Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from              to             

Commission File Number 001 – 32205

CB RICHARD ELLIS GROUP, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   94-3391143

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer Identification Number)

11150 Santa Monica Boulevard, Suite 1600

Los Angeles, California

  90025
(Address of principal executive offices)   (Zip Code)
(310) 405-8900  
(Registrant’s telephone number, including area code)  

(Former name, former address and

former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x   Accelerated filer ¨   Non-accelerated filer ¨   Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

The number of shares of Class A common stock outstanding at July 29, 2011 was 325,097,062.

 

 

 


Table of Contents

FORM 10-Q

June 30, 2011

TABLE OF CONTENTS

 

          Page  
PART I—FINANCIAL INFORMATION   

Item 1.

   Financial Statements   
   Consolidated Balance Sheets at June 30, 2011 (Unaudited) and December 31, 2010      3   
   Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (Unaudited)      4   
   Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (Unaudited)      5   
   Consolidated Statement of Equity for the six months ended June 30, 2011 (Unaudited)      6   
   Notes to Consolidated Financial Statements (Unaudited)      7   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      32   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      57   

Item 4.

   Controls and Procedures      59   
PART II—OTHER INFORMATION   

Item 1.

   Legal Proceedings      60   

Item 1A.

   Risk Factors      60   

Item 6.

   Exhibits      61   

Signatures

     63   

 

2


Table of Contents

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

 

    June 30,
2011
    December 31,
2010
 
    (Unaudited)        
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 752,109      $ 506,574   

Restricted cash

    49,221        52,257   

Receivables, less allowance for doubtful accounts of $39,078 and $33,272 at June 30, 2011 and December 31, 2010, respectively

    968,585        940,167   

Warehouse receivables

    308,249        485,433   

Income taxes receivable

    36,356        —     

Prepaid expenses

    100,251        96,951   

Deferred tax assets, net

    112,969        112,304   

Real estate and other assets held for sale

    558        16,295   

Other current assets

    50,756        50,889   
 

 

 

   

 

 

 

Total Current Assets

    2,379,054        2,260,870   

Property and equipment, net

    216,584        188,397   

Goodwill

    1,407,543        1,323,801   

Other intangible assets, net of accumulated amortization of $182,361 and $166,295 at June 30, 2011 and December 31, 2010, respectively

    333,940        332,855   

Investments in unconsolidated subsidiaries

    145,158        138,973   

Deferred tax assets, net

    6,300        10,320   

Real estate under development

    90,469        112,819   

Real estate held for investment

    539,920        626,395   

Available for sale securities

    33,930        31,936   

Other assets, net

    129,834        95,202   
 

 

 

   

 

 

 

Total Assets

  $ 5,282,732      $ 5,121,568   
 

 

 

   

 

 

 
LIABILITIES AND EQUITY    

Current Liabilities:

   

Accounts payable and accrued expenses

  $ 441,799      $ 445,337   

Compensation and employee benefits payable

    337,062        346,539   

Accrued bonus and profit sharing

    224,969        455,523   

Income taxes payable

    —          18,398   

Short-term borrowings:

   

Warehouse lines of credit

    302,490        453,835   

Revolving credit facility

    111,220        17,516   

Other

    16        16   
 

 

 

   

 

 

 

Total short-term borrowings

    413,726        471,367   

Current maturities of long-term debt

    42,038        38,086   

Notes payable on real estate

    153,598        154,213   

Liabilities related to real estate and other assets held for sale

    46        12,152   

Other current liabilities

    17,598        15,153   
 

 

 

   

 

 

 

Total Current Liabilities

    1,630,836        1,956,768   

Long-Term Debt:

   

Senior secured term loans

    979,500        602,500   

11.625% senior subordinated notes, net of unamortized discount of $11,671 and $12,318 at June 30, 2011 and December 31, 2010, respectively

    438,329        437,682   

6.625% senior notes

    350,000        350,000   

Other long-term debt

    85        54   
 

 

 

   

 

 

 

Total Long-Term Debt

    1,767,914        1,390,236   

Pension liability

    40,061        40,007   

Non-current tax liabilities

    81,217        78,306   

Notes payable on real estate

    366,353        461,665   

Other liabilities

    156,693        128,791   
 

 

 

   

 

 

 

Total Liabilities

    4,043,074        4,055,773   

Commitments and contingencies

    —          —     

Equity:

   

CB Richard Ellis Group, Inc. Stockholders’ Equity:

   

Class A common stock; $0.01 par value; 525,000,000 shares authorized; 324,992,942 and 323,594,919 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively

    3,250        3,236   

Additional paid-in capital

    854,983        814,244   

Accumulated earnings

    280,929        185,337   

Accumulated other comprehensive loss

    (56,158     (94,602
 

 

