SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 11, 2000
JONES LANG LASALLE INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 001-13145 36-4150422
--------------- ----------------------- --------------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
200 East Randolph Drive, Chicago, IL 60601
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (312) 782-5800
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS.
Financial statements for the years ended December 31, 1998 and
December 31, 1999 and for the quarters ended March 31, 1999 and March 31,
2000 are being filed as part of this report. The financial statements
filed as part of this report are identical to those previously filed by
Jones Lang LaSalle in its Form 10-K for the year ended December 31, 1999
and its Form 10-Q for the quarter ended March 31, 2000, except that the
financial statements filed as part of this report include an additional
footnote providing financial information for Jones Lang LaSalle
Incorporated, Jones Lang LaSalle Finance B.V. (the subsidiary which is the
issuer of euro 165,000,000 of notes (the "Notes") and the borrower under
Jones Lang LaSalle's corporate credit agreement (the "Credit Agreement")),
the subsidiaries which are guarantors with respect to the Notes and the
Credit Facility and the subsidiaries which are not guarantors with respect
to the Notes and the Credit Facility.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
EXHIBITS
The following exhibit is included with this Report:
23. Consent of KPMG LLP
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Jones Lang LaSalle Incorporated -
Consolidated Financial Statements
Report of KPMG LLP, Independent Auditors . . . . . . . . . . 4
Consolidated Balance Sheets as of December 31,
1999 and 1998. . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Earnings For the Years Ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . . 7
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1999, 1998 and 1997 . . . 9
Consolidated Statements of Cash Flows For the
Years Ended December 31, 1999, 1998 and 1997 . . . . . . . 12
Notes to Consolidated Financial Statements . . . . . . . . . 14
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 (Unaudited). . . . . . . . . . . . . . . 44
Consolidated Statements of Earnings and Comprehensive
Income For the Three Months Ended March 31, 2000
and 1999 (Unaudited) . . . . . . . . . . . . . . . . . . . 46
Consolidated Statements of Stockholders' Equity
for the Periods Ended March 31, 2000 and
December 31, 1999 (Unaudited). . . . . . . . . . . . . . . 47
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited) . . 49
Notes to Consolidated Financial Statements . . . . . . . . . 51
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and
Board of Directors of
Jones Lang LaSalle Incorporated:
We have audited the accompanying consolidated balance sheets of Jones
Lang LaSalle Incorporated and subsidiaries and their predecessors as of
December 31, 1999 and 1998 and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Jones Lang LaSalle Incorporated and subsidiaries and their predecessors as
of December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the years in the three-year period ended
December 31, 1999, in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
Chicago, Illinois
February 7, 2000, except as to note 14
which is as of June 22, 2000
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998
($ in thousands, except share data)
1999 1998
---------- ----------
ASSETS
------
Current assets:
Cash and cash equivalents. . . . . . . . . $ 23,308 $ 16,941
Trade receivables, net of allowances
of $9,871 and $3,978 in 1999 and 1998,
respectively . . . . . . . . . . . . . . 270,593 116,965
Notes receivable and advances to
real estate ventures . . . . . . . . . . 4,519 17,042
Other receivables. . . . . . . . . . . . . 7,045 3,385
Income tax refund receivable . . . . . . . 14,500 --
Prepaid expenses . . . . . . . . . . . . . 9,598 2,185
Deferred tax assets. . . . . . . . . . . . 13,673 9,926
Other assets . . . . . . . . . . . . . . . 5,446 --
---------- ----------
Total current assets . . . . . . . . 348,682 166,444
---------- ----------
Property and equipment, at cost,
less accumulated depreciation
of $55,943 and $35,859 in 1999 and
1998, respectively . . . . . . . . . . . . 76,470 28,773
Intangibles resulting from business
acquisitions and JLW merger,
net of accumulated amortization
of $27,515 and $11,961 in 1999
and 1998, respectively . . . . . . . . . . 367,215 229,437
Investments in real estate ventures. . . . . 67,305 52,976
Long-term receivables, net . . . . . . . . . 27,962 10,950
Prepaid pension asset. . . . . . . . . . . . 23,956 --
Deferred tax assets. . . . . . . . . . . . . 5,270 660
Other assets, net. . . . . . . . . . . . . . 7,940 1,681
---------- ----------
$ 924,800 $ 490,921
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS (Continued)
1999 1998
---------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Accounts payable and accrued liabilities . $ 88,257 $ 51,101
Accrued compensation . . . . . . . . . . . 142,960 58,398
Short-term borrowings. . . . . . . . . . . 162,643 --
Other liabilities. . . . . . . . . . . . . 26,259 8,324
---------- ----------
Total current liabilities. . . . . . 420,119 117,823
Long-term liabilities:
Credit facilities. . . . . . . . . . . . . 159,743 202,923
Deferred tax liabilities . . . . . . . . . 7,535 --
Other. . . . . . . . . . . . . . . . . . . 12,878 603
---------- ----------
Total liabilities. . . . . . . . . . 600,275 321,349
Commitments and contingencies
Minority interest in consolidated
subsidiaries . . . . . . . . . . . . . . . 589 --
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,285,472 and 16,264,176 shares
issued and outstanding as of
December 31, 1999 and 1998,
respectively . . . . . . . . . . . . . . 303 163
Additional paid-in capital . . . . . . . . 442,699 123,543
Unallocated ESOT shares. . . . . . . . . . (7) --
Deferred stock compensation. . . . . . . . (70,106) --
Retained earnings (deficit). . . . . . . . (50,050) 44,792
Accumulated other comprehensive income . . 1,097 1,074
---------- ----------
Total stockholders' equity . . . . . 323,936 169,572
---------- ----------
$ 924,800 $ 490,921
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands, except share data)
1999 1998 1997 (1)
---------- ---------- ----------
Revenue:
Fee based services . . . . . . $ 736,042 $ 289,296 $ 219,911
Equity in earnings from
unconsolidated ventures. . . 6,218 3,911 3,238
Gain on sale of business . . . 7,502 -- --
Other income . . . . . . . . . 5,677 2,257 1,624
---------- ---------- ----------
Total revenue. . . . . . 755,439 304,464 224,773
Operating expenses:
Compensation and benefits. . . 477,658 172,982 123,281
Operating, administrative
and other. . . . . . . . . . 161,007 70,164 57,285
Depreciation and amortization. 36,676 13,455 9,093
---------- ---------- ----------
Total operating expenses
before merger related
non-recurring charges. 675,341 256,601 189,659
Merger related non-recurring
charges:
Stock compensation expense . . 101,579 -- --
Integration and transition
expenses . . . . . . . . . . 49,822 10,021 --
---------- ---------- ----------
Total merger related
non-recurring charges. 151,401 10,021 --
---------- ---------- ----------
Total operating
expenses . . . . . . . 826,742 266,622 189,659
Operating income (loss). (71,303) 37,842 35,114
Interest expense, net of
interest income. . . . . . . . 18,211 4,153 3,995
---------- ---------- ----------
Earnings (loss) before
provision for income taxes . . (89,514) 33,689 31,119
Net provision for income taxes . 5,328 13,224 5,279
---------- ---------- ----------
Net earnings (loss). . . $ (94,842) $ 20,465 $ 25,840
========== ========== ==========
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
1999 1998 1997 (1)
---------- ---------- ----------
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments. . . . . . . . . 23 444 (469)
========== ========== ==========
Comprehensive income (loss). . $ (94,819) $ 20,909 $ 25,371
========== ========== ==========
Basic earnings (loss)
per common share . . . . . . . $ (4.20) $ 1.26 $ 1.50
========== ========== ==========
Basic weighted average shares
outstanding. . . . . . . . . . 22,607,350 16,215,478 16,200,000
========== ========== ==========
Diluted earnings (loss)
per common share . . . . . . . $ (4.20) $ 1.25 $ 1.49
========== ========== ==========
Diluted weighted average
shares outstanding . . . . . . 22,607,350 16,387,721 16,329,613
========== ========== ==========
------------
(1) Earnings per share for 1997 is calculated based on earnings for the
period from conversion to corporate form, July 22, 1997, through
December 31, 1997.
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands, except share data)
<CAPTION>
Partners' Accu-
Capital mulated
(Deficit) Other
Addi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
-------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (loss) Total
---------- -------- -------- -------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances 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
reorganiza-
tion . . . . .12,200,000 122 38,996 - - - (39,118) - -
Net proceeds
from the
initial Offer-
ing . . . . . . .4,000,000 40 82,782 - - - - - 82,822
Cumulative effect
of foreign
currency
translation
adjustments . . . - - - - - - - (565) (565)
---------- -------- -------- -------- -------- -------- -------- -------- --------
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Partners' Accu-
Capital mulated
(Deficit) Other
Addi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
-------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (loss) Total
---------- -------- -------- -------- -------- --------- --------- -------- --------
Balances after
the reorganiza-
tion and initial
Offering. . . . .16,200,000 162 121,778 - - - - 534 122,474
Net earnings
(July 22, 1997
through Decem-
ber 31, 1997) . . - - - - - 24,327 - - 24,327
Cumulative effect
of foreign
currency trans-
lation adjust-
ments . . . . . . - - - - - - - 96 96
---------- -------- -------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1997. . . . . . .16,200,000 162 121,778 - - 24,327 - 630 146,897
Net earnings . . . - - - - - 20,465 - - 20,465
Shares issued
under stock
purchase
plan. . . . . . . 64,176 1 1,765 - - - - - 1,766
Cumulative
effect of
foreign
currency
translation
adjustments . . . - - - - - - - 444 444
---------- -------- -------- -------- -------- -------- -------- -------- --------
Balances at
December 31,
1998. . . . . . .16,264,176 163 123,543 - - 44,792 - 1,074 169,572
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED
Partners' Accu-
Capital mulated
(Deficit) Other
Addi- Unallo- Deferred Pre- Compre-
Common Stock tional cated Stock Retained decessor hensive
-------------------- Paid-In ESOT Compen- Earnings Partner- Income
Shares Amount Capital Shares sation (Deficit) ships (loss) Total
---------- -------- -------- -------- -------- --------- --------- -------- --------
Net loss . . . . . - - - - - (94,842) - - (94,842)
Shares issued in
connection with:
Stock option
plan . . . . . 21,292 - 495 - - - - - 495
Stock purchase
programs. . . . . 199,587 2 3,695 - - - - - 3,697
Share activity
related to
JLW merger:
Shares issued
at closing. . .14,254,116 143 355,233 (9) (160,253) - - - 195,114
Adjustment shares
subsequently
retained . . . . (453,699) (5) (8,462) - - - - - (8,467)
ESOT shares
allocated . . . . - - 1,597 2 - - - - 1,599
Stock compensa-
tion adjust-
ments . . . . . . - - (33,402) - 27,906 - - - (5,496)
Amortization of
deferred stock
compensation. . . - - - - 62,241 - - - 62,241
Cumulative effect
of foreign
currency
translation
adjustments . . . - - - - - - - 23 23
---------- ------- -------- ------- -------- -------- -------- ------- --------
Balances at
December 31,
1999. . . . . . .30,285,472 $ 303 $442,699 $ (7) $(70,106) $(50,050) $ - $ 1,097 $323,936
========== ======== ======== ======= ======== ======== ======== ======= ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
($ in thousands)
1999 1998 1997
---------- ---------- ----------
Cash flows from operating
activities:
Net earnings (loss). . . . . . $(94,842) $ 20,465 $ 25,840
Reconciliation of net earnings
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortiza-
tion . . . . . . . . . . . 36,676 13,455 9,093
Equity in earnings and gain
on sale from unconsolidated
ventures . . . . . . . . . (6,218) (3,911) (3,238)
Provision for loss on
receivables and other
assets . . . . . . . . . . 2,744 4,009 2,640
Stock compensation expense . 101,143 -- --
Amortization of deferred
compensation . . . . . . . 2,070 229 --
Tax benefit on conversion
to corporate form. . . . . -- -- (6,842)
Changes in:
Receivables. . . . . . . . . (49,962) (28,504) 9,631
Prepaid expenses and
other assets . . . . . . . (10,442) (3,760) 1,864
Deferred tax assets and
income tax refund
receivable . . . . . . . . (19,479) -- --
Accounts payable, accrued
liabilities and accrued
compensation . . . . . . . 5,544 17,255 (2,429)
---------- ---------- ----------
Net cash (used in)
provided by operating
activities . . . . . . (32,766) 19,238 36,559
Cash flows provided by (used in)
investing activities:
Net capital additions -
property and equipment . . . (36,848) (15,592) (6,277)
Cash paid in connection with
merger with Jones Lang
Wootton, net of cash
balances assumed (Note 3). . (27,704) -- --
Other acquisitions,
net of cash balances
assumed. . . . . . . . . . . (3,030) (178,919) 1,008
Investments in real estate
ventures: . . . . . . . . . .
Capital contributions and
advances to real estate
ventures . . . . . . . . . (25,491) (51,347) (16,546)
Distributions, repayments
of advances and sale of
investments. . . . . . . . 25,930 10,493 11,707
---------- ---------- ----------
Net cash used in
investing activities . (67,143) (235,365) (10,108)
<PAGE>
JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1999 1998 1997
---------- ---------- ----------
Cash flows provided by (used
in) financing activities:
Proceeds from borrowings
under credit facilities. . . 326,004 356,929 92,300
Repayments of borrowings
under credit facilities. . . (223,479) (154,552) (126,202)
Net repayments under long-
term notes payable . . . . . -- -- (37,213)
Common stock issued under
stock option plan and
stock purchase programs. . . 4,192 -- --
Distributions to partners. . . -- -- (14,835)
Net proceeds from the
initial Offering . . . . . . -- -- 82,822
---------- ---------- ----------
Net cash provided by
(used in) financing
activities . . . . . . 106,717 202,377 (3,128)
Effects of foreign currency
translation on cash balances . (441) 31 130
---------- ---------- ----------
Net increase (decrease)
in cash and. . . . . . . . . 6,367 (13,719) 23,453
Cash and cash equivalents,
January 1. . . . . . . . . . 16,941 30,660 7,207
---------- ---------- ----------
Cash and cash equivalents,
December 31. . . . . . . . . $ 23,308 $ 16,941 $ 30,660
========== ========== ==========
Supplemental disclosure of
cash flow information:
Cash paid during the period
for:
Interest . . . . . . . . . . $ 20,448 $ 3,215 $ 4,195
Taxes, net of refunds. . . . 20,763 2,881 9,910
Non-cash investing and
financing activities: . . . .
