YEAR 2000 ISSUES
The Company conducts its business primarily with commercial software
purchased from third-party vendors. After an analysis of the Company's
exposure to the impact of the year 2000 issues, the Company has determined
that such commercial software is expected to be substantially year 2000
compliant and that completion of the year 2000 compliance is not expected
to have a material impact on its business, operations, or financial
condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in various litigation matters arising in
the ordinary course of business, some of which involve claims for damages
that are substantial in amount. Most of these matters are covered by
insurance. In the opinion of the Company, the ultimate resolution of such
litigation matters will not have a material adverse effect on the financial
position, results of operations and liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on May 21, 1998, the
following business was conducted:
A. Stockholders elected the following persons to office as Class
I and Class II Directors (as indicated):
Robert C. Spoerri (Class I):
Votes for: 13,469,985
Votes withheld: 47,550
Daniel W. Cummings (Class I):
Votes for: 13,469,585
Votes withheld: 47,950
Charles K. Esler, Jr. (Class I):
Votes for: 13,469,985
Votes withheld: 47,550
Darryl Hartley-Leonard (Class I):
Votes for: 13,469,985
Votes withheld: 47,550
John R. Walter (Class II):
Votes for: 13,469,985
Votes withheld: 47,550
B. Stockholders ratified the appointment of KPMG Peat Marwick
LLP as the Company's independent auditors for the year ended December 31,
1998 as follows:
Votes for: 13,513,535
Votes against: 1,150
Votes abstained: 2,850
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 reports,
other filings with the Securities and Exchange Commission, press releases,
presentations and communications by the Company 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 Company 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 Company's Registration
Statement (No. 333-25741), under "Risk Factors" and elsewhere, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
<PAGE>
in Item 1. "Business", Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere, and in other
reports filed by the Company with the Securities and Exchange Commission.
These factors include, among other things, the following: (i) the impact
of general economic conditions and the real estate economic climate on the
Company'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 Company's revenue
from property management and leasing services on the performance of the
properties managed by the Company; (iv) the risks inherent in pursuing a
selective acquisition strategy; (v) the concentration of the Company's
business in properties in central business districts; (vi) the risks
associated with the co-investment activities of the Company; (vii) the
seasonal nature of the Company's revenue, operating income and net
earnings; and (viii) the competition faced by the Company in a variety of
business disciplines within the commercial real estate industry. The
Company expressly disclaims any obligation or undertaking to update or
revise any forward-looking statements to reflect any changes in events or
circumstances or in the Company's expectations or results.
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) No reports on Form 8-K were filed during the quarter ended
June 30, 1998.
<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: August 4, 1998 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
- ------- -----------
10.1 Amendment to the LaSalle Partners Incor-
porated 1997 Stock Award and Incentive Plan.
10.2 First Amendment to the LaSalle Partners
Incorporated Employee Stock Purchase Plan.
27.1 Financial Data Schedule.
EXHIBIT 10.1
- ------------
AMENDMENT TO THE
LASALLE PARTNERS INCORPORATED
1997 STOCK AWARD AND INCENTIVE PLAN
WHEREAS, LaSalle Partners Incorporated (the "Company") maintains the
1997 Stock Award and Incentive Plan (the "Plan") for the benefit of
directors (including non-employee directors), selected employees and
independent contractors of the Company (the "Participants"); and
WHEREAS, the Company has determined that amending the Plan in certain
respects is in the best interest of the Participants; and
WHEREAS, Section 10(e) of the Plan provides that the Board of
Directors of the Company (the "Board") may at any time and from time-to-
time alter, amend, suspend or terminate the Plan in whole or in part, and
the Board has adopted a resolution approving such an amendment to the Plan;
NOW THEREFORE, the Plan has been amended effective December 11, 1997
as follows:
1. Section 9(b) of the Plan has been amended in its entirety to
read as follows:
b. ELECTED OPTIONS. Each Non-employee director may, at any time prior
to the commencement of any calendar year during which he or she will serve
as a member of the Board, irrevocably elect to receive, in lieu of the
annual directors' retainer payable to such non-employee director with
respect to such calendar year, an Option (an "Elected Option") to purchase
shares of Stock. With respect to the annual retainer payable to a New
Director for the first calendar year (beginning with the 1998 calendar
year) of his or her Board service, such an election must be made within
five (5) days of his or her election or appointment to the Board and prior
to the performance of any significant service with respect to such first
year. The number
<PAGE>
of shares of Stock covered by an Elected Option shall be the number
(rounded to the nearest whole number of shares) equal to (i) the annual
retainer divided by (ii) the value, as determined by application of the
Black-Scholes Option Pricing Model (the "Black-Scholes Model"), of a ten
year option with respect to one (1) share of Stock and with an exercise
price equal to the exercise price at which the Elected Option will be
granted. The Black-Scholes Model calculation shall be based upon the
volatility of the Stock over the period (i) beginning on the later of (x)
the date which is ten (10) years before the date of grant of the Elected
Option and (y) July 17, 1997 and (ii) ending on the date of grant of the
Elected Option. The risk fee rate of return for purposes of the Black-
Scholes Model calculation shall be the yield (based on the "ask price")
with respect to "U.S. Treasury Strips" with a maturity which is closest to
the date which is ten (10) years from the date of grant of the Elected
Option, as reported in the Wall Street Journal (or, to the extent that such
yield is not quoted in the Wall Street Journal, such other rate as
determined by the Committee) on the date of grant of the Elected Option
(or, if not published on the date of grant, the last date preceding the
date of grant on which the Wall Street Journal is published). An Elected
Option shall be granted on December 31 of the year in which the annual
retainer to which it relates is earned.