 

   

 

 

 

Total CB Richard Ellis Group, Inc. Stockholders’ Equity

    1,083,004        908,215   

Non-controlling interests

    156,654        157,580   
 

 

 

   

 

 

 

Total Equity

    1,239,658        1,065,795   
 

 

 

   

 

 

 

Total Liabilities and Equity

  $ 5,282,732      $ 5,121,568   
 

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share data)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2011     2010     2011     2010  

Revenue

  $ 1,422,218      $ 1,171,919      $ 2,607,323      $ 2,197,802   

Costs and expenses:

       

Cost of services

    839,822        678,714        1,553,577        1,293,908   

Operating, administrative and other

    432,856        372,033        809,881        710,739   

Depreciation and amortization

    25,385        27,616        48,563        53,911   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    1,298,063        1,078,363        2,412,021        2,058,558   

Gain on disposition of real estate

    6,027        3,623        7,999        3,623   
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    130,182        97,179        203,301        142,867   

Equity income from unconsolidated subsidiaries

    17,068        14,235        32,247        7,651   

Interest income

    1,902        3,111        4,570        4,911   

Interest expense

    34,216        50,275        67,934        100,067   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before provision for income taxes

    114,936        64,250        172,184        55,362   

Provision for income taxes

    46,336        26,704        69,742        34,003   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

    68,600        37,546        102,442        21,359   

Income from discontinued operations, net of income taxes

    6,267        7,140        16,911        7,140   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    74,867        44,686        119,353        28,499   

Less: Net income (loss) attributable to non-controlling interests

    13,644        (10,104     23,761        (19,664
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 61,223      $ 54,790      $ 95,592      $ 48,163   
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic income per share attributable to CB Richard Ellis Group, Inc. shareholders

       

Income from continuing operations attributable to CB Richard Ellis Group, Inc.

  $ 0.19      $ 0.15      $ 0.30      $ 0.13   

Income from discontinued operations attributable to CB Richard Ellis Group, Inc.

    —          0.02        —          0.02   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 0.19      $ 0.17      $ 0.30      $ 0.15   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding for basic income per share

    317,698,275        312,910,934        317,133,967        312,895,372   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted income per share attributable to CB Richard Ellis Group, Inc. shareholders

       

Income from continuing operations attributable to CB Richard Ellis Group, Inc.

  $ 0.19      $ 0.15      $ 0.30      $ 0.13   

Income from discontinued operations attributable to CB Richard Ellis Group, Inc.

    —          0.02        —          0.02   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 0.19      $ 0.17      $ 0.30      $ 0.15   
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding for diluted income per share

    324,093,042        318,425,227        323,510,069        317,736,844   
 

 

 

   

 

 

   

 

 

   

 

 

 

Amounts attributable to CB Richard Ellis Group, Inc. shareholders

       

Income from continuing operations, net of tax

  $ 61,223      $ 47,279      $ 95,592      $ 40,652   

Income from discontinued operations, net of tax

    —          7,511        —          7,511   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 61,223      $ 54,790      $ 95,592      $ 48,163   
 

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

    Six Months Ended
June 30,
 
    2011     2010  

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net income

  $ 119,353      $ 28,499   

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

   

Depreciation and amortization

    49,088        54,079   

Amortization of financing costs

    3,241        5,325   

Gain on sale of loans, servicing rights and other assets

    (25,437     (20,343

Gain on disposition of real estate held for investment

    (19,695     (11,879

Equity income from unconsolidated subsidiaries

    (32,247     (7,651

Provision for doubtful accounts

    6,830        12,421   

Compensation expense related to stock options and non-vested stock awards

    21,292        22,018   

Incremental tax benefit from stock options exercised

    (14,495     (236

Distribution of earnings from unconsolidated subsidiaries

    11,855        11,793   

Tenant concessions received

    11,807        3,424   

Decrease in receivables

    4,131        4,961   

(Increase) decrease in prepaid expenses and other assets

    (4,523     4,352   

Decrease (increase) in real estate held for sale and under development

    32,525        (10,868

Decrease in accounts payable and accrued expenses

    (34,955     (23,737

Decrease in compensation and employee benefits payable and accrued bonus and profit sharing

    (256,597     (83,708

(Increase) decrease in income taxes receivable

    (28,245     113,243   

Increase (decrease) in other liabilities

    400        (601

Other operating activities, net

    (718     (85
 

 

 

   

 

 

 

Net cash (used in) provided by operating activities

    (156,390     101,007   
 

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

   