Acquisitions and merger:
Shares issued in connec-
tion with merger and
acquisition. . . . . . . 141,918 -- 29,292
Fair value of assets
acquired . . . . . . . . (218,514) (23,257) (12,448)
Fair value of liabilities
assumed. . . . . . . . . 197,556 22,652 14,740
Goodwill . . . . . . . . . (151,694) (178,314) (30,576)
---------- ---------- ----------
Cash paid, net of cash
balances assumed . . . $ (30,734) $ (178,919) $ 1,008
========== ========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except where otherwise noted)
(1) ORGANIZATION
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle") is a leading
full-service real estate services firm that provides investment management,
hotel acquisition, disposition, strategic advisory and valuation, property
management, corporate property services, development services, project
management, tenant and agency leasing, investment disposition, acquisition,
financing and capital placement services on a local, regional and global
basis. With over 7,000 employees in more than 100 markets on five
continents, Jones Lang LaSalle is able to satisfy local, regional and
international service needs. The ability to provide this network of
services around the globe was solidified effective March 11, 1999 with the
merger of the business of the Jones Lang Wootton companies ("JLW") with
those of LaSalle Partners Incorporated ("LaSalle Partners"). In connection
with this merger, the name of the company was changed from LaSalle Partners
Incorporated to Jones Lang LaSalle Incorporated (see Note 3).
Jones Lang LaSalle, formerly 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. On July 22, 1997, LaSalle
Partners completed an initial public offering (the "Offering") of 4,000,000
shares of LaSalle Partners 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 LaSalle Partners, 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 $82.8 million, net of offering costs,
of which $63.5 million was used to retire long-term debt and related
interest.
The Predecessor Partnerships were subject to a reorganization as part
of Jones Lang LaSalle's incorporation. 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
financial statements include the financial positions and results of
operations of the Predecessor Partnerships at their historical basis.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Jones
Lang LaSalle and their majority-owned-and-controlled partnerships and
subsidiaries. All material intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
<PAGE>
CASH HELD FOR OTHERS
Jones Lang LaSalle controls certain cash and cash equivalents as
agents for its investment and property management clients. Such amounts are
not included in the accompanying Consolidated Balance Sheets.
STATEMENT OF CASH FLOWS
Cash and cash equivalents include demand deposits and investments in
U.S. Treasury instruments (generally held available for sale) with
maturities of three months or less. The combined carrying value of such
investments of $5.6 million and $3.0 million at December 31, 1999 and 1998,
respectively, approximates their market value.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or a change in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying value of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
INVESTMENTS IN REAL ESTATE VENTURES
Jones Lang LaSalle has limited partner, general partner and limited
liability company interests in various real estate ventures with interests
generally ranging from less than 1% to 49.5% which are accounted for using
the equity method. In instances where Jones Lang LaSalle exercises
temporary control over co-investments, such investments are accounted for
under the equity method.
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS AND JLW MERGER
Intangibles resulting from business acquisitions and the JLW merger
are amortized on a straight-line basis over the estimated lives (generally
eight to 40 years) of the related assets. Jones Lang LaSalle periodically
evaluates the recoverability of the carrying amount of intangibles
resulting from business acquisitions and mergers by assessing whether any
impairment indications are present, including substantial recurring
operating deficits or significant adverse changes in legal or economic
factors that affect the businesses acquired. If such analysis indicates
impairment, the intangible asset would be adjusted in the period such
changes occurred based on its estimated fair value, which is derived from
expected cash flow of the businesses.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Jones Lang LaSalle's financial instruments include cash and cash
equivalents, receivables, accounts payable, notes payable, interest rate
swap agreements and foreign currency exchange contracts. The estimated fair
value of cash and cash equivalents, receivables and payables approximates
their carrying amounts due to the short maturity of these instruments. The
estimated fair value of Jones Lang LaSalle's credit facilities approximates
their carrying value due to their variable interest rate terms. The fair
value of interest rate swaps is estimated, using third-party quotes, as the
amount that Jones Lang LaSalle would receive or pay to execute a new
agreement with terms identical to those remaining on the current agreement,
considering current interest rates. The fair value of forward foreign
currency exchange contracts is estimated by valuing the net position of the
contracts using the applicable spot rates and forward rates as of the
reporting date.
<PAGE>
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries located outside the United
States, except those subsidiaries located in highly inflationary economies,
are generally measured using the local currency as the functional currency.
The assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date with the resulting translation
adjustments included as a separate component of stockholders' equity and
comprehensive income. Income and expense are translated at average monthly
rates of exchange. Gains and losses from foreign currency transactions are
included in net earnings. For subsidiaries operating in highly inflationary
economies, the associated gains and losses from balance sheet translation
adjustments are included in net earnings.
DERIVATIVE INSTRUMENTS
Jones Lang LaSalle has entered into interest rate swap agreements as
a hedge against a portion of its credit facilities in order to manage
interest rate risk. Fees, if any, related to these agreements are amortized
using the effective interest method over the life of the agreements. As of
December 31, 1999 and 1998, Jones Lang LaSalle had interest rate swap
agreements in effect with a notional amount of $55.0 million with an
approximate market value of $.2 million.
Interest rate swap agreements are contracts that represent an
exchange of interest payments and the underlying principal balances of the
assets or liabilities are not affected. Net settlement amounts are reported
as adjustments to interest income or interest expense. Gains and losses
from the termination of interest rate swaps are deferred and amortized over
the remaining lives of the interest rate swap agreements. If the balance of
the liability falls below that of the notional amount of the derivative,
the excess portion of the derivative is marked-to-market with a
corresponding effect on current earnings.
Jones Lang LaSalle also enters into forward foreign currency exchange
contracts on a limited basis to manage currency risks and reduce its
exposure resulting from fluctuations in the designated foreign currency
associated with existing commitments, assets or liabilities. The associated
gains and losses are deferred and are recognized in income upon settlement
of the related transaction. At December 31, 1999, Jones Lang LaSalle had
forward foreign currency exchange contracts in effect with a notional value
of $5.7 million with no market value and no carrying value. There were no
forward exchange contracts in effect at December 31, 1998.
Jones Lang LaSalle does not enter into derivative financial
instruments for trading or speculative purposes.
EARNINGS PER SHARE
The basic and diluted losses per common share for the year ended
December 31, 1999 were calculated based on basic weighted average shares
outstanding of 22,607,350. Consideration shares issued as a result of the
merger with JLW, to the extent included, have been weighted as of March 11,
1999. As a result of the operating loss incurred for the period, diluted
weighted average shares outstanding for the year ended December 31, 1999 do
not give effect to common stock equivalents as to do so would be anti-
dilutive. These common stock equivalents consist principally of
consideration shares issued in connection with the JLW merger that are
subject to vesting provisions or are contingently returnable. Basic
earnings per share for the year ended December 31, 1998 and for the period
from conversion to corporate form, July 22, 1997, through December 31, 1997
were based on weighted average shares outstanding of 16,215,478 and
16,200,000, respectively. Diluted earnings per share for the year ended
December 31, 1998 and for the period from conversion to corporate form,
July 22, 1997, through December 31, 1997 were based on weighted average
<PAGE>
shares outstanding of 16,387,721 and 16,329,613, respectively. These
amounts reflect an increase of 172,243 shares and 129,613 shares,
respectively, primarily representing the dilutive effect of outstanding
stock options whose exercise price was less than the average market price
of Jones Lang LaSalle's stock for the period, and, to a lesser extent, the
dilutive effect of shares to be issued under employee stock compensation
programs.
REVENUE RECOGNITION
Advisory and management fees are recognized in the period in which
the services are performed. Transaction commissions are recorded as income
at the time the related services are provided unless significant future
contingencies exist. Development services fees are generally recognized as
billed, which approximates the percentage of completion method of
accounting. Incentive fees are recorded in accordance with specific terms
of each compensation agreement and are typically tied to performance that
is measured at contractual milestones, such as the disposition of an asset,
or at the conclusion of a given project. Fees recognized in the current
period that are expected to be received beyond one year have been
discounted to the present value of future expected payments. Pursuant to
contractual arrangements, accounts receivable includes unbilled amounts of
$70.9 million and $32.3 million at December 31, 1999 and 1998,
respectively.
For financial statement presentation purposes, certain one-time
leasing commission payments, aggregating $10.8 million in 1997, made to
former Galbreath employees related to contracts in progress at the
acquisition date have been presented as a reduction of related commission
revenue.
DEPRECIATION
Depreciation and amortization is calculated for financial reporting
purposes primarily using the straight-line method based on the estimated
useful lives of the assets. Furniture, fixtures and equipment totaling
$34.4 million and $18.0 million at December 31, 1999 and 1998,
respectively, are generally depreciated over seven years. Computer
equipment and software totaling $59.7 million and $33.3 million at
December 31, 1999 and 1998, respectively, are generally depreciated over
three to five years. Leasehold improvements totaling $26.2 million and
$13.3 million at December 31, 1999 and 1998, respectively, are amortized
over the lease periods which generally range from one to ten years.
Automobiles totaling $12.1 million at December 31, 1999 are generally
depreciated using a declining balance method over three to five years.
There were no automobiles at December 31, 1998.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
<PAGE>
STOCK-BASED COMPENSATION
Jones Lang LaSalle grants stock options for a fixed number of shares
to employees with an exercise price equal to the fair value of the shares
at the date of grant. Jones Lang LaSalle follows the requirements of the
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees" in accounting for stock-based compensation, and
accordingly, recognizes no compensation expense for stock option grants,
but provides the pro forma disclosures required by the Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation."
RECLASSIFICATIONS
Certain 1998 and 1997 amounts have been reclassified to conform with
the 1999 presentation.
(3) ACQUISITIONS AND MERGER
ACQUISITIONS
On October 1, 1998, Jones Lang LaSalle acquired all of the common
stock of the following real estate service companies formerly owned by Lend
Lease Corporation ("Lend Lease"): Compass Management and Leasing, Inc. and
its wholly owned subsidiaries; The Yarmouth Group Property
Management, Inc.; and ERE Yarmouth Retail, Inc. (formerly Compass
Retail, Inc.). On October 31, 1998, Jones Lang LaSalle also acquired
Compass Management and Leasing (Australia) Pty Limited, the Lend Lease
property and facility management business in Australia. Atlanta-based
Compass Management and Leasing, Inc. was a global real estate management
firm, with operations across the United States, United Kingdom, South
America and Australia. Jones Lang LaSalle paid $180.0 million in cash for
all of the acquired companies ("COMPASS"). The purchase of the companies
also includes provisions for an earnout payment of up to $77.5 million over
five years. 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 Statements of
Earnings. The excess purchase price over the fair value of the identifiable
assets and liabilities acquired was $175.6 million, including transaction
costs, of which $35.1 million was allocated to management contracts and is
being amortized on a straight-line basis over eight years, and
$140.5 million was allocated to goodwill and is being amortized on a
straight-line basis over 40 years based on Jones Lang LaSalle's estimate of
useful lives.
On April 22, 1997, Jones Lang LaSalle acquired all of the common
stock of Galbreath, a property, facility and development management
company. In consideration for the stock, Jones Lang LaSalle issued a 17.5%
limited partnership interest in the Predecessor Partnerships 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 Statements of
Earnings. The excess purchase price over the fair value of the identifiable
assets and liabilities acquired was $30.6 million, including transaction
costs, of which $6.1 million was allocated to management contracts that are
being amortized on a straight-line basis over eight years and $24.5 million
was allocated to goodwill which is being amortized on a straight-line basis
over 40 years based on Jones Lang LaSalle's estimate of useful lives.
<PAGE>
JONES LANG WOOTTON MERGER
On March 11, 1999, LaSalle Partners merged its business with that of
JLW and changed its name to Jones Lang LaSalle Incorporated. In accordance
with the purchase and sale agreements, Jones Lang LaSalle issued
14.3 million shares of its common stock on March 11, 1999, plus
$6.2 million in cash (collectively, the "Consideration") in connection with
the acquisition of the property and asset management, advisory and other
real estate businesses operated by a series of JLW partnerships and
corporations in Europe, Asia, Australia, North America and New Zealand.
Approximately 12.5 million of the shares were issued to former JLW equity
owners (having both direct and indirect ownership) and 1.8 million of the
shares were placed in an employee stock ownership trust ("ESOT") to be
distributed by December 31, 2000 to selected employees of the former JLW
entities. Included in the total ESOT shares are .9 million shares that were
allocated on March 11, 1999 and .2 million that were allocated on
December 31, 1999, with the remaining .7 million shares to be allocated on
December 31, 2000. Issuance of the shares was not registered under the U.S.
securities laws, and the shares are generally subject to a contractual one-
year restriction on sale.
Included in the 14.3 million shares originally issued were
1.2 million shares which were subject to a post-closing net worth
adjustment. The procedures related to the post-closing net worth
calculation were completed during the third quarter and resulted in
.5 million shares being retained by Jones Lang LaSalle and an additional
$.5 million in cash consideration being due to certain of the former JLW
shareholders.
