<PAGE>
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): November 3, 1999
CB RICHARD ELLIS SERVICES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 001-12231 52-1616016
- ------------------ ---------------- -------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
200 North Sepulveda Boulevard, El Segundo, California 90245
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 563-8600
---------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) The following is furnished as an exhibit to this report:
99 Press release dated November 3, 1999 issued by CB Richard Ellis
Services, Inc.
This report may contain forward-looking statements as well as historical
information. Forward-looking statements, which are included in accordance with
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, may involve known and unknown risks, uncertainties and other factors that
may cause the Company's actual results and performance in future periods to be
materially different from any future results or performance suggested by the
forward-looking statements in the report. Such forward-looking statements speak
only as of the date of this report. The Company expressly disclaims any
obligation to update or revise any forward-looking statements found herein to
reflect any changes in company expectations or results or any change in events.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CB RICHARD ELLIS SERVICES, INC.
Date: November 12, 1999 By: /s/ Walter V. Stafford
----------------------------------------
Walter V. Stafford
Senior Executive Vice President,
Secretary and General Counsel
-3-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- ----------------------
99 Press release dated November 3, 1999 issued by CB Richard Ellis
Services, Inc.
-4-
<PAGE>
CB [LOGO] Richard Ellis
P R E S S R E L E A S E
- -------------------------- CB Richard Ellis, Inc.
Los Angeles Downtown
Office
333 South Beaudry Avenue
Los Angeles, CA 90017-5139
T 213 613 3123
F 213 613 3535
www.cbrichardellis.com
EXHIBIT 99
FOR IMMEDIATE RELEASE -- November 3, 1999
For further information:
Media: Investors:
Joseph Fitzpatrick Jeff Misakian
CB Richard Ellis CB Richard Ellis
213 613 3033 213 613 3351
CB Richard Ellis Reports Third Quarter Results
El Segundo, Calif. (November 3, 1999) - CB Richard Ellis (NYSE:CBG) today
reported a 12 percent increase in revenue for the third quarter ended September
30, 1999 and a 16 percent increase in revenue for the nine months ended
September 30, 1999, compared to the same periods last year. Earnings before
interest, taxes, depreciation and amortization (EBITDA) in the September 1999
quarter declined 16 percent to $30.0 million, compared to $35.9 million in the
same period last year. EBITDA for the nine months ended September 30, 1999
decreased 10 percent to $71.7 million, compared to $79.2 million in the same
period last year.
The increase in revenue in the September 1999 quarter primarily reflects
stronger sales and leasing revenues and contributions from operations acquired
last year. For the nine months ended September 30, 1999, the increase primarily
reflects the contribution from offshore operations acquired last year. The
decline in EBITDA was principally due to higher expenses associated with the
company's North American and global operations relative to the pace of revenue
growth and expenses related to the company's recently announced restructuring.
In addition, the emphasis on a bonus rather than commission-based compensation
structure by the company's offshore operations resulted in higher expenses
relative to revenues in the first three quarters of 1999 versus the same periods
last year.
Ray Wirta, chief executive officer, commented, "We are pleased that revenues
continued to run ahead of last year. Offshore operations, in particular,
continued to post strong results. We also are encouraged to see sales and
leasing activity in North America in the recent quarter begin to improve,
although there can be no assurance that this improvement will continue. Because
the pace of sales and leasing activity in North America trailed expectations for
most of the year, revenue growth has not been sufficient to offset the increased
costs from building our North American and global platform. This resulted in
lower earnings performance than we had expected to see at this time of the year.
While we expect to see
-more-
N A V I G A T I N G A N E W W O R L D
<PAGE>
CB Richard Ellis Press Release
November 3, 1999
Page 2 of 4
leasing activity remain strong for the rest of the year, final sales revenue for
the year will depend, in large part, on interest rate movements and the effect
of Y2K concerns on year-end closings.
"We believe the challenges we face in revenue growth this year are temporary.