Capital expenditures

    (47,148     (7,161

Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired

    (41,075     (62,720

Contributions to unconsolidated subsidiaries

    (17,094     (10,852

Distributions from unconsolidated subsidiaries

    34,988        16,130   

Net proceeds from disposition of real estate held for investment

    109,667        57,249   

Additions to real estate held for investment

    (6,315     (5,212

Proceeds from the sale of servicing rights and other assets

    11,416        9,741   

Decrease in restricted cash

    3,974        7,804   

Other investing activities, net

    (704     (954
 

 

 

   

 

 

 

Net cash provided by investing activities

    47,709        4,025   
 

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

   

Proceeds from senior secured term loans

    400,000        —     

Repayment of senior secured term loans

    (19,000     (60,770

Proceeds from revolving credit facility

    744,733        16,349   

Repayment of revolving credit facility

    (652,000     (10,496

Proceeds from notes payable on real estate held for investment

    3,551        8,741   

Repayment of notes payable on real estate held for investment

    (91,471     (48,493

Proceeds from notes payable on real estate held for sale and under development

    1,665        3,214   

Repayment of notes payable on real estate held for sale and under development

    (26,594     (3,412

Repayment of short-term borrowings and other loans, net

    —          (4,047

Proceeds from exercise of stock options

    4,858        312   

Incremental tax benefit from stock options exercised

    14,495        236   

Non-controlling interests contributions

    8,630        22,103   

Non-controlling interests distributions

    (30,679     (6,954

Payment of financing costs

    (18,454     (5,707

Other financing activities, net

    (91     (217
 

 

 

   

 

 

 

Net cash provided by (used in) financing activities

    339,643        (89,141

Effect of currency exchange rate changes on cash and cash equivalents

    14,573        (13,885
 

 

 

   

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

    245,535        2,006   

CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD

    506,574        741,557   
 

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, AT END OF PERIOD

  $ 752,109      $ 743,563   
 

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   

Cash paid (received) during the period for:

   

Interest

  $ 68,221      $ 85,408   
 

 

 

   

 

 

 

Income tax payments (refunds), net

  $ 95,744      $ (77,047
 

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

(Dollars in thousands)

 

    CB Richard Ellis Group, Inc. Shareholders              
    Class A
common
stock
    Additional
paid-in
capital
    Accumulated
earnings
    Accumulated
other
comprehensive
loss
    Non-controlling
interests
    Total  

Balance at December 31, 2010

  $ 3,236      $ 814,244      $ 185,337      $ (94,602   $ 157,580      $ 1,065,795   

Net income

    —          —          95,592        —          23,761        119,353   

Stock options exercised (including tax benefit)

    14        19,339        —          —          —          19,353   

Compensation expense for stock options and non-vested stock awards

    —          21,292        —          —          —          21,292   

Foreign currency translation gain

    —          —          —          44,715        830        45,545   

Unrealized losses on interest rate swaps and interest rate caps, net

    —          —          —          (6,777     —          (6,777

Contributions from non-controlling interests

    —          —          —          —          8,630        8,630   

Distributions to non-controlling interests

    —          —          —          —          (30,679     (30,679

Other, net

    —          108        —          506        (3,468     (2,854
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2011

  $ 3,250      $ 854,983      $ 280,929      $ (56,158   $ 156,654      $ 1,239,658   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements of CB Richard Ellis Group, Inc. (which may be referred to in these financial statements as the “company”, “we”, “us” and “our”) have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (GAAP) for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, and reported amounts of revenue and expenses. Such estimates include the value of real estate assets, accounts receivable, investments in unconsolidated subsidiaries and assumptions used in the calculation of income taxes, retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including consideration of the current economic environment, and adjusts such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2011. The consolidated financial statements and notes to consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010, which contains the latest available audited consolidated financial statements and notes thereto, which are as of and for the year ended December 31, 2010.

2. New Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-29, “Business Combinations (Topic 805), Disclosure of Supplementary Pro Forma Information for Business Combinations.” ASU 2010-29 specifies that when a public company completes a business combination, the company should disclose revenue and earnings of the combined entity as though the business combination occurred as of the beginning of the comparable prior annual reporting period. The update also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, non-recurring pro forma adjustments directly attributable to the business combination included in the pro forma revenue and earnings. The requirements of ASU 2010-29 are effective for business combinations that occur on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We do not believe the adoption of this update will have a material impact on the disclosure requirements for our consolidated financial statements.

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860), Reconsideration of Effective Control for Repurchase Agreements.” ASU 2011-03 specifies when an entity may or may not recognize a sale upon the transfer of financial assets subject to repurchase agreements. That determination is based, in part, on whether the entity has maintained effective control over the transferred financial assets. The requirements of ASU 2011-03 will be effective for the first interim or annual period beginning on or after December 15, 2011, with early adoption prohibited. We do not believe the adoption of this update will have a material effect on our consolidated financial position or results of operations.