The transaction, which was principally structured as a share
exchange, has been treated as a purchase and is being accounted for using
both APB Opinion No. 16, "Business Combinations" and APB Opinion No. 25,
"Accounting for Stock Issued to Employees" as reflected in the following
table. Accordingly, JLW's operating results have been included in Jones
Lang LaSalle's results as of March 1, 1999, the effective date of the
merger for accounting purposes.
ACCOUNTING METHOD
(SHARES IN MILLIONS) NO. OF SHARES % OF SHARES ISSUED
-------------------- ------------- ------------------
APB Opinion No. 16 7.2 52%
APB Opinion No. 25 -
Fixed Award 5.3 38%
Variable Award 1.3 10%
Net Shares Issued 13.8 100%
As noted in the previous table, 7.2 million shares, or 52% of the
shares issued, are subject to accounting under APB Opinion No. 16. The
value of those shares totaled $141.9 million for accounting purposes based
on the five-day average closing stock price surrounding the date the
financial terms of the merger with JLW were substantially complete,
discounted at a rate of 20% for transferability restrictions. The value of
the shares, in addition to a cash payment of approximately $6.2 million and
capitalizable transaction costs of approximately $15.8 million were
allocated to the identifiable assets acquired and liabilities assumed,
based on management's estimate of fair value, which totaled $252.6 million
and $240.7 million, respectively. Included in the assets acquired is
$32.2 million in cash. Included in the liabilities assumed is $47.4 million
of obligations to former partners for undistributed earnings, of which
$9.5 million remains unpaid at December 31, 1999. The resulting excess
purchase price of $152.0 million was allocated to goodwill which is being
amortized on a straight-line basis over 40 years based on management's
estimate of useful lives.
<PAGE>
The remaining 6.6 million shares, or 48% of the shares issued, and
$.4 million in cash paid are subject to accounting under APB Opinion
No. 25. Accordingly, shares issued are being accounted for as compensation
expense or deferred compensation expense to the extent they are subject to
forfeiture or vesting provisions. Included in the 6.6 million shares are
1.3 million shares that are subject to variable stock award plan
accounting. The remaining 5.3 million shares and the $.4 million in cash
paid are subject to fixed stock award plan accounting. Compensation expense
incurred for the year ended December 31, 1999 totaled $101.6 million,
inclusive of the compensation expense recognized at closing and the
amortization of deferred compensation for the periods.
UNAUDITED COMBINED PRO FORMA RESULTS
The following unaudited combined pro forma results give effect to the
merger with JLW as if it had occurred on January 1, 1998 and the
acquisitions of COMPASS and Galbreath and estimated incremental general and
administrative costs associated with operations as a public company and the
repayment of Jones Lang LaSalle's long-term debt out of the proceeds of the
Offering, as if these events occurred on January 1, 1997 ($ in thousands):
1999 1998 1997
-------- -------- --------
Total revenue. . . . . . . . . . . . . $813,899 $848,325 $317,788
Net earnings (loss). . . . . . . . . . (108,253) (108,365) 16,683
Basic earnings (loss)
per common share . . . . . . . . . . (4.50) (4.47) 1.03
Diluted earnings (loss)
per common share . . . . . . . . . . (4.50) (4.47) 1.02
The above combined pro forma results are based upon available
information and certain assumptions that management believes are
reasonable. These pro forma results are not necessarily indicative of what
the actual results of operations would have been for the three-year period
ended December 31, 1999 had Jones Lang LaSalle completed the merger with
JLW, the acquisitions of COMPASS and 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 Jones Lang LaSalle.
(4) DISPOSITION
Effective December 31, 1996, Jones Lang LaSalle sold its Construction
Management business and certain related assets to a former member of
management for a $9.1 million note. The note, which is secured by the
current and future assets of the business, is due December 31, 2006 and
bears interest at rates of 6.8% to 10.0%, with interest payments due
annually. Annual principal repayments began in January 1998.
Under the terms of the Asset Purchase Agreement, Jones Lang LaSalle
agreed to provide certain financial assistance and administrative and
financial services, at cost, beginning in January 1997. The nature of these
arrangements prohibited Jones Lang LaSalle from recognizing the sale as a
divestiture prior to December 31, 1999. As such, Jones Lang LaSalle
accounted for the results of operations, including principal and interest
received on the note, in a method similar to the equity method of
accounting. As such, principal and interest received under the note were
treated as a reduction of such net assets and as a reserve, if necessary,
for any anticipated financial exposure under the terms of the Asset
Purchase Agreement with the remainder recognized as income. Revenue
recognized for the years ended December 31, 1999, 1998 and 1997 was
$1.8 million, $1.3 million and $1.1 million, respectively, and has been
reflected in Fee Based Services in the accompanying Consolidated Statements
of Earnings.
<PAGE>
As of December 31, 1999, Jones Lang LaSalle had received substantial
principal payments on its note receivable and is no longer obligated to
provide financial assistance to the Construction Management business under
the Asset Purchase Agreement. Accordingly, Jones Lang LaSalle recognized
the disposition as a divestiture at December 31, 1999 and has recognized a
resulting gain of $7.5 million in the Consolidated Statement of Earnings.
(5) BUSINESS SEGMENTS
As a result of the merger with JLW, Jones Lang LaSalle is managing
its business along a combination of functional and geographic lines. In the
fourth quarter of 1999, Jones Lang LaSalle consolidated its operations in
Asia and Australasia into a unified region now known as Asia Pacific.
Accordingly, operations are now classified into five business segments: two
global businesses, (i) Investment Management and (ii) Hotel Services; and
three geographic regions, (iii) the Americas, (iv) Europe and (v) Asia
Pacific. The Investment Management segment provides real estate investment
management services to institutional investors, corporations, and high net
worth individuals. The Hotel Services segment provides strategic advisory,
sales, acquisition, valuation and asset management services related solely
to hotel, conference and resort properties. The geographic regions of the
Americas, Europe and Asia Pacific each provide Owner and Occupier Services
which consist primarily of tenant representation and agency leasing,
investment disposition and acquisition, and valuation services
(collectively, "implementation services") and property, facility,
development and project management services (collectively, "management
fees"). Results for 1998 and 1997 have been realigned based upon the
current business segments.
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. Jones Lang LaSalle
allocates all expenses, other than interest and income taxes, as nearly all
expenses incurred benefit one or more of the segments. Merger related non-
recurring charges are not allocated to the segments.
JONES LANG LASALLE INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) BUSINESS SEGMENTS
Summarized financial information by business segment for 1999, 1998
and 1997 are as follows ($ in thousands):
1999 1998 1997
-------- -------- --------
OWNER AND OCCUPIER SERVICES
- AMERICAS
Revenue:
Implementation services. . . . . . $151,769 $119,928 $ 90,817
Management fees. . . . . . . . . . 117,395 82,330 48,264
Equity earnings. . . . . . . . . . 873 369 816
Other services . . . . . . . . . . 11,883 10,168 6,270
Gain on sale of business . . . . . 7,502 -- --
Intersegment revenue . . . . . . . 3,661 2,353 1,659
-------- -------- --------
293,083 215,148 147,826
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . 243,883 176,184 118,683
Depreciation and amortization. . . . 19,843 8,787 4,796
-------- -------- --------
Operating income . . . . . . . . $ 29,357 $ 30,177 $ 24,347
======== ======== ========
<PAGE>
1999 1998 1997
-------- -------- --------
EUROPE
Revenue:
Implementation services. . . . . . . $171,935 $ 831 $ 710
Management fees. . . . . . . . . . . 79,454 755 --
Equity losses. . . . . . . . . . . . (219) -- --
Other services . . . . . . . . . . . 1,998 168 --
-------- -------- --------
253,168 1,754 710
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . 215,830 1,243 625
Depreciation and amortization. . . . 8,047 47 --
-------- -------- --------
Operating income . . . . . . . . $ 29,291 $ 464 $ 85
======== ======== ========
ASIA PACIFIC
Revenue:
Implementation services. . . . . . . $ 69,899 $ 1,543 $ 319
Management fees. . . . . . . . . . . 36,651 81 --
Equity earnings. . . . . . . . . . . 117 -- --
Other services . . . . . . . . . . . 7,577 6 --
-------- -------- --------
114,244 1,630 319
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . 101,642 2,883 971
Depreciation and amortization. . . . 4,976 107 6
-------- -------- --------
Operating income (loss). . . . . $ 7,626 $ (1,360) $ (658)
======== ======== ========
HOTEL SERVICES
Revenue:
Implementation services. . . . . . . $ 10,089 -- --
Management fees. . . . . . . . . . . 1,301 -- --
Other services . . . . . . . . . . . 2,375 -- --
-------- -------- --------
13,765 -- --
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . 11,340 -- --
Depreciation and amortization. . . . 149 -- --
-------- -------- --------
Operating income . . . . . . . . $ 2,276 $ -- $ --
======== ======== ========
INVESTMENT MANAGEMENT
Revenue:
Implementation services. . . . . . . $ 11,488 $ 6,402 $ 3,600
Advisory fees. . . . . . . . . . . . 67,560 77,140 70,817
Equity earnings. . . . . . . . . . . 5,447 3,542 2,422
Other services . . . . . . . . . . . 345 1,201 738
Intersegment revenue . . . . . . . . 136 -- --
-------- -------- --------
84,976 88,285 77,577
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . 69,767 65,189 61,946
Depreciation and amortization. . . . 3,661 4,514 4,291
-------- -------- --------
Operating income . . . . . . . . $ 11,548 $ 18,582 $ 11,340
======== ======== ========
<PAGE>
1999 1998 1997
-------- -------- --------
Total segment revenue. . . . . . . . . $759,236 $306,817 $226,432
Intersegment revenue eliminations. . . (3,797) (2,353) (1,659)
-------- -------- --------
Total revenue. . . . . . . . . 755,439 304,464 224,773
Total segment operating expenses . . . 679,138 258,954 191,318
Intersegment operating expense
eliminations . . . . . . . . . . . . (3,797) (2,353) (1,659)
-------- -------- --------
Total operating expenses
before merger related
non-recurring charges(1) . . 675,341 256,601 189,659
Merger related non-recurring
charges(1) . . . . . . . . . 151,401 10,021 --
-------- -------- --------
Operating income (loss). . . . $(71,303) $ 37,842 $ 35,114
======== ======== ========
--------
(1) Merger related non-recurring charges consist of integration and
transition costs related to the merger with JLW and the COMPASS acquisition
and compensation expense incurred associated with the issuance of shares to
former employees of JLW in connection with the JLW merger.
Identifiable assets by segment are those assets that are used by or
are a result of each segment's business. Corporate assets are principally
cash and cash equivalents, office furniture and computer hardware and
software.
The following table reconciles segment identifiable assets to
consolidated assets, investments in real estate ventures to consolidated
investments in real estate ventures and fixed asset expenditures to
consolidated fixed asset expenditures.
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Invest- Invest-
ments Fixed ments Fixed Fixed
Identi- in Real Asset Identi- in Real Asset Asset
fiable Estate Expen- fiable Estate Expen- Expen-
($ in thousands) Assets Ventures ditures Assets Ventures ditures ditures
---------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Owner and Occupier Services:
Americas . . . . . . . . . . $428,226 $ 9,604 $ 19,294 $355,840 $ 7,059 $14,022 $ 5,536
Europe . . . . . . . . . . . 226,535 -- 10,328 5,221 -- -- --
Asia Pacific . . . . . . . . 149,365 -- 5,867 14,859 -- 30 117
Hotel Services . . . . . . . . 5,193 -- 20 -- -- -- --
Investment Management. . . . . 107,000 57,701 3,999 98,060 45,917 1,540 624
Corporate. . . . . . . . . . . 8,481 -- 763 16,941 -- -- --
-------- -------- -------- -------- -------- -------- --------
Consolidated . . . . . . . . . $924,800 $ 67,305 $ 40,271 $490,921 $ 52,976 $ 15,592 $ 6,277
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
Jones Lang LaSalle conducts business in two countries which
individually comprise over 10% of total revenue and total assets in 1999.
Geographic segment information is as follows ($ in thousands):
Total Long-Lived
Revenue Assets
-------- ----------
United States. . . . . . . . . . . $339,339 $292,102
United Kingdom . . . . . . . . . . 160,238 108,788
Other foreign countries. . . . . . 255,862 156,695
-------- --------
$755,439 $557,585
======== ========
Long-lived assets include intangibles resulting from business
acquisitions and the JLW merger.
(6) INVESTMENTS IN REAL ESTATE VENTURES
Jones Lang LaSalle has invested in certain real estate ventures that
own and operate commercial real estate. These investments include
noncontrolling general and limited partnership ownership interests
generally ranging from less than 1% to 49.5% of the respective ventures.
Jones Lang LaSalle has made initial capital contributions to the ventures
and had remaining commitments to certain ventures for additional capital
contributions of approximately $28.7 million as of December 31, 1999.
Substantially all venture interests are held by corporate subsidiaries of
Jones Lang LaSalle. Accordingly, Jones Lang LaSalle's exposure to
liabilities and losses of the ventures is limited to its initial and
remaining commitments. To the extent Jones Lang LaSalle's investment basis
differs from its share of the equity of an unconsolidated investment, such
difference is amortized over the depreciable lives of the investee's
investment assets.
Included in investment in real estate ventures is an 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 Jones Lang LaSalle by investing principally in upscale and luxury full-
service hotels located primarily in major business and urban, resort and
convention markets. Jones Lang LaSalle 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, are paid in the form of LHO common stock or
units, at Jones Lang LaSalle's option. LHO was formed with 10 hotels, nine
of which Jones Lang LaSalle had a nominal co-investment in and acted as the
investment advisor for. In accordance with the individual investment
advisory agreements, Jones Lang LaSalle earned and received performance
fees totaling $15.2 million on the disposition of certain of the assets.
Jones Lang LaSalle contributed its ownership interests in the hotels as
well as the related performance fees to LHO for an effective ownership
interest of approximately 6.4%.