Real estate fundamentals remain sound, continuing to benefit from a U.S. economy
with stable growth and low inflation and an encouraging real estate
supply/demand balance. Because of these temporary challenges, we are focused on
controlling costs for the remainder of the year and into 2000. Our previously
announced, and now fully implemented, restructuring of North American field
operations will result in annual cost savings of $14 million in 2000 and beyond.
These cost savings will have little impact on 1999 because of the associated
severance costs. We will continue to focus on opportunities to streamline
operations further in the coming months. In particular, we have targeted an
additional $10 million in annual run-rate cost savings from our North American
and global back-office operations, which currently run at a $55 million rate.
These additional cost savings are expected to be in place by the first quarter
of 2000."
The company reported net income for the September 1999 quarter of $4.6 million,
or $0.22 per diluted share, compared with $10.1 million, or $0.48 per diluted
share in the September 1998 quarter. Net income for the nine months ended
September 30, 1999 was $6.3 million, or $0.30 per diluted share, compared with a
net loss applicable to common shareholders of $21.3 million, or $1.07 per
diluted share in the same period last year. The results for the 1998 nine-month
period include after-tax merger-related and other non-recurring charges of $8.7
million and a deemed dividend of $32.3 million on the repurchase of the
company's preferred stock. Excluding these factors, the company reported
adjusted net income in the 1998 nine-month period of $19.7 million, or $0.96 per
diluted share.
The decline in net income reflects the lower EBITDA, higher interest expense and
goodwill amortization associated with last year's acquisitions and a higher
effective income tax rate.
Wirta commented, "The slower than expected pace of sales and leasing
transactions in North America in the first half of the year has made it
difficult to forecast revenue and earnings growth. Given the challenges we face
in sales activity in the fourth quarter, EBITDA for the 1999 full year could
come in 15 percent or more below current expectations. Because of the leverage
created by the debt incurred and goodwill recorded in past acquisitions, this
reduced level of EBITDA would translate into a reduction in earnings per share
of approximately 25 percent from current expectations for 1999."
Segment Results
As previously announced, the company changed its segment reporting due to a
reorganization undertaken to streamline operations and simplify reporting.
Prior periods have been restated to conform to the new segment presentation.
Transaction Management
Transaction Management, which includes commercial property sales and leasing
transactions and brokerage consulting fees, contributed 73 percent of the
company's consolidated revenue in the September 1999 quarter. Investment
property sales, which had previously been included in the Financial Services
segment, are now included in Transaction Management.
<PAGE>
CB Richard Ellis Press Release
November 3, 1999
Page 3 of 4
Transaction Management revenue increased 14 percent and 12 percent,
respectively, in the September 1999 quarter and year-to-date, compared to a year
ago. EBITDA for Transaction Management increased 12 percent in the September
1999 quarter, but decreased 5 percent in the nine months ended September 30,
1999 compared to the same periods last year. The EBITDA margin for Transaction
Management of 13.3 percent in the September 1999 quarter was essentially flat
compared to the same period last year. For the nine months ended September 30,
1999, the EBITDA margin for Transaction Management declined to 10.2 percent,
compared to 12.0 percent in the same period last year.
The revenue and EBITDA improvement in the current quarter over last year is
primarily due to higher sales and lease revenues, which reflect an improvement
in transaction activity. The decline in EBITDA performance in the September
1999 nine-month period reflects the continued impact of the slower pace of sales
and leasing activity in the first half of the year.
Wirta commented, "In spite of a challenging year for sales and leasing activity,
our Transaction Management segment posted solid results in the current quarter.
CB Richard Ellis continued to lead the market with several major deals that
demonstrated the synergies that are being brought to bear by our global services
platform."
Financial Services
Financial Services provides valuation, mortgage lending and advisory services to
property owners, including Wall Street firms and institutional, corporate and
offshore investors. Financial Services contributed 14 percent to the company's
consolidated revenue in the September 1999 quarter.
Financial Services revenue increased 2 percent and 24 percent in the September
1999 quarter and year-to-date, respectively, compared to the same periods last
year. Financial Services EBITDA declined 108 percent and 11 percent in the
September 1999 quarter and year-to-date, respectively, compared to the same
periods last year.