Section 9(c)(ii) of the Plan has been amended and restated in its entirety
to read as follows:
(ii) The exercise price of Automatic Options and Elected Options
shall be equal to the Fair Market Value of the shares of Stock subject to
such Automatic Options and Elected Options on the date of grant.
2. Except as herein modified, all the terms, conditions and
provisions of the LaSalle Partners Incorporated 1997 Stock Award and
Incentive Plan are hereby ratified, confirmed and carried forward.
EXHIBIT 10.2
- ------------
FIRST AMENDMENT TO THE
LASALLE PARTNERS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, LaSalle Partners Incorporated (the "Company") maintains the
Employee Stock Purchase Plan (the "Plan").
WHEREAS, the Company has determined that amending the Plan in certain
respects is in the best interest of the Company.
WHEREAS, PARAGRAPH 17 of the Plan authorizes Board of Directors of
the Company to amend the plan, and the amendments to the Plan set forth
herein do not require stockholder approval under PARAGRAPH 17 in order to
be effective.
NOW THEREFORE, the Plan has been amended effective May 21, 1998 as
follows:
1. The second sentence of PARAGRAPH 2 of the Plan is hereby deleted
and replaced with the following sentence: "Such Shares may, in whole or in
part, be authorized but unissued shares of Common Stock or shares of Common
Stock that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise."
2. The third, fourth and fifth sentences of PARAGRAPH 7 of the Plan
are hereby deleted and replaced with the following sentences:
"If the withdrawal form is received by the Company
during the last two weeks of any Offering Period, the amount credited to
the employee's Payroll Deduction Account shall be applied to the purchase
of stock and the withdrawal shall be effective for the next Offering
Period. If the withdrawal form is received by the Company prior to the
last two weeks of any Offering Period, amounts credited to the Payroll
Deduction Account shall be refunded to the employee as soon as practicable
after the withdrawal. The employee may resume participation in the Plan at
an Enrollment Date which begins after the expiration of two complete six-
month Offering Periods beginning after the date of the withdrawal and
during which the employee does not make any Plan contributions, by filing a
new election in accordance with paragraph 5 at least two weeks prior to the
Enrollment Date."
Capitalized terms used but not defined in this First Amendment shall
have the respective meanings assigned to them in the Plan. Except as
herein modified, all the terms, conditions and provisions of the Plan are
hereby ratified, confirmed and carried forward.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,684
<SECURITIES> 0
<RECEIVABLES> 80,248
<ALLOWANCES> 3,597
<INVENTORY> 0
<CURRENT-ASSETS> 98,458
<PP&E> 19,631
<DEPRECIATION> 32,068
<TOTAL-ASSETS> 222,511
<CURRENT-LIABILITIES> 59,680
<BONDS> 0
<COMMON> 162
0
0
<OTHER-SE> 151,805
<TOTAL-LIABILITY-AND-EQUITY> 222,511
<SALES> 122,456
<TOTAL-REVENUES> 125,277
<CGS> 116,303
<TOTAL-COSTS> 118,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,103
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> 6,292
<INCOME-TAX> 2,422
<INCOME-CONTINUING> 3,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,870
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