Such investments have been accounted for under the equity method of
accounting in the accompanying Consolidated Financial Statements. As such,
Jones Lang LaSalle recognizes its share of the underlying profits and
losses of the ventures as revenue in the accompanying Consolidated
Statements of Earnings. Jones Lang LaSalle generally is entitled to
operating distributions in accordance with its respective ownership
interests.
<PAGE>
Summarized combined financial information for the above
unconsolidated ventures is presented below ($ in thousands):
1999 1998 1997
---------- ---------- ----------
Balance Sheet:
Investments in real estate . . . $2,081,747 $2,021,372 $1,236,217
Total assets . . . . . . . . . . $2,603,815 $2,513,483 $1,406,236
---------- ---------- ----------
Mortgage indebtedness. . . . . . $ 695,442 $ 614,349 $ 579,310
========== ========== ==========
Total liabilities. . . . . . . . $1,327,824 $ 977,194 $ 631,807
Total equity . . . . . . . . $1,275,991 $1,536,289 $ 774,429
========== ========== ==========
Investments in real estate
ventures . . . . . . . . . . . . $ 66,538 $ 52,083 $ 17,100
========== ========== ==========
Statements of Operations:
Revenues . . . . . . . . . . . . $ 403,557 $ 298,886 $ 288,709
Net earnings . . . . . . . . . . $ 115,571 $ 104,095 $ 96,725
---------- ---------- ----------
Equity in earnings from real
estate ventures. . . . . . . . . $ 6,218 $ 3,911 $ 3,238
========== ========== ==========
During 1999, 1998 and 1997, Jones Lang LaSalle made loans to certain
of these real estate ventures, of which $6.7 million, $15.5 million and
$4.7 million was outstanding at December 31, 1999, 1998 and 1997,
respectively, and is included in notes and other receivables in the
accompanying Consolidated Balance Sheets. These notes, which bear interest
rates of 7.25% to 8.0%, are to be repaid by 2005.
Jones Lang LaSalle also has investments that are accounted for using
the cost method that totaled $.8 million, $.9 million and $1.0 million at
December 31, 1999, 1998 and 1997, respectively.
(7) DEBT
CREDIT FACILITIES
On October 27, 1999, Jones Lang LaSalle closed a new $380.0 million
unsecured credit agreement. The agreement includes a $223.5 million three-
year revolving facility and a $156.5 million term facility due October 15,
2000 (collectively, the "New Facilities"). Jones Lang LaSalle is authorized
under the agreement to increase the revolving facility up to a total of
$250.0 million and the term facility up to a total of $175.0 million
through the expansion of its existing bank group. Jones Lang LaSalle is
currently in discussions with additional banks to increase the New
Facilities, however, there can be no guarantee as to the final outcome of
these discussions. The New Facilities replaced the five-year unsecured
$150.0 million revolving credit facility, $175.0 million term credit
facility and $30.0 million short-term facility (the "Previous Facilities").
The revolving facility is available for working capital, co-
investments and acquisitions. As of December 31, 1999, there was
$316.2 million outstanding on the New Facilities, of which $156.5 million
is classified as current.
<PAGE>
The New Facilities are guaranteed by certain of Jones Lang LaSalle's
subsidiaries. Jones Lang LaSalle must maintain a certain level of
consolidated net worth and a ratio of funded debt to earnings before
interest expense, taxes, depreciation and amortization ("EBITDA"). Jones
Lang LaSalle must also meet a minimum interest coverage ratio, a minimum
liquidity ratio and minimum EBITDA. Additionally, Jones Lang LaSalle is
restricted from, among other things, incurring certain levels of
indebtedness to lenders outside of the New Facilities, disposing of a
significant portion of its assets, and paying dividends until the term
facility is repaid. Lender approval is required for certain levels of co-
investment. The New Facilities bear variable rates of interest based on
market rates. Jones Lang LaSalle uses interest rate swaps to convert a
portion of the floating rate indebtedness to a fixed rate. The effective
interest rate on the Previous Facilities and the New Facilities was 6.48%
for the year ended December 31, 1999, including the effect of interest rate
swap agreements. The effective interest rate on the Previous Facilities for
the year ended December 31, 1998 was 6.1%, including the effect of interest
rate swap agreements.
Jones Lang LaSalle also has various interest bearing overdraft
facilities and short-term credit facilities in Europe and Asia Pacific. The
aggregate amount available under these facilities approximates
$32.8 million, of which $4.1 million was outstanding as of December 31,
1999. Borrowings on these facilities are currently limited to $50.0 million
under the terms of the New Facilities.
(8) LEASES
Jones Lang LaSalle leases office space in various buildings for its
own use. The terms of these non-cancellable operating leases provide for
Jones Lang LaSalle to pay base rent and a share of increases in operating
expenses and real estate taxes in excess of defined amounts. Jones Lang
LaSalle also leases equipment under both operating and capital lease
arrangements.
Minimum future lease payments (i.e., base rent for leases of office
space) due in each of the next five years ending December 31 and thereafter
are as follows ($ in thousands):
Operating Capital
Leases Leases
---------- ----------
2000 . . . . . . . . . . . . . . . $36,270 $ 1,957
2001 . . . . . . . . . . . . . . . 33,408 1,314
2002 . . . . . . . . . . . . . . . 26,813 461
2003 . . . . . . . . . . . . . . . 21,077 386
2004 . . . . . . . . . . . . . . . 17,091 169
Thereafter . . . . . . . . . . . . 37,410 92
-------- --------
$172,069 $ 4,379
======== ========
Assets recorded under capital leases in the Consolidated Balance
Sheet at December 31, 1999 are as follows ($ in thousands):
1999
--------
Furniture, fixtures and equipment. . . . . . . $2,244
Computer equipment and software. . . . . . . . 2,492
Automobiles. . . . . . . . . . . . . . . . . . 455
Leasehold improvements . . . . . . . . . . . . 1,775
--------
6,966
Less accumulated depreciation
and amortization . . . . . . . . . . . . . . (3,557)
--------
Net assets under capital leases. . . . . . . . $ 3,409
========
<PAGE>
Rent expense was $45.0 million, $9.8 million and $7.1 million, during
1999, 1998 and 1997, respectively.
(9) INCOME TAXES
For the year ended December 31, 1999, 1998 and for the period
subsequent to conversion to corporate form in 1997, Jones Lang LaSalle's
provision for income taxes aggregated $5.3 million, $13.2 million and
$11.0 million, respectively, and consisted of the following ($ in
thousands):
Year Ended December 31,
1999 1998 1997
-------- -------- --------
U.S. Federal:
Current. . . . . . . . . . . . . $(11,762) $ 11,843 $ 3,930
Deferred tax . . . . . . . . . . 2,570 (1,970) 2,656
-------- -------- --------
(9,192) 9,873 6,586
-------- -------- --------
State and Local:
Current. . . . . . . . . . . . . (2,979) 2,819 823
Deferred tax . . . . . . . . . . 901 (144) 1,000
-------- -------- --------
(2,078) 2,675 1,823
-------- -------- --------
Foreign:
Current. . . . . . . . . . . . . 17,959 1,506 2,600
Deferred tax . . . . . . . . . . (1,361) (830) --
-------- -------- --------
16,598 676 2,600
-------- -------- --------
Total. . . . . . . . . . . . . . . $ 5,328 $ 13,224 $ 11,009
======== ======== ========
For the period prior to the incorporation of the Predecessor
Partnerships, the accompanying Consolidated Statements of Earnings include
a federal and state income tax provision for wholly owned corporate
subsidiaries and a state tax provision for certain states that require
partnerships to pay income taxes. For the period January 1, 1997 through
July 21, 1997, such amounts aggregated $1.1 million. 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 of the Predecessor
Partnerships. As a result of Jones Lang LaSalle's conversion from
partnership to corporate form in July 1997, a tax benefit of $6.8 million
was recognized related to deferred tax assets recorded in accordance with
the provisions of SFAS No. 109 arising from temporary differences between
the book and tax basis of Jones Lang LaSalle's assets and liabilities at
the date of conversion.
Income tax expense for 1999, 1998 and for the period subsequent to
conversion to corporate form for 1997 differed from the amounts computed by
applying the U.S. federal income tax rate of 35% to earnings before
provision for income taxes (a loss of $89.5 million for the year ended
December 31, 1999, income of $33.7 million for the year ended December 31,
1998 and income of $28.6 million for the period July 22, 1997 through
December 31, 1997) as a result of the following ($ in thousands):
1999 1998 1997
---- ---- ----
Computed "expected"
tax expense
(benefit) . . . . . $(31,330)35.0% $11,791 35.0% $10,009 35.0%
Increase (reduction)
in income taxes
resulting from:
Nondeductible stock
compensation
expense . . . . . 34,078(38.1%) - - - -
<PAGE>
1999 1998 1997
---- ---- ----
State and local
income taxes,
net of federal
income tax
benefit . . . . . . (1,350) 1.5% 1,739 5.2% 1,185 4.1%
Amortization of
goodwill and other
intangibles . . . . 76 (0.1%) (1,182) (3.5%) (573) (2.0%)
Nondeductible
expenses. . . . . . 2,402 (2.7%) 807 2.4% 205 0.7%
Foreign earnings
taxed at varying
rates . . . . . . . (1,022) 1.1% - - - -
Valuation allowances 1,552 (1.7%) - - - -
Other, net . . . . . 922 (1.0%) 69 0.2% 183 0.7%
------- ----- ------- ----- ------- -----
$ 5,328 (6.0%) $13,224 39.3% $11,009 38.5%
======= ===== ======= ===== ======= =====
Domestic and foreign losses before provision for income taxes for the
year ended December 31, 1999 were $35.6 million and $53.9 million,
respectively. Domestic and foreign earnings before provision for income
taxes for the year ended December 31, 1998 were $29.9 million and
$3.8 million, respectively.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below ($ in thousands):
1999 1998 1997
-------- -------- --------
Deferred tax assets:
Accrued expenses . . . . . . . . $ 13,525 $ 3,957 $ 2,205
Allowances for uncollectible
accounts . . . . . . . . . . . 3,983 3,238 2,208
Foreign tax credit carry-
forwards . . . . . . . . . . . 3,634 3,800 2,600
Foreign loss carry-forwards. . . 3,326 830 --
Property and equipment . . . . . 2,233 1,644 1,397
Investments in real estate
ventures . . . . . . . . . . . 1,208 -- --
Alternative minimum tax
credit carryover . . . . . . . 750 -- --
Other. . . . . . . . . . . . . . 639 355 554
-------- -------- --------
29,298 13,824 8,964
Less valuation allowances. . 2,020 -- --
-------- -------- --------
$ 27,278 $ 13,824 $ 8,964
======== ======== ========
Deferred tax liabilities:
Prepaid pension asset. . . . . . $ 6,978 $ -- $ --
Intangible assets. . . . . . . . 3,743 -- --
Income deferred for tax
purposes . . . . . . . . . . . 3,329 -- --
Investments in real estate
ventures . . . . . . . . . . . -- 2,483 2,820
Other. . . . . . . . . . . . . . 1,820 716 1,065
-------- -------- --------
$ 15,870 $ 3,199 $ 3,885
======== ======== ========
<PAGE>
In connection with the merger with JLW, Jones Lang LaSalle recorded
deferred tax assets of $13.3 million and deferred tax liabilities of
$8.2 million as part of its purchase price allocation. In connection with
the COMPASS acquisition, Jones Lang LaSalle recorded deferred tax assets of
$2.6 million as part of its purchase price allocation.
A deferred U.S. tax liability has not been provided on the unremitted
earnings of foreign subsidiaries because it is the intent of Jones Lang
LaSalle to permanently reinvest such earnings.
As of December 31, 1999, Jones Lang LaSalle has available
$3.6 million of foreign tax credit carryforwards for U.S. federal income
tax purposes, which expire in 2002 through 2004. There were also foreign
loss carryforwards at December 31, 1999 approximating $10.8 million which
expire in 2003 and thereafter.
The net deferred tax asset of $11.4 million at December 31, 1999 is
considered realizable given past income and estimates of future income.
These considerations include, but are not limited to, net operating losses,
earnings trends and tax planning strategies. Valuation allowances have been
provided with regard to the tax benefit of certain foreign net operating
loss carryforwards for which utilization is not probable.
(10) RETIREMENT PLANS
DEFINED CONTRIBUTION PLANS
Jones Lang LaSalle has a qualified profit sharing plan that
incorporates IRC Section 401(k) for its eligible U.S. employees.
Contributions under the qualified profit sharing plan are made via a
combination of employer match and an annual contribution on behalf of
eligible employees. Included in the accompanying Consolidated Statements of
Earnings for the years ended December 31, 1999, 1998 and 1997 are
contributions of $4.2 million, $1.8 million and $1.7 million, respectively.
Related trust assets of the Plan are managed by trustees and are
excluded from the accompanying Consolidated Financial Statements.
Jones Lang LaSalle, through the merger with JLW, maintains several
defined contribution retirement plans for its eligible non-U.S. employees.
Contributions to these plans were approximately $2.0 million for the year
ended December 31, 1999. Amounts contributed to similar plans for the year
ended December 31, 1998, prior to the merger with JLW, were immaterial.
DEFINED BENEFIT PLANS
Jones Lang LaSalle maintains several contributory defined benefit
pension plans to provide retirement benefits to eligible employees in
certain countries. It is Jones Lang LaSalle's policy to fund the minimum
annual contributions required by applicable regulations.