The revenue improvement in the nine-month period was primarily due to increased
consulting and appraisal fees, partially offset by lower mortgage banking fees.
The decline in EBITDA in the September 1999 quarter was primarily due to lower
than expected revenues in the company's Appraisal and Mortgage Banking business
lines as a result of the sluggish commercial mortgage backed securities market
and an unusually high level of activity in the third quarter of 1998.
Management Services
Management Services provides property and facilities management services to
investors and major corporate clients. Management Services contributed 13
percent of the company's consolidated revenue in the September 1999 quarter.
<PAGE>
CB Richard Ellis Press Release
November 3, 1999
Page 4 of 4
Revenue for Management Services increased 14 percent and 33 percent in the
September 1999 quarter and year-to-date, respectively, compared to the same
periods last year. EBITDA for Management Services decreased 92 percent and 39
percent in the September 1999 quarter and year-to-date, respectively, compared
to the same periods last year. The higher revenues reflect increased business
from the company's integrated service approach and increased servicing of larger
portfolios. The decline in EBITDA reflects the company's continued investment
in building its global corporate outsourcing capabilities.
The company secured several property and facilities management contracts in the
recent quarter, increasing total square feet under management by 14 percent to
433 million square feet at the end of the September 1999 quarter from 380
million square feet a year ago. Wirta noted that the company is also responding
to a number of significant requests for proposals from both real estate
investors and Corporate America.
CB Richard Ellis (NYSE:CBG) is the world's leading real estate services company.
Headquartered in Los Angeles with 10,000 employees worldwide, the company serves
real estate owners, investors and occupiers through nearly 250 principal offices
in 35 countries. Services include property sales and leasing, property
management, corporate services and facilities management, mortgage banking,
investment management, capital markets, appraisal/valuation, research and
consulting. CB Richard Ellis had 1998 revenues of over $1 billion. For more
information about CB Richard Ellis, visit the company's website at
www.cbrichardellis.com.
- ----------------------
This release contains forward-looking statements concerning expectations for
future revenues, cost reductions and earnings performance. These statements
reflect the company's current plans and expectations and are based on
information currently available to it. They rely on a number of assumptions and
estimates, which could prove to be inaccurate, and which are subject to risks
and uncertainties that could cause the company's actual results to vary
materially from the results anticipated. CB Richard Ellis undertakes no
obligation to update publicly or revise any forward-looking statements. These
statements are qualified by reference to the company's 1998 Annual Report and
10-K and its quarterly reports on 10-Q.
###
<PAGE>
CB RICHARD ELLIS SERVICES, INC
OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1999 and 1998
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
Consolidated 1999 1998 1999 1998
- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Leases................................................. $ 111,430 $ 97,763 $ 295,957 $ 252,654
Sales.................................................. 106,695 93,770 268,704 253,463
Property and facilities management fees................ 26,689 23,838 80,516 58,814
Consulting and referral fees........................... 18,612 19,515 54,044 41,340
Appraisal fees......................................... 15,018 13,983 45,334 31,661
Loan origination and servicing fees.................... 10,247 11,750 26,682 27,625
Realty advisor fees.................................... 7,854 7,348 20,723 23,755
Other.................................................. 10,473 5,836 25,426 14,902
