CB Richard Ellis Group Inc. Reports Operating Results (10-Q)

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Aug 10, 2009
CB Richard Ellis Group Inc. (CBG, Financial) filed Quarterly Report for the period ended 2009-06-30.

CB Richard Ellis Group is a global commercial real estate services firm offering a full range of services to occupiers owners lenders and investors in office retail industrial multi-family and other commercial real estate assets. CB Richard Ellis Group Inc. has a market cap of $3.19 billion; its shares were traded at around $12.01 with a P/E ratio of 18.48 and P/S ratio of 0.62. CB Richard Ellis Group Inc. had an annual average earning growth of 14.6% over the past 5 years.

Highlight of Business Operations:

Although our management believes that strategic acquisitions can significantly decrease the cost, time and commitment of management resources necessary to attain a meaningful competitive position within targeted markets or to expand our presence within our current markets, our management also believes that most acquisitions will initially have an adverse impact on our operating and net income, both as a result of transaction-related expenditures and the charges and costs of integrating the acquired business and its financial and accounting systems into our own. For example, we incurred $200.9 million of transaction-related expenditures in connection with our acquisition of Insignia in 2003 (the Insignia Acquisition) and $196.6 million of transaction-related expenditures in connection with our acquisition of Trammell Crow Company in 2006. Transaction-related expenditures included severance costs, lease termination costs, transaction costs, deferred financing costs and merger-related costs, among others. We incurred our final transaction expenditures with respect to the Insignia Acquisition in the third quarter of 2004 and the Trammell Crow Company Acquisition in the fourth quarter of 2007. In addition, through June 30, 2009, we have incurred expenses of $41.9 million related to Insignia and $56.6 million related to Trammell Crow Company in connection with the integration of these companies\' business lines, as well as accounting and other systems, into our own. During the six months ended June 30, 2009, we incurred $3.5 million of integration expenses, the majority of which were related to the acquisition of Trammell Crow Company. We expect to incur total integration expenses relating to past acquisitions of approximately $7 million during 2009, which include residual integration costs associated with our acquisition of Trammell Crow Company as well as similar costs related to a strategic in-fill acquisition in 2006.

Following the successful amendment to our Credit Agreement in the first quarter of 2009, which gave us increased flexibility, in the second quarter of 2009, we issued $450.0 million of 11.625% senior subordinated notes due June 15, 2017. During the three months ended June 30, 2009, we also prepaid $145.8 million of our tranche A term loan facility and $42.3 million of our tranche A-1 term loan facility. These actions significantly extended the weighted average maturity of our outstanding debt. In addition, on July 16, 2009, we initiated a loan modification program with our lenders for participants in our Credit Agreement, which is designed to provide us additional flexibility relative to our Credit Agreement debt amortization schedule and maturities.

We reported a consolidated net loss of $6.6 million for the three months ended June 30, 2009 on revenue of $955.7 million as compared to consolidated net income of $16.6 million on revenue of $1.3 billion for the three months ended June 30, 2008.

Our consolidated interest income was $1.2 million for the three months ended June 30, 2009, a decrease of $3.2 million, or 72.4%, as compared to the three months ended June 30, 2008. This decrease was mainly driven by lower interest income earned in our Americas and EMEA segments as a result of lower average cash balances in the current year and our Development Services segment due to a decrease in notes receivable in the current year.

Our consolidated interest expense increased by $5.9 million during the three months ended June 30, 2009, or 14.1%, as compared to the three months ended June 30, 2008. The increase was primarily due to higher interest expense associated with our Credit Agreement as well as interest expense associated with the $450.0 million of 11.625% senior subordinated notes issued in June 2009.

We reported a consolidated net loss of $43.3 million for the six months ended June 30, 2009 on revenue of $1.8 billion as compared to consolidated net income of $37.0 million on revenue of $2.5 billion for the six months ended June 30, 2008.

Read the The complete ReportCBG is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Ron Baron of Baron Funds, Tom Gayner of Markel Gayner Asset Management Corp.