Net periodic pension cost consisted of the following ($ in
thousands):
1999
--------
Employer service cost - benefits earned
during the year. . . . . . . . . . . . . . . . . . $ 5,902
Interest cost on projected benefit obligation. . . . 3,680
Expected (return) loss on plan assets. . . . . . . . (5,332)
Net amortization/deferrals . . . . . . . . . . . . . (1,224)
--------
Net periodic pension cost. . . . . . . . . . . . . . $ 3,026
========
<PAGE>
The change in benefit obligation and plan assets and reconciliation
of funded status as of December 31, 1999 are as follows ($ in thousands):
1999
--------
Change in benefit obligation:
Projected benefit obligation at beginning
of year. . . . . . . . . . . . . . . . . . . . . $ --
Merger with JLW. . . . . . . . . . . . . . . . . . 85,311
Service cost . . . . . . . . . . . . . . . . . . . 5,902
Interest cost. . . . . . . . . . . . . . . . . . . 3,680
Benefits paid. . . . . . . . . . . . . . . . . . . (1,631)
Actuarial loss . . . . . . . . . . . . . . . . . . (4,309)
Changes in foreign exchange rates. . . . . . . . . 210
--------
Projected benefit obligation at end of year. . $ 89,163
========
Change in plan assets:
Fair value of plan assets at beginning of year . . $ --
Merger with JLW. . . . . . . . . . . . . . . . . . 111,197
Actual return on plan assets . . . . . . . . . . . 5,729
Benefits paid. . . . . . . . . . . . . . . . . . . (2,610)
Changes in foreign exchange rates. . . . . . . . . 408
--------
Fair value of plan assets at end of year . . . $114,724
========
Reconciliation of funded status:
Funded status. . . . . . . . . . . . . . . . . . . $ 25,561
Unrecognized actuarial loss. . . . . . . . . . . . (2,153)
--------
Net amount recognized. . . . . . . . . . . . . $ 23,408
========
The amounts recognized in the accompanying Consolidated Balance Sheet
as of December 31, 1999 are as follows ($ in thousands):
1999
--------
Prepaid pension asset. . . . . . . . . . . . . . . . $ 23,956
Accrued pension liability. . . . . . . . . . . . . . (548)
--------
Net amount recognized. . . . . . . . . . . . . $ 23,408
========
For one of the plans, the accumulated benefit obligation exceeded the
fair value of the plan assets at December 31, 1999. The related aggregate
benefit obligation was $2.4 million and the aggregate fair value of the
plan assets was $1.9 million.
Weighted average assumptions used in developing the projected benefit
obligation as of December 31 were generally as follows:
1999
--------
Discount rate used in determining present values . . 6.25%
Annual increase in future compensation levels. . . . 4.00%
Expected long-term rate of return on assets. . . . . 7.50%
Plan assets consist of a diversified portfolio of fixed-income
investments and equity securities.
<PAGE>
(11) STOCK OPTION AND STOCK COMPENSATION PLANS
STOCK AWARD AND INCENTIVE PLAN
In 1997, Jones Lang LaSalle adopted a stock award and incentive plan
that provides for the granting of options to purchase a specified number of
shares of common stock and other stock awards to eligible participants of
Jones Lang LaSalle. Under the plan, the total number of shares of common
stock available to be issued is 4,160,000. The options are granted at the
market value of common stock at the date of grant. The options vest at such
times and conditions as the Compensation Committee of the Board of
Directors of Jones Lang LaSalle determines and sets forth in the award
agreement. Such options granted in 1999 and 1998 vest over a period of zero
to five years. Such options granted in 1997 vest over a period of one to
six years. Certain 1997 options having a six-year vesting period are
subject to an accelerated vesting schedule based on the future average
stock price. At December 31, 1999 and 1998, there were 2,127,662 and
973,100 additional shares, respectively, available for grant under the
stock award and incentive plan.
The per share weighted-average fair value of options granted during
1999, 1998 and 1997 was $17.63, $16.44 and $11.63 on the date of grant
using the Black Scholes option-pricing model with the following
weighted-average assumptions:
1999 1998 1997
-------- -------- --------
Expected dividend yield. . . . . . 0.00% 0.00% 0.00%
Risk-free interest rate. . . . . . 6.90% 4.95% 6.95%
Expected life. . . . . . . . . . . 6 to 9 6 to 9 6 to 9
years years years
Expected volatility. . . . . . . . 47.34% 41.50% 16.50%
Contractual terms. . . . . . . . . 7 to 10 7 to 10 7 to 10
years years years
Jones Lang LaSalle accounts for its stock option and compensation
plans under the provisions of SFAS No. 123, which allows entities to
continue to apply the provisions of APB No. 25 and provide pro forma net
income and net income per share disclosures for employee option grants as
if the fair-value-based method defined in SFAS No. 123 had been applied.
Jones Lang LaSalle has elected to apply the provisions of APB No. 25 in
accounting for its stock award and incentive plan, and, accordingly, no
compensation cost has been recognized for its stock award and incentive
plan in the Consolidated Financial Statements. Had Jones Lang LaSalle
determined compensation cost based upon the fair value at the date of grant
for its options as set forth under SFAS No. 123, Jones Lang LaSalle's net
earnings (loss), basic earnings (loss) per common share and diluted
earnings (loss) per common share would have been as follows ($ in
thousands, except share data):
1999 1998 1997(1)
-------- -------- --------
Net earnings (loss). . . . . . . . $(98,767) $ 15,689 $ 23,924
Basic earnings (loss)
per common share . . . . . . . . (4.37) 0.97 1.48
Diluted earnings (loss)
per common share . . . . . . . . (4.37) 0.96 1.47
--------
(1) Earnings per share for 1997 is calculated based on earnings for the
period from conversion to corporate form, July 22, 1997, through
December 31, 1997.
<PAGE>
Stock option activity is as follows (shares in thousands):
1999 1998 1997
---- ---- ----
Weighted- Weighted- Weighted-
Shares Average Shares Average Shares Average
------ --------- ------ --------- ------ ---------
Outstanding
at beginning
of year . . . 1,241.9 $26.75 738.0 $23.29 - $ -
Granted. . . . 997.6 31.45 524.9 31.71 740.5 23.29
Exercised. . . (21.3) 23.25 - - - -
Forfeited. . . (207.2) 31.39 (21.0) 29.56 (2.5) 23.00
------- ------ ----- ------ ----- ------
Outstanding
at end of
year. . . . . 2,011.0 $28.67 1,241.9 $26.75 738.0 $23.29
======= ====== ======= ====== ===== ======
At December 31, 1999, 1998 and 1997, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was
$9.31-$43.88 and 6.5 years, $23.00-$43.88 and 7.6 years, and $23.00-$35.06
and 9.5 years, respectively. At December 31, 1999 and 1998, approximately
645,333 and 534,000 options were exercisable, respectively. None of the
options were exercisable at December 31, 1997.
OTHER STOCK COMPENSATION PROGRAMS
In 1999, Jones Lang LaSalle established a stock compensation program
for certain of its employees pursuant to which they are awarded a portion
of their annual bonus in the form of restricted shares of Jones Lang
LaSalle common stock. The number of shares awarded was enhanced by Jones
Lang LaSalle by 20% in 1999 and will be enhanced by 15% in future years.
The shares vest 50% at eighteen months from the date of grant and the
remaining 50% at thirty months from the date of grant. The related
compensation cost is amortized to expense over the vesting period.
In 1997 and 1998, Jones Lang LaSalle maintained a Stock Compensation
Program ("SCP") for eligible employees. Under this plan, employee
contributions for stock purchases were enhanced by Jones Lang LaSalle
through an additional contribution of 15%. Employee contributions vested
immediately while Jones Lang LaSalle contributions were subject to various
vesting periods. The related compensation cost is amortized to expense over
the vesting period. As of December 31, 1999, 37,598 shares have been issued
under this plan. The plan was suspended in 1999.
In 1998, Jones Lang LaSalle adopted an Employee Stock Purchase Plan
("ESPP") for eligible employees. Under this plan, employee contributions
for stock purchases will be enhanced by Jones Lang LaSalle through an
additional contribution of 15%. Employee contributions and Jones Lang
LaSalle contributions vest immediately. As of December 31, 1999, 226,165
shares have been issued under this plan.
(12) TRANSACTIONS WITH AFFILIATES
Certain officers of Jones Lang LaSalle are trustees for real estate
funds that were organized by a subsidiary. Jones Lang LaSalle earns
advisory and management fees for services rendered to the funds. Included
in the accompanying Consolidated Financial Statements are revenues of
$.2 million, $2.3 million and $4.2 million for 1999, 1998 and 1997,
respectively, as well as receivables of $.03 million and $.1 million at
December 31, 1999 and 1998, respectively, related to such services.
<PAGE>
Jones Lang LaSalle also earns fees and commissions for services
rendered to affiliates of Dai-ichi Life Property Holdings, Inc. and
Galbreath Holdings, LLC, two significant stockholders and real estate
ventures in which Jones Lang LaSalle has an equity interest. Included in
the accompanying Consolidated Financial Statements are revenues from such
affiliates of $39.0 million, $45.9 million and $33.0 million for 1999, 1998
and 1997, respectively, as well as receivables for reimbursable expenses
and revenues as of December 31, 1999 and 1998 of $8.7 million and
$9.3 million, respectively.
(13) COMMITMENTS AND CONTINGENCIES
At December 31, 1999, Jones Lang LaSalle has several completion and
budget guarantees relating to development projects. Management does not
expect to incur any material losses under these guarantees.
Jones Lang LaSalle 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. Many of these litigation
matters are covered by insurance. In the opinion of Management, the
ultimate resolution of such litigation matters is not expected to have a
material adverse effect on the financial position, results of operations or
liquidity of Jones Lang LaSalle.
(14) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Jones Lang LaSalle Finance B.V. intends to issue Senior Notes (the
"Notes") due 2007 with a value of Euros 165.0 million ($152.4 million). The
payment obligations under the Notes are fully and unconditionally
guaranteed by Jones Lang LaSalle and certain of its wholly-owned
subsidiaries; Jones Lang LaSalle America's, Inc., LaSalle Investment
Management Inc., Jones Lang LaSalle International, Inc., Jones LaSalle
Co-Investment, Inc., LaSalle Hotel Advisors, Inc., and Jones Lang
LaSalle Ltd. (the "Guarantor Subsidiaries"). All of Jones Lang LaSalle's
remaining subsidiaries (the "Non-Guarantor Subsidiaries") are owned by the
Guarantor Subsidiaries. The following supplemental Consolidating Condensed
Balance Sheets as of December 31, 1999 and 1998, Consolidating Condensed
Statement of Earnings and Consolidating Condensed Statement of Cash Flows
for the years ended December 31, 1999, and 1998 present financial
information for (i) Jones Lang LaSalle (carrying any investment in
subsidiaries under the equity method), (ii) Jones Lang LaSalle Finance B.V.
(the issuer of the Notes), (iii) on a combined basis the Guarantor
Subsidiaries (carrying any investment in Non-Guarantor subsidiaries under
the equity method) and (iv) on a combined basis the Non-Guarantor
Subsidiaries. Condensed consolidating financial information has not been
presented for any period prior to the year ended December 31, 1998 because
no Guarantor Subsidiaries existed prior to January 1, 1998. Separate
financial statements of the Guarantor Subsidiaries are not presented
because the guarantors are jointly, severally, and unconditionally liable
under the guarantees, and Jones Lang LaSalle believes that separate
financial statements and other disclosures regarding the Guarantor
Subsidiaries are not material to investors. In general, Jones Lang LaSalle
has entered into third party borrowings, financing its subsidiaries via
intercompany accounts that are then converted into equity on a periodic
basis. All intercompany activity has been included as subsidiary activity
in investing activities in the Consolidating Condensed Statements of Cash
Flows. Cash is managed on a consolidated basis and there is a right of
offset between bank accounts in the different groupings of legal entities
in the condensed consolidating financial information. Therefore, in certain
cases negative cash balances have not been reallocated to payables as they
legally offset positive cash balances elsewhere in Jones Lang LaSalle. In
certain cases, taxes have been calculated on the basis of a group position
that includes both Guarantor and Non-Guarantor Subsidiaries. In such cases,
the taxes have been allocated to individual legal entities on the basis of
that legal entity's pre tax income.