----------- ----------- ----------- -----------
Total revenue.......................................... 307,018 273,803 817,386 704,214
Costs and expenses:
Commissions, fees and other incentives................. 137,709 119,959 351,317 315,271
Operating, administrative and other.................... 139,262 117,909 394,404 309,700
Merger-related and other nonrecurring charges.......... - - - 16,585
Depreciation and amortization.......................... 10,001 9,337 29,963 22,086
----------- ----------- ----------- -----------
Operating income.......................................... 20,046 26,598 41,702 40,572
Interest income........................................... 791 703 1,861 1,968
Interest expense.......................................... 10,294 9,628 29,670 21,359
----------- ----------- ----------- -----------
Income before provision for income tax.................... 10,543 17,673 13,893 21,181
Provision for income tax.................................. 5,895 7,534 7,642 10,257
----------- ----------- ----------- -----------
Net income................................................ $ 4,648 $ 10,139 $ 6,251 $ 10,924
Dividend on preferred stock............................... $ - $ - $ - $ 32,273 (2)
----------- ----------- ----------- -----------
Earnings (loss) applicable to common stockholders......... $ 4,648 $ 10,139 $ 6,251 $ (21,349)
=========== =========== =========== ===========
Basic earnings (loss) per share........................... $ 0.22 $ 0.49 $ 0.30 $ (1.07)
=========== =========== =========== ===========
Number of shares used in computing basic
earnings (loss) per share.............................. 21,098,757 20,692,573 21,021,512 19,917,773
=========== =========== =========== ===========
Diluted earnings (loss) per share......................... $ 0.22 $ 0.48 $ 0.30 $ (1.07)
=========== =========== =========== ===========
Number of shares used in computing
diluted earnings (loss) per share...................... 21,162,334 21,101,324 21,103,139 19,917,773
=========== =========== =========== ===========
Adjusted diluted earnings per share (1)................... $ 0.22 $ 0.48 $ 0.30 $ 0.96
=========== =========== =========== ===========
Number of shares used in computing
adjusted diluted earnings per share (1)................. 21,162,334 21,101,324 21,103,139 20,454,938
=========== =========== =========== ===========
EBITDA excluding merger-related and other
nonrecurring charges..................................... $ 30,047 $ 35,935 $ 71,665 $ 79,243
=========== =========== =========== ===========
EBITDA Margin............................................. 9.8% 13.1% 8.8% 11.3%
=========== =========== =========== ===========
</TABLE>
(1) Excludes merger-related and other nonrecurring charges, net of tax effect
and the effect of deemed dividend associated with the repurchase of
preferred stock
(2) Deemed dividend associated with the repurchase of preferred stock
<PAGE>
CB RICHARD ELLIS SERVICES, INC
OPERATING RESULTS BY BUSINESS SEGMENT
For the Three and Nine Months Ended September 30, 1999 and 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Transaction Management
- ----------------------
Revenue:
Leases. . . . . . . . . . . . . . . . . . . . . . .. $ 105,893 $ 93,433 $ 280,866 $ 240,584
Sales. . . . . . . . . . . . . . . . . . . . . . . . 103,890 91,107 261,510 246,780
Other consulting and referral fees . . . . . . . . . 15,461 12,967 40,192 33,315
--------- --------- --------- ----------
Total revenue. . . . . . . . . . . . . . . . . . . . 225,244 197,507 582,568 520,679
Costs and expenses:
Commissions, fees and other incentives . . . . . . . 119,717 105,041 305,206 278,497
Operating, administrative and other. . . . . . . . . 75,509 65,558 218,165 179,604
Depreciation and amortization . . . . . . . . . . . 4,826 3,981 13,615 8,959
--------- --------- --------- ----------
Operating income . . . . . . . . . . . . . . . . . .. $ 25,192 $ 22,927 $ 45,582 $ 53,619
========= ========= ========= ==========
EBITDA . . . . . . . . . . . . . . . . . . . . . . . $ 30,018 $ 26,908 $ 59,197 $ 62,578
========= ========= ========= ==========