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1999
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents. . $ (615) $ - $ 1,027 $ 22,896 $ - $ 23,308
Trade receivables,
net of allowances. . . . . 2,070 - 128,599 139,924 - 270,593
Other current assets . . . . 23,379 - 15,223 16,179 - 54,781
-------- -------- -------- -------- -------- --------
Total current assets . . 24,834 - 144,849 178,999 - 348,682
Property and equipment,
at cost, less accumulated
depreciation . . . . . . . . 749 - 48,491 27,230 - 76,470
Intangibles resulting from
business acquisitions and
JLW merger, net of
accumulated amortization . . - - 287,848 79,367 - 367,215
Other assets, net. . . . . . . 3,010 - 38,147 91,276 - 132,433
Investment in subsidiaries . . 357,593 - 348,702 - (706,295) -
-------- -------- -------- -------- --------- --------
$386,186 $ - $868,037 $376,872 $(706,295) $924,800
======== ======== ======== ======== ========= ========
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable and
accrued liabilities. . . . $ (4,847) $ - $ 30,516 $ 62,588 $ - $ 88,257
Short-term borrowings. . . . 156,471 - 959 5,213 - 162,643
Other current liabilities. . (250,272) - 485,978 (66,487) - 169,219
-------- -------- -------- -------- --------- --------
Total current
liabilities. . . . . . (98,648) - 517,453 1,314 - 420,119
Long-term liabilities:
Credit facilities. . . . . . 159,743 - - - - 159,743
Other long-term
liabilities. . . . . . . . 1,155 - (7,009) 26,856 - 21,002
-------- -------- -------- -------- --------- --------
Total liabilities. . . . . 62,250 - 510,444 28,170 - 600,864
Commitments and contingencies
Stockholders' equity . . . . 323,936 - 357,593 348,702 (706,295) 323,936
-------- -------- -------- -------- --------- --------
$386,186 $ - $868,037 $376,872 $(706,295) $924,800
======== ======== ======== ======== ========= ========
</TABLE>
<PAGE>
<TABLE>
(14) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Year Ended December 31, 1999
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . $ - $ - $342,871 $412,568 $ - $755,439
Equity earnings (loss)
from subsidiaries. . . . . 8,970 - 53,410 - (62,380) -
-------- -------- -------- -------- -------- --------
Total revenue. . . . . . . 8,970 - 396,281 412,568 (62,380) 755,439
Operating expenses before
merger related non-recurring
charges. . . . . . . . . . . 13,816 - 341,276 320,249 - 675,341
Merger related non-recurring
charges. . . . . . . . . . . 100,054 - 41,536 9,811 - 151,401
-------- -------- -------- -------- -------- --------
Operating income (loss). . (104,900) - 13,469 82,508 (62,380) (71,303)
Interest expense,
net of interest income . . . 1,979 - 16,325 (93) - 18,211
-------- -------- -------- -------- -------- --------
Earnings (loss) before
provision (benefit)
for income taxes . . . . (106,879) - (2,856) 82,601 (62,380) (89,514)
Net provision (benefit)
for income taxes . . . . (12,037) - (11,826) 29,191 - 5,328
-------- -------- -------- -------- -------- --------
Net earnings (loss). . . . $(94,842) $ - $ 8,970 $ 53,410 $(62,380) $(94,842)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 1999
($ in thousands)
<CAPTION>
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
(Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities . . . . . . . . . $(27,865) $(77,145) $ 71,803 $(33,207)
-------- -------- -------- --------
Cash flows provided by (used in)
investing activities:
Net capital additions-property
and equipment. . . . . . . . . . . . (734) (24,517) (11,597) (36,848)
Cash balances assumed in Jones
Lang Wootton merger, net of
cash paid and transaction costs. . . - 19,388 (47,092) (27,704)
Other acquisitions and investments,
net of cash acquired and
transaction costs. . . . . . . . . . - (1,022) (2,008) (3,030)
Subsidiary activity. . . . . . . . . . (91,893) 93,929 (2,036) -
Investments in real estate ventures. . - (4,533) 4,972 439
-------- -------- -------- --------
Net cash provided by (used in)
investing activities . . . . . (92,627) 83,245 (57,761) (67,143)
Cash flows provided by (used in)
financing activities:
Net borrowings under credit facility . 326,004 - - 326,004
Proceeds from borrowings under
credit facility. . . . . . . . . . . (212,022) (7,233) (4,224) (223,479)
Common stock issued under stock
option plan. . . . . . . . . . . . . 4,192 - - 4,192
-------- -------- -------- --------
Net cash provided by (used in)
financing activities . . . . . 118,174 (7,233) (4,224) 106,717
-------- -------- -------- --------
<PAGE>
JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED
Year Ended December 31, 1999
($ in thousands)
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
(Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
Net increase (decrease) in
cash and cash equivalents. . . (2,318) (1,133) 9,818 6,367
Cash and cash equivalents,
January 1. . . . . . . . . . . 1,703 2,160 13,078 16,941
-------- -------- -------- --------
Cash and cash equivalents,
December 31. . . . . . . . . . $ (615) $ 1,027 $ 22,896 $ 23,308
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 1998
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents. . . $ 1,703 $ - $ 2,160 $ 13,078 $ - $ 16,941
Trade receivables,
net of allowances. . . . . . 3,683 - 46,170 67,112 - 116,965
Other current assets . . . . . 8,438 - 16,637 7,463 - 32,538
-------- -------- -------- -------- --------- --------
Total current assets . . 13,824 - 64,967 87,653 - 166,444
Property and equipment,
at cost, less accumulated
depreciation . . . . . . . . 56 - 23,214 5,503 - 28,773
Intangibles resulting from
business acquisitions and
JLW merger, net of
accumulated amortization . . - - 229,432 5 - 229,437
Other assets, net. . . . . . . 2,098 - 5,896 58,273 - 66,267
Investment in subsidiaries . . 75,425 - 80,361 - (155,786) -
-------- -------- -------- -------- --------- --------
$ 91,403 $ - $403,870 $151,434 $(155,786) $490,921
======== ======== ======== ======== ========= ========
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable and
accrued liabilities. . . . . $ 8,372 $ - $ 23,275 $ 19,454 $ - $ 51,101
Other current liabilities. . . (289,888) - 316,338 40,272 - 66,722
-------- -------- -------- -------- --------- --------
Total current
liabilities. . . . . . (281,516) - 339,613 59,726 - 117,823
Long-term liabilities:
Credit facilities. . . . . . 202,923 - - - - 202,923
Other long-term liabilities. . 424 - (11,168) 11,347 - 603
-------- -------- -------- -------- --------- --------
Total liabilities. . . . (78,169) - 328,445 71,073 - 321,349
Commitments and contingencies
Stockholders' equity . . . . . 169,572 - 75,425 80,361 (155,786) 169,572
-------- -------- -------- -------- --------- --------
$ 91,403 $ - $403,870 $151,434 $(155,786) $490,921
======== ======== ======== ======== ========= ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Year Ended December 31, 1998
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . $ 859 $ - $157,047 $146,558 $ - $304,464
Equity earnings (loss)
from subsidiaries. . . . . . 26,723 - 55,283 - (82,006) -
-------- -------- -------- -------- -------- --------
Total revenue. . . . . . 27,582 - 212,330 146,558 (82,006) 304,464
Operating expenses before
merger related non-recurring
charges. . . . . . . . . . . 6,943 - 166,531 83,127 - 256,601
Merger related non-recurring
charges. . . . . . . . . . . - - 10,021 - - 10,021
-------- -------- -------- -------- -------- --------
Operating income (loss). 20,639 - 35,778 63,431 (82,006) 37,842
Interest expense,
net of interest income . . . (2,471) - 5,484 1,140 - 4,153
-------- -------- -------- -------- -------- --------
Earnings (loss) before
provision (benefit)
for income taxes . . . 23,110 - 30,294 62,291 (82,006) 33,689
Net provision (benefit)
for income taxes . . . 2,645 - 3,571 7,008 - 13,224
-------- -------- -------- -------- -------- --------
Net earnings (loss). . . $ 20,465 $ - $ 26,723 $ 55,283 $(82,006) $ 20,465
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 1998
($ in thousands)
<CAPTION>
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
(Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities . . . . . . . . . $ 1,823 $(29,534) $ 46,980 $ 19,269
Cash flows provided by (used in)
investing activities:
Net capital additions-property
and equipment. . . . . . . . . . . . (49) (11,518) (4,025) (15,592)
Cash balances assumed in Jones
Lang Wootton merger, net of
cash paid and transaction costs. . . - - - -
Other acquisitions and investments,
net of cash acquired and
transaction costs. . . . . . . . . . - (178,919) - (178,919)
Subsidiary activity. . . . . . . . . . (202,253) 213,938 (11,685) -
Investments in real estate ventures. . - (10,229) (30,625) (40,854)
-------- -------- -------- --------
Net cash used in investing
activities . . . . . . . . . . . (202,302) 13,272 (46,335) (235,365)
Cash flows provided by (used in)
financing activities:
Net borrowings under credit facility . 356,929 - - 356,929
Proceeds from borrowings under
credit facility. . . . . . . . . . . (154,552) - - (154,552)
Common stock issued under stock
option plan. . . . . . . . . . . . . - - - -
-------- -------- -------- --------
Net cash provided by
financing activities . . . . . . 202,377 - - 202,377
-------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. . . . 1,898 (16,262) 645 (13,719)
Cash and cash equivalents,
January 1. . . . . . . . . . . . (195) 18,422 12,433 30,660
-------- -------- -------- --------
Cash and cash equivalents,
December 31. . . . . . . . . . . $ 1,703 $ 2,160 $ 13,078 $ 16,941
======== ======== ======== ========
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(in thousands)
(Unaudited)
March 31, December 31,
2000 1999
---------- ------------
ASSETS
------
Current assets:
Cash and cash equivalents. . . . . . . . . $ 15,771 $ 23,308
Trade receivables, net of allowances
of 10,996 and 9,871 in 2000 and 1999,
respectively . . . . . . . . . . . . . . 235,090 270,593
Notes receivable and advances to
real estate ventures . . . . . . . . . . 4,616 4,519
Other receivables. . . . . . . . . . . . . 4,570 7,045
Income tax refund receivable . . . . . . . 14,500 14,500
Prepaid expenses . . . . . . . . . . . . . 10,117 9,598
Deferred tax assets. . . . . . . . . . . . 16,699 13,673
Other assets . . . . . . . . . . . . . . . 16,563 5,446
-------- --------
Total current assets . . . . . . . . . $317,926 $348,682
======== ========
Property and equipment, at cost,
less accumulated depreciation of 60,015
and 55,943 in 2000 and 1999, respectively. $ 78,505 $ 76,470
Intangibles resulting from business
acquisitions and JLW merger, net of
accumulated amortization of 31,599 and
27,515 in 2000 and 1999, respectively. . . 363,700 367,215
Investments in real estate ventures. . . . . 73,246 67,305
Long-term receivables, net . . . . . . . . . 27,494 27,962
Prepaid pension asset. . . . . . . . . . . . 22,800 23,956
Deferred tax assets. . . . . . . . . . . . . 5,188 5,270
Other assets, net. . . . . . . . . . . . . . 8,813 7,940
-------- --------
$897,672 $924,800
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Balance Sheets March 31, 2000 and December 31, 1999
(in thousands)
(Unaudited)
March 31, December 31,
2000 1999
---------- ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Accounts payable and accrued liabilities . $ 92,029 $ 88,257
Accrued compensation . . . . . . . . . . . 70,758 142,960
Short-term borrowings. . . . . . . . . . . 181,394 162,643
Deferred tax liabilities . . . . . . . . . 231 -
Other liabilities. . . . . . . . . . . . . 21,614 26,259
-------- --------
Total current liabilities. . . . . . . $366,026 $420,119
======== ========
Long-term liabilities:
Credit facilities. . . . . . . . . . . . . $194,466 $159,743
Deferred tax liabilities . . . . . . . . . 7,225 7,535
Other. . . . . . . . . . . . . . . . . . . 15,539 12,878
-------- --------
Total liabilities. . . . . . . . . . . 583,256 600,275
Commitments and contingencies
Minority interest in consolidated
subsidiaries . . . . . . . . . . . . . . . 554 589
Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
30,288,978 and 30,285,472 shares
issued and outstanding as of 2000
and 1999, respectively . . . . . . . . . 303 303
Additional paid-in capital . . . . . . . . 449,132 442,699
Unallocated ESOT shares. . . . . . . . . . (7) (7)
Deferred stock compensation. . . . . . . . (56,531) (70,106)
Retained deficit . . . . . . . . . . . . . (75,022) (50,050)
Accumulated other comprehensive income . . (4,013) 1,097
-------- --------
Total stockholders' equity . . . . . . 313,862 323,936
-------- --------
$897,672 $924,800
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Earnings and Comprehensive Income
For the Three Months Ended March 31, 2000 and 1999
(in thousands, except share data)
(Unaudited)
March 31, March 31,
2000 1999
---------- ----------
Revenue:
Fee based services . . . . . . . . . . . . $180,423 $100,704
Equity in earnings from uncon-
solidated ventures . . . . . . . . . . . 5,940 181
Other income . . . . . . . . . . . . . . . 617 536
-------- --------
Total revenue. . . . . . . . . . . . . 186,980 101,421
Operating expenses:
Compensation and benefits. . . . . . . . . 130,237 75,439
Operating, administrative and other. . . . 51,485 31,317
Depreciation and amortization. . . . . . . 10,694 6,955
-------- --------
Total operating expenses before
merger related non-recurring
charges. . . . . . . . . . . . . . . 192,416 113,711
-------- --------
Operating loss before merger related
non-recurring charges. . . . . . . . . . . (5,436) (12,290)
Merger related non-recurring charges:
Stock compensation expense . . . . . . . . 18,326 46,199
Integration and transition expense . . . . - 7,844
-------- --------
Total merger related non-recurring
charges. . . . . . . . . . . . . . . 18,326 54,043
-------- --------
Total operating expenses . . . . . . . 210,742 167,754
-------- --------
Operating loss . . . . . . . . . . . . (23,762) (66,333)
Interest expense, net of interest income . . 6,675 2,642
-------- --------