EBITDA Margin. . . . . . . . . . . . . . . . . . . 13.3% 13.6% 10.2% 12.0%
========= ========= ========= ==========
EBITDA as a percent of consolidated EBITDA. . . . . 99.9% 74.9% 82.6% 79.0%
========= ========= ========= ==========
Financial Services
- ------------------
Revenue:
Appraisal fees . . . . . . . . . . . . . . . . . . . $ 14,730 $ 14,389 $ 44,129 $ 31,911
Loan origination and servicing fees . . . . . . . . . 10,247 11,750 26,680 27,625
Realty advisor fees . . . . . . . . . . . . . . . . . 7,338 7,496 19,765 23,281
Other. . . . . . . . . . . . . . . . . . . . . . . . 10,632 8,654 32,125 16,351
--------- --------- --------- ---------
Total revenue. . . . . . . . . . . . . . . . . . . . 42,947 42,289 122,699 99,168
Costs and expenses:
Commissions, fees and other incentives . . . . . . . 14,858 12,437 36,966 28,140
Operating, administrative and other. . . . . . . . . 28,442 25,407 78,406 62,844
Depreciation and amortization . . . . . . . . . . . . 2,804 3,080 9,260 7,499
--------- --------- --------- ---------
Operating loss . . . . . . . . . . . . . . . . . . . $ (3,157) $ 1,365 $ (1,933) $ 685
========= ========= ========= =========
EBITDA . . . . . . . . . . . . . . . . . . . . . . . $ (353) $ 4,445 $ 7,327 $ 8,184
========= ========= ========= =========
EBITDA Margin . . . . . . . . . . . . . . . . . . . -0.8% 10.5% 6.0% 8.3%
========= ========= ========= =========
EBITDA as a percent of consolidated EBITDA. . . . . -1.2% 12.4% 10.2% 10.3%
========= ========= ========= =========
Management Services
- -------------------
Revenue:
Property Management fees . . . . . . . . . . . . . $ 19,706 $ 20,054 $ 60,712 $ 46,085
Facilities management fees . . . . . . . . . . . . . 5,961 3,857 16,725 11,497
Leases. . . . . . . . . . . . . . . . . . . . . . . . 5,364 4,165 14,809 11,837
Sales. . . . . . . . . . . . . . . . . . . . . . . . 1,547 1,205 3,727 3,909
Other. . . . . . . . . . . . . . . . . . . . . . . . 6,249 4,726 16,146 11,039
--------- --------- --------- ---------
Total revenue. . . . . . . . . . . . . . . . . . . . 38,827 34,007 112,119 84,367
Costs and expenses:
Commissions, fees and other incentives . . . . . . . 3,134 2,481 9,145 8,634
Operating, administrative and other. . . . . . . . . 35,311 26,944 97,833 67,252
Depreciation and amortization . . . . . . . . . . . 2,371 2,276 7,088 5,628
--------- --------- --------- ---------
Operating income (loss) . . . . . . . . . . . . . . $ (1,989) $ 2,306 $ (1,947) $ 2,853
========= ========= ========= =========
EBITDA . . . . . . . . . . . . . . . . . . . . . . . $ 382 $ 4,582 $ 5,141 $ 8,481
========= ========= ========= =========
EBITDA Margin . . . . . . . . . . . . . . . . . . . 1.0% 13.5% 4.6% 10.1%
========= ========= ========= =========
EBITDA as a percent of consolidated EBITDA. . . . . 1.3% 12.7% 7.2% 10.7%
========= ========= ========= =========
Merger-related and other nonrecurring charges $ - $ - $ - $ 16,585
- --------------------------------------------- ========= ========= ========= =========
</TABLE>
(1) Revenue is broken down by material line of business specific to the segment.
"Other" includes revenue shown separately in the other segments which is
immaterial to the segment.
<PAGE>
CB RICHARD ELLIS SERVICES, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 25,122 $ 19,551
Other current assets 172,597 156,853
Property and equipment, net 62,808 58,366
Goodwill and other intangible assets, net 503,065 509,037
Other assets, net 107,567 113,085
--------- ---------
Total assets $ 871,159 $ 856,892
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturites of long-term debt $ 3,846 $ 12,343
Other current liabilities 182,145 213,404
Long-term debt, less current maturities 413,227 373,691
Other long-term liabilities 71,467 60,737
--------- ---------
Total liabilities 670,685 660,175
Minority Interest 4,150 5,875
Stockholders' Equity
Contributed capital 336,479 335,470
Accumulated deficit (140,155) (144,628)
--------- ---------
Total stockholders' equity 196,324 190,842
--------- ---------
Total liabilities and stockholders' equity $ 871,159 $ 856,892
========= =========
</TABLE>