Loss before benefit for income taxes . . . . (30,437) (68,975)
Net benefit for income taxes . . . . . . . . (5,465) (13,560)
-------- --------
Net loss . . . . . . . . . . . . . . . $(24,972) $(55,415)
======== ========
Other comprehensive income:
Foreign currency translation adjustments . (5,110) (433)
Comprehensive loss . . . . . . . . . . . $(30,082) $(55,848)
======== ========
Basic loss per common share. . . . . . . . . $ (1.02) $ (3.09)
======== ========
Basic weighted average shares outstanding. . 24,395,021 17,914,221
========== ==========
Diluted loss per common share. . . . . . . . $ (1.02) $ (3.09)
======== ========
Diluted weighted average shares
outstanding. . . . . . . . . . . . . . . . 24,395,021 17,914,221
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Stockholders' Equity
Periods Ended March 31, 2000 and December 31, 1999
(in thousands, except share data)
(Unaudited)
<CAPTION>
Accu-
mulated
Other
Addi- Unallo- Deferred Compre-
Common Stock tional cated Stock Retained hensive
---------------------- Paid-In ESOT Compen- Earnings Income
Shares Amount Capital Shares sation (Deficit) (loss) Total
------------ -------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1998 . . . . .16,264,176 $163 $123,543 $- $- $44,792 $1,074 $169,572
Net loss . . . . . . . . . - - - - - (94,842) - (94,842)
Shares issued in
connection with:
Stock option plan. . . . . 21,292 - 495 - - - - 495
Stock purchase programs. . . 199,587 2 3,695 - - - - 3,697
Share activity related
to JLW merger:
Shares issued at
closing. . . . . . . . .14,254,116 143 355,233 (9) (160,253) - - 195,114
Adjustment shares
subsequently retained. . (453,699) (5) (8,462) - - - - (8,467)
ESOT shares allocated. . . - - 1,597 2 - - - 1,599
Stock compensation
adjustments. . . . . . . - - (33,402) - 27,906 - - (5,496)
Amortization of
deferred stock
compensation . . . . . . - - - - 62,241 - - 62,241
Cumulative effect of
foreign currency
translation
adjustments. . . . . . . . - - - - - - 23 23
---------- -------- -------- -------- -------- -------- -------- --------
Balances at
December 31, 1999. . . . .30,285,472 303 442,699 (7) (70,106) (50,050) 1,097 323,936
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Stockholders' Equity - Continued
Accu-
mulated
Other
Addi- Unallo- Deferred Compre-
Common Stock tional cated Stock Retained hensive
---------------------- Paid-In ESOT Compen- Earnings Income
Shares Amount Capital Shares sation (Deficit) (loss) Total
------------ -------- -------- -------- -------- --------- -------- --------
Net loss . . . . . . . . . . - - - - - (24,972) - (24,972)
Shares issued in
connection with:
Stock purchase
programs . . . . . . . . 65,306 1 2,425 - - - - 2,426
Share activity related
to JLW merger:
Shares repurchased
for payment of
taxes on ESOT
Shares allocated at
December 31, 1999. . . . (61,800) (1) (743) - - - - (744)
Stock compensation
adjustments. . . . . . . - - 4,751 - (4,304) - - 447
Amortization of
deferred stock
compensation . . . . . . - - - - 17,879 - - 17,879
Other. . . . . . . . . . . - - - - - - (5,110) (5,110)
---------- -------- -------- -------- -------- -------- -------- --------
Balances at
March 31, 2000 . . . . . .30,288,978 $ 303 $449,132 $ (7) $(56,531) $(75,022) $ (4,013) $313,862
========== ======== ======== ======== ======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(in thousands, unless otherwise noted)
(Unaudited)
2000 1999
---------- ----------
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(24,972) $(55,415)
Reconciliation of net loss to net
cash used in operating activities:
Depreciation and amortization. . . . . . 10,694 6,955
Equity in earnings from uncon-
solidated ventures . . . . . . . . . . (5,940) (181)
Provision for loss on receivables
and other assets . . . . . . . . . . . 1,455 2,524
Stock compensation expense . . . . . . . 18,326 46,199
Amortization of deferred compensation. . 691 -
Changes in:
Receivables. . . . . . . . . . . . . . . . 33,639 16,729
Prepaid expenses and other assets. . . . . (1,552) (4,894)
Deferred tax assets and income tax
refund receivable. . . . . . . . . . . . (9,426) (20,180)
Accounts payable, accrued liabilities
and accrued compensation . . . . . . . . (76,948) (23,412)
-------- --------
Net cash used in operating
activities . . . . . . . . . . . . . (54,033) (31,675)
Cash flows provided by (used in)
investing activities:
Net capital additions - property
and equipment. . . . . . . . . . . . . . (10,266) (5,888)
Cash paid in connection with Jones
Lang Wootton merger, net of cash
balances assumed . . . . . . . . . . . . - (33,930)
Other acquisitions and investments,
net of cash balances assumed . . . . . . (1,250) (1,380)
Investments in real estate ventures:
Capital contributions and advances
to real estate ventures. . . . . . . . (2,363) (366)
Distributions, repayments of advances
and sale of investments. . . . . . . . 4,475 3,525
-------- --------
Net cash used in
investing activities . . . . . . . (9,404) (38,039)
Cash flows provided by financing activities:
Proceeds from borrowings under
credit facilities. . . . . . . . . . . . 117,356 118,556
Repayments of borrowings under
credit facilities. . . . . . . . . . . . (63,882) (27,159)
Common stock issued under stock option
plan and stock purchase programs . . . . 2,426 1,363
-------- --------
Net cash provided by
financing activities . . . . . . . 55,900 92,760
-------- --------
Net (decrease) increase in
cash and cash equivalents. . . . . (7,537) 23,046
Cash and cash equivalents,
beginning of period. . . . . . . . 23,308 16,941
-------- --------
Cash and cash equivalents,
end of period. . . . . . . . . . . $ 15,771 $ 39,987
======== ========
<PAGE>
JONES LANG LASALLE INCORPORATED
Consolidated Statements of Cash Flows - Continued
2000 1999
---------- ----------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . $ 5,665 $ 2,595
Taxes, net of refunds. . . . . . . . . . 2,609 10,041
Non-cash investing and financing
activities:
Acquisitions and merger:
Shares issued in connection
with merger . . . . . . . . . . . . - 149,521
Fair value of assets acquired . . . . 174 (206,992)
Fair value of liabilities assumed . . 3,797 179,025
Goodwill. . . . . . . . . . . . . . . (3,971) (156,864)
Other investments . . . . . . . . . . (1,250) -
-------- --------
Cash paid, net of cash
balances assumed . . . . . . . . . $ (1,250) $(35,310)
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
JONES LANG LASALLE INCORPORATED
Notes to Consolidated Financial Statements
(in millions, except where otherwise noted)
(Unaudited)
These notes should be read in conjunction with the notes to our
audited financial statements, which are included above commencing on
page F-12.
(1) ACCOUNTING POLICIES
INTERIM INFORMATION
The consolidated financial statements as of March 31, 2000 and for
the three month periods ended March 31, 2000 and 1999 are unaudited;
however, in the opinion of management, all adjustments (consisting solely
of normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements for these interim periods have been
included. The results for the periods ended March 31, 2000 and 1999 are not
necessarily indicative of the results to be obtained for the full fiscal
year.
Certain prior year amounts have been reclassified to conform with the
current presentation.
BONUS INCENTIVE COMPENSATION
In the first quarter of 2000, Jones Lang LaSalle changed its method
of estimating and allocating bonus incentive compensation to interim
periods. The impact of this change for the three months ended March 31,
2000 was to reduce compensation expense by approximately $8.2 million. This
change does not impact the overall compensation cost that will be incurred
during the year ended December 31, 2000, but rather the periods in which it
is recognized.
EARNINGS PER SHARE
The basic and diluted losses per common share were calculated based
on basic weighted average shares outstanding of 24.4 million and
17.9 million for the three month periods ended March 31, 2000 and 1999,
respectively. As a result of the operating losses incurred for these
periods, diluted weighted average shares outstanding for the three month
periods ended March 31, 2000 and 1999 do not give effect to common stock
equivalents, as to do so would be anti-dilutive. These common stock
equivalents consist principally of consideration shares issued in
connection with the JLW merger that are subject to vesting provisions or
are contingently returnable. To a lesser extent, common stock equivalents
also include outstanding stock options whose exercise price was less than
the average market price of Jones Lang LaSalle's stock for the period and
shares to be issued under employee stock compensation programs.
STATEMENT OF CASH FLOWS
The effects of foreign currency translation on cash balances are
reflected in cash flows from operating activities on the Consolidated
Statements of Cash Flows.
(2) JONES LANG WOOTTON MERGER
On March 11, 1999, LaSalle Partners Incorporated merged its
businesses with those of the Jones Lang Wootton companies ("JLW") and
changed its name to Jones Lang LaSalle Incorporated. In accordance with the
purchase and sale agreements, Jones Lang LaSalle issued 14.3 million shares
of common stock and paid cash consideration of $6.2 million. This trans-
action, which was principally structured as a share exchange, has been
treated as an acquisition and is being accounted for using both APB Opinion
<PAGE>
No. 16, "Business Combinations" and APB Opinion No. 25, "Accounting for
Stock Issued to Employees." See our Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 for a full discussion of this
transaction and the related accounting treatment.
The total value attributed to the issuance of the 7.2 million shares
accounted for under APB No. 16 of $141.9 million, in addition to the cash
payment of $6.2 million and capitalizable transaction costs of
approximately $15.8 million, have been allocated to the identifiable assets
acquired and liabilities assumed, based on management's estimates of fair
value, which totaled $251.4 million and $244.5 million, respectively. The
resulting excess purchase price of $157.0 million was allocated to goodwill
which is being amortized on a straight-line basis over 40 years based on
management's estimate of useful lives. Included in the assets acquired was
$32.2 million in cash and included in the liabilities assumed was
$47.4 million of obligations to former partners of undistributed earnings.
The liabilities assumed also included employee termination costs of
$9.3 million, as well as office rental payments in excess of sublease
rental income of $.3 million and telecommunication lease termination costs
of $.8 million related to the closing of offices with geographic overlap in
the United States. As of March 31, 2000, $.4 million of employee
termination costs remain unpaid and will be paid in the remainder of 2000.
Approximately $1.1 million of office closure costs remain unpaid as of
March 31, 2000. These amounts will be recognized through 2002.
In relation to the transaction, 4.6 million of the shares issued are
subject to forfeiture or vesting provisions and therefore, pursuant to APB
Opinion No. 25, have been accounted for as deferred compensation with
compensation expense to be recognized over the forfeiture or vesting
period. In addition, 1.3 million shares are deemed to be contingently
returnable and therefore, are being accounted for as a variable stock award
plan. Under a variable stock award plan, the amount of compensation expense
and value of deferred compensation will be adjusted at the end of each
quarter based on the change in stock price from the previous quarter until
the final number of shares to be issued is known.
Compensation expense incurred for the three months ended March 31,
2000 related to the amortization of deferred compensation totaled
$18.3 million, net of the quarterly adjustment for the change in stock
price. Compensation expense incurred for the three months ended March 31,
1999 related to the issuance of shares and the amortization of deferred
compensation totaled $46.2 million, net of the quarterly adjustment for the
change in stock price. Deferred compensation at March 31, 2000 totaled
$56.5 million, including the effect of the quarterly adjustment for the
change in stock price, which will be amortized into compensation expense
during the remainder of 2000. Such compensation expense, in addition to
compensation expense anticipated to be incurred at December 31, 2000
associated with the final allocation of the shares in the employee stock
ownership trust ("ESOT"), is expected to result in a significant non-cash
net loss for Jones Lang LaSalle for the year.
(3) BUSINESS SEGMENTS
Operations are classified into five business segments: two global
businesses, (i) Investment Management and (ii) Hotel Services; and Owner
and Occupier Services which is divided into three geographic regions,
(iii) the Americas, (iv) Europe and (v) Asia Pacific. The Investment
Management segment provides real estate investment management services to
institutional investors, corporations, and high net worth individuals. The
Hotels Services segment provides strategic advisory, sales, acquisition,
valuation and asset management services related solely to hotel, conference
and resort properties. Owner and Occupier Services consist primarily of
tenant representation and agency leasing, investment disposition and
acquisition, and valuation services (collectively, "implementation
services") and property management, corporate property services,
development and project management services (collectively, "management
services").
<PAGE>
Total revenue by industry segment includes revenue derived from
services provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. Jones Lang LaSalle
allocates all expenses, other than interest and income taxes, as nearly all
expenses incurred benefit one or more of the segments. Merger related non-
recurring charges are not allocated to the segments.
Summarized unaudited financial information by business segment for
the three month periods ended March 31, 2000 and 1999 is as follows ($ in
thousands):
Segment
Operating Results
March 31,
------------------------
2000 1999
---------- ----------
OWNER AND OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services. . . . . . . . $ 20,704 $ 17,159
Management services. . . . . . . . . . 29,229 26,610
Equity losses. . . . . . . . . . . . . (360) (180)
Other services . . . . . . . . . . . . 188 522
Intersegment revenue . . . . . . . . . 395 62
-------- --------
50,156 44,173
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . 59,594 57,086
Depreciation and amortization. . . . . 5,382 5,043
-------- --------
Operating loss . . . . . . . . . . . $(14,820) $(17,956)
======== ========
EUROPE
Revenue:
Implementation services. . . . . . . . $ 59,586 $ 21,468
Management services. . . . . . . . . . 20,176 6,331
Equity losses. . . . . . . . . . . . . - (21)
Other services . . . . . . . . . . . . 236 5
-------- --------
79,998 27,783
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . 72,128 21,189
Depreciation and amortization. . . . . 2,749 615
-------- --------
Operating income . . . . . . . . . . $ 5,121 $ 5,979
======== ========
ASIA PACIFIC
Revenue:
Implementation services. . . . . . . . $ 18,688 $ 6,210
Management services. . . . . . . . . . 11,414 3,426
Equity losses. . . . . . . . . . . . . - (24)
Other services . . . . . . . . . . . . 167 115
-------- --------
30,269 9,727
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . 28,193 11,371
Depreciation and amortization. . . . . 1,550 406
-------- --------
Operating income (loss). . . . . . . $ 526 $ (2,050)
======== ========
<PAGE>
Segment
Operating Results
March 31,
------------------------
2000 1999
---------- ----------
HOTEL SERVICES -
Revenue:
Implementation services. . . . . . . . $ 3,380 $ 854
Management services. . . . . . . . . . 344 -
Other services . . . . . . . . . . . . 1 -
-------- --------
3,725 854
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . 3,353 920
Depreciation and amortization. . . . . 28 11
-------- --------
Operating income (loss). . . . . . . $ 344 $ (77)
======== ========
INVESTMENT MANAGEMENT -
Revenue:
Implementation services. . . . . . . . $ 2,969 $ 1,861
Advisory fees. . . . . . . . . . . . . 13,933 16,614
Equity earnings. . . . . . . . . . . . 6,300 406
Other services . . . . . . . . . . . . 25 65
Intersegment revenue . . . . . . . . . - 35
-------- --------
23,227 18,981
Operating expenses:
Compensation, operating and
administrative expenses. . . . . . . 18,849 16,286
Depreciation and amortization. . . . . 985 881
-------- --------
Operating income . . . . . . . . . . $ 3,393 $ 1,814
======== ========
Total segment revenue. . . . . . . . . . . . $187,375 $101,518
Intersegment revenue eliminations. . . . . . (395) (97)
-------- --------
Total revenue. . . . . . . . . . . . $186,980 $101,421
======== ========
Total segment operating expenses . . . . . . $192,811 $113,808
Intersegment operating expense eliminations. (395) (97)
-------- --------
Total operating expenses
before merger related
non-recurring charges. . . . . . . $192,416 $113,711
======== ========
Operating loss before merger
related non-recurring charges. . . $ (5,436) $(12,290)
======== ========
<PAGE>
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Jones Lang LaSalle Finance B.V. intends to issue Senior Notes (the
"Notes") due 2007 with a value of Euros 165.0 million ($152.4 million). The
payment obligations under the Notes are fully and unconditionally
guaranteed by Jones Lang LaSalle and certain of its wholly-owned
subsidiaries; Jones Lang LaSalle America's, Inc., LaSalle Investment
Management Inc., Jones Lang LaSalle International, Inc., Jones LaSalle
Co-Investment, Inc., LaSalle Hotel Advisors, Inc., and Jones Lang LaSalle
Ltd. (the "Guarantor Subsidiaries"). All of Jones Lang LaSalle's remaining
subsidiaries (the "Non-Guarantor Subsidiaries") are owned by the Guarantor
Subsidiaries. The following supplemental Consolidating Condensed Balance
Sheets as of March 31, 2000 and 1999, Consolidating Condensed Statement of
Earnings and Consolidating Condensed Statement of Cash Flows for the three
months ended March 31, 2000 and 1999, present financial information for
(i) Jones Lang LaSalle (carrying any investment in subsidiaries under the
equity method), (ii) Jones Lang LaSalle Finance B.V. (the issuer of the
Notes), (iii) on a combined basis the Guarantor Subsidiaries (carrying any
investment in Non-Guarantor subsidiaries under the equity method) and
(iv) on a combined basis the Non-Guarantor Subsidiaries. Separate financial
statements of the Guarantor Subsidiaries are not presented because the
guarantors are jointly, severally, and unconditionally liable under the
guarantees, and Jones Lang LaSalle believes that separate financial
statements and other disclosures regarding the Guarantor Subsidiaries are
not material to investors. In general, Jones Lang LaSalle has entered into
third party borrowings, financing its subsidiaries via intercompany
accounts that are then converted into equity on a periodic basis. All
intercompany activity has been included as subsidiary activity in investing
activities in the Consolidating Condensed Statements of Cash Flows. Cash is
managed on a consolidated basis and there is a right of offset between bank
accounts in the different groupings of legal entities in the condensed
consolidating financial information. Therefore, in certain cases negative
cash balances have not been reallocated to payables as they legally offset
positive cash balances elsewhere in Jones Lang LaSalle . In certain cases,
taxes have been calculated on the basis of a group position that includes
both Guarantor and Non-Guarantor Subsidiaries. In such cases, the taxes
have been allocated to individual legal entities on the basis of that legal
entity's pre tax income.
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 2000
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents. . . $ 2,035 $ - $ (2,107) $ 15,843 $ - $ 15,771
Trade receivables,
net of allowances. . . . . . 2,540 - 108,723 123,827 - 235,090
Other current assets . . . . . 31,802 - 18,477 16,786 - 67,065
-------- -------- -------- -------- -------- --------
Total current assets . . 36,377 - 125,093 156,456 - 317,926
Property and equipment,
at cost, less accumulated
depreciation . . . . . . . . 748 - 50,157 27,600 - 78,505
Intangibles resulting from
business acquisitions and
JLW merger, net of
accumulated amortization . . - - 285,997 77,703 - 363,700
Other assets, net. . . . . . . 3,089 - 43,926 90,526 - 137,541
Investment in subsidiaries . . 364,686 - 364,092 - (728,778) -
-------- -------- -------- -------- -------- --------
$404,900 $ - $869,265 $352,285 $(728,778) $897,672
======== ======== ======== ======== ======== ========
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable and
accrued liabilities. . . . . $ 10,545 $ - $ 29,492 $ 51,992 $ - $ 92,029
Short-term borrowings. . . . . 166,765 - 3,220 11,409 - 181,394
Other current liabilities. . . (281,811) - 468,872 (94,458) - 92,603
-------- -------- -------- -------- -------- --------
Total current
liabilities. . . . . . (104,501) - 501,584 (31,057) - 366,026
Long-term liabilities:
Credit facilities. . . . . . 194,466 - - - - 194,466
Other long-term
liabilities. . . . . . . . 1,073 - 2,995 19,250 - 23,318
-------- -------- -------- -------- -------- --------
Total liabilities. . . . 91,038 - 504,579 (11,807) - 583,810
Commitments and contingencies
Stockholders' equity . . . . . 313,862 - 364,686 364,092 (728,778) 313,862
-------- -------- -------- -------- -------- --------
$404,900 $ - $869,265 $352,285 $(728,778) $897,672
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Three Months Ended March 31, 2000
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . $ - $ - $ 79,718 $107,262 $ - $186,980
Equity earnings (loss)
from subsidiaries. . . . . . (7,582) - 5,936 - 1,646 -
-------- -------- -------- -------- -------- --------
Total revenue. . . . . . (7,582) - 85,654 107,262 1,646 186,980
Operating expenses before
merger related non-recurring
charges. . . . . . . . . . . 3,115 - 91,490 97,811 - 192,416
Merger related non-recurring
charges. . . . . . . . . . . 18,326 - - - - 18,326
-------- -------- -------- -------- -------- --------
Operating income (loss). (29,023) - (5,836) 9,451 1,646 (23,762)
Interest expense, net of
interest income. . . . . . . 2,373 - 4,199 103 - 6,675
-------- -------- -------- -------- -------- --------
Earnings (loss) before
provision (benefit)
for income taxes . . . . . . (31,396) - (10,035) 9,348 1,646 (30,437)
Net provision (benefit)
for income taxes . . . . . . (6,424) - (2,453) 3,412 - (5,465)
-------- -------- -------- -------- -------- --------
Net earnings (loss). . . $(24,972) $ - $ (7,582) $ 5,936 $ 1,646 $(24,972)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2000
($ in thousands)
<CAPTION>
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
(Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities . . . . . . . . . $ 5,399 $(31,711) $(27,721) $(54,033)
Cash flows provided by (used in)
investing activities:
Net capital additions - property
and equipment. . . . . . . . . . . . (7) (5,756) (4,503) (10,266)
Other acquisitions and investments,
net of cash acquired and
transaction costs. . . . . . . . . . . - (1,250) - (1,250)
Subsidiary activity. . . . . . . . . . . (50,185) 28,974 21,211 -
Investments in real estate ventures. . . - 4,348 (2,236) 2,112
-------- -------- -------- --------
Net cash provided by (used in)
investing activities . . . . . . (50,192) 26,316 14,472 (9,404)
Cash flows provided by financing
activities:
Net borrowings under credit facility . 108,899 2,261 6,196 117,356
Proceeds from borrowings under
credit facility. . . . . . . . . . . (63,882) - - (63,882)
Common stock issued under stock
option plan. . . . . . . . . . . . . 2,426 - - 2,426
-------- -------- -------- --------
Net cash provided by
financing activities . . . . . . 47,443 2,261 6,196 55,900
-------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. . . . . . . 2,650 (3,134) (7,053) (7,537)
Cash and cash equivalents,
January 1. . . . . . . . . . . . . . . (615) 1,027 22,896 23,308
-------- -------- -------- --------
Cash and cash equivalents,
March 31 . . . . . . . . . . . . . . . $ 2,035 $ (2,107) $ 15,843 $ 15,771
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 1999
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents. . . $ 2,791 $ - $ (576) $ 37,772 $ - $ 39,987
Trade receivables,
net of allowances. . . . . . 2,911 - 103,615 98,234 - 204,760
Other current assets . . . . . 15,934 - 35,110 14,070 - 65,114
-------- -------- -------- -------- -------- --------
Total current assets . . 21,636 - 138,149 150,076 - 309,861
Property and equipment,
at cost, less accumulated
depreciation . . . . . . . . 63 - 42,120 21,228 - 63,411
Intangibles resulting from
business acquisitions and
JLW merger, net of
accumulated amortization . . - - 289,109 101,195 - 390,304
Other assets, net. . . . . . . 2,785 - 30,648 69,879 - 103,312
investment in subsidiaries . . 191,088 - 165,872 - (356,960) -
-------- -------- -------- -------- --------- --------
$215,572 $ - $665,898 $342,378 $(356,960) $866,888
======== ======== ======== ======== ========= ========
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET - CONTINUED
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable and
accrued liabilities. . . . . $ 23,761 $ - $ 52,374 $ 39,974 $ - $116,109
Short-term borrowings. . . . . (3,984) - 18,298 5,637 - 19,951
Other current liabilities. . . (401,172) - 406,547 116,375 - 121,750
-------- -------- -------- -------- -------- --------
Total current
liabilities. . . . . . (381,395) - 477,219 161,986 - 257,810
Long-term liabilities:
Credit facilities. . . . . . 289,521 - 122 2,735 - 292,378
Other long-term liabilities. (4,911) - (2,531) 11,785 - 4,343
-------- -------- -------- -------- -------- --------
Total liabilities. . . . (96,785) - 474,810 176,506 - 554,531
Commitments and contingencies
Stockholders' equity . . . . . 312,357 - 191,088 165,872 (356,960) 312,357
-------- -------- -------- -------- --------- --------
$215,572 $ - $665,898 $342,378 $(356,960) $866,888
======== ======== ======== ======== ========= ========
</TABLE>
<PAGE>
<TABLE>
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Three Months Ended March 31, 1999
($ in thousands)
<CAPTION>
Consol-
Jones Lang idated
LaSalle Jones Non- Jones
Incorporated Lang Guarantor Guarantor Lang
(Parent and Finance Sub- Sub- Elimin- Incor-
(Guarantor) B.V. sidiaries sidiaries ations porated
------------ --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . $ - $ - $ 54,489 $ 46,932 $ - $101,421
Equity earnings (loss)
from subsidiaries. . . . . . (16,041) - 1,701 - 14,340 -
-------- -------- -------- -------- -------- --------
Total revenue. . . . . . (16,041) - 56,190 46,932 14,340 101,421
Operating expenses before
merger related non-recurring
charges. . . . . . . . . . . 2,261 - 66,824 44,626 - 113,711
Merger related non-recurring
charges. . . . . . . . . . . 48,134 - 5,558 351 - 54,043
-------- -------- -------- -------- -------- --------
Operating income (loss). (66,436) - (16,192) 1,955 14,340 (66,333)
Interest expense, net of
interest income. . . . . . . (1,045) - 3,968 (281) - 2,642
-------- -------- -------- -------- -------- --------
Earnings (loss) before
provision (benefit) for
income taxes . . . . . . . . (65,391) - (20,160) 2,236 14,340 (68,975)
Net provision (benefit)
for income taxes . . . . . . (9,976) - (4,119) 535 - (13,560)
-------- -------- -------- -------- -------- --------
Net earnings (loss). . . $(55,415) $ - $(16,041) $ 1,701 $ 14,340 $(55,415)
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1999
($ in thousands)
<CAPTION>
Jones Lang
LaSalle Consolidated
Incorporated Jones Lang
(Parent and Guarantor Non-Guarantor LaSalle
(Guarantor) Subsidiaries Subsidiaries Incorporated
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities . . . . . . . . . $ (9,931) $(81,095) $ 59,351 $(31,675)
Cash flows provided by (used in)
investing activities:
Net capital additions-property
and equipment. . . . . . . . . . . . (13) (5,232) (643) (5,888)
Cash balances assumed in Jones
Lang Wootton merger, net of
cash paid and transaction costs. . . - (10,244) (23,686) (33,930)
Other acquisitions and investments,
net of cash acquired and
transaction costs. . . . . . . . . . - (1,380) - (1,380)
Subsidiary activity. . . . . . . . . . (72,945) 86,550 (13,605) -
Investments in real estate ventures. . - 62 3,097 3,159
-------- -------- -------- --------
Net cash provided by (used in)
investing activities . . . . . . (72,958) 69,756 (34,837) (38,039)
Cash flows provided by financing
activities:
Net borrowings under credit facility . 109,773 8,603 180 118,556
Proceeds from borrowings under
credit facility. . . . . . . . . . . (27,159) - - (27,159)
Common stock issued under stock
option plan. . . . . . . . . . . . . 1,363 - - 1,363
-------- -------- -------- --------
Net cash provided by
financing activities . . . . . . 83,977 8,603 180 92,760
-------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. . . . 1,088 (2,736) 24,694 23,046
Cash and cash equivalents,
January 1. . . . . . . . . . . . 1,703 2,160 13,078 16,941
-------- -------- -------- --------
Cash and cash equivalents,
March 31 . . . . . . . . . . . . $ 2,791 $ (576) $ 37,772 $ 39,987
======== ======== ======== ========
</TABLE>
<PAGE>
(5) SUBSEQUENT EVENT
Jones Lang LaSalle increased its unsecured credit agreement to
$425 million, through the addition of five new banks to its credit group.
The credit agreement is now comprised of a $250 million revolving facility
maturing in October 2002 and a $175 million term facility maturing on
October 15, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: August 11, 2000 JONES LANG LASALLE INCORPORATED
By: /s/ William E. Sullivan
------------------------------
Name: William E. Sullivan
Title: Executive Vice President,
Chief Financial Officer
and Secretary
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 23 Consent of KPMG LLP