 

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Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” These amendments were issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (IFRS). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. This ASU is effective for interim and annual periods beginning after December 15, 2011, with early adoption prohibited. We are currently evaluating the impact of adoption of this update on our consolidated financial statements, but do not expect it to have a material impact.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income.” This ASU eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted, and will require retrospective application for all periods presented. We do not believe the adoption of this update will have a material impact on the disclosure requirements for our consolidated financial statements.

3. REIM Acquisitions

On February 15, 2011, we announced that we had entered into definitive agreements to acquire the majority of the real estate investment management business of Netherlands-based ING Group N.V. (ING) for approximately $940 million in cash. The acquisitions include substantially all of the ING Real Estate Investment Management (REIM) operations in Europe and Asia, as well as substantially all of Clarion Real Estate Securities (CRES), its U.S.-based global real estate listed securities business (collectively referred to as ING REIM). On February 15, 2011, we also announced that we expected to acquire approximately $55 million of CRES co-investments from ING and potentially additional interests in other funds managed by ING REIM Europe and ING REIM Asia. Upon completion of the acquisitions (which we refer to as the REIM Acquisitions), ING REIM is expected to become part of our Global Investment Management segment (which conducts business through our indirect wholly-owned subsidiary, CBRE Investors), which will continue to be an independently operated business segment upon completion of the acquisitions. In addition, we expect to incur transaction costs relating to the acquisitions of approximately $150 million (pre-tax), including financing, retention and integration costs. We secured borrowings of $800.0 million of new term loans to finance the REIM Acquisitions (see Note 9). Of this amount, $400.0 million was drawn on June 30, 2011 to finance the CRES portion of the REIM Acquisitions, which closed on July 1, 2011 (see Note 17). The acquisition of ING REIM’s operations in Europe and Asia is expected to close in the second half of 2011 and is subject to approval by certain stakeholders, including regulatory agencies in Europe and Asia. We anticipate financing the acquisition of ING REIM’s operations in Europe and Asia primarily with the remaining $400.0 million of new term loans we have secured and cash on hand.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

4. Fair Value Measurements

The “Fair Value Measurements and Disclosures” Topic of the FASB ASC (Topic 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

   

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

   

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

   

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The fair value measurements employed for our impairment evaluations were generally based on a discounted cash flow approach and/or review of comparable activities in the market place. Inputs used in these evaluations included risk-free rates of return, estimated risk premiums as well as other economic variables.

There were no significant non-recurring fair value measurements recorded during the three and six months ended June 30, 2011 or the three months ended June 30, 2010. The following non-recurring fair value measurements were recorded during the six months ended June 30, 2010 (dollars in thousands):

 

    Net Carrying Value
as of

June 30, 2010
    Fair Value Measured and Recorded Using     Total  Impairment
Charges for the
Six Months Ended
June 30, 2010
 
         Level 1               Level 2               Level 3         

Investments in unconsolidated subsidiaries

  $ 32,803      $ —        $ —        $ 32,803      $ 6,947   

During the six months ended June 30, 2010, we recorded investment write-downs of $6.9 million, of which $2.5 million were attributable to non-controlling interests. Such write-downs were included in equity loss from unconsolidated subsidiaries within our Global Investment Management segment in the accompanying consolidated statements of operations. During the six months ended June 30, 2010, $5.9 million of the investment write-downs were driven by a decrease in the estimated holding period of certain assets and $1.0 million was driven by a decline in value of an investment attributable to continued capital market disruption. When we performed our impairment analysis, the assumptions utilized reflected our outlook for the commercial real estate industry and the impact on our business. This outlook incorporated our belief that market conditions deteriorated and that these challenging conditions could persist for some time.

We do not have any material assets or liabilities that are required to be recorded at fair value on a recurring basis.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Topic 820 also requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets, as follows:

Cash and Cash Equivalents and Restricted Cash: These balances include cash and cash equivalents as well as restricted cash with maturities of less than three months. The carrying amount approximates fair value due to the short-term maturities of these instruments.

Receivables, less Allowance for Doubtful Accounts: Due to their short-term nature, fair value approximates carrying value.

Warehouse Receivables: Due to their short-term nature, fair value approximates carrying value. Fair value is determined based on the terms and conditions of funded mortgage loans and generally reflects the values of the warehouse lines of credit outstanding for our wholly-owned subsidiary, CBRE Capital Markets.

Available for Sale Securities: These investments are carried at their fair value.

Short-Term Borrowings: The majority of this balance represents our warehouse lines of credit outstanding for CBRE Capital Markets and our revolving credit facility. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value.

Senior Secured Term Loans: Based upon information from third-party banks, the estimated fair value of our senior secured term loans was approximately $1.0 billion at June 30, 2011, which approximates their actual carrying value at June 30, 2011 (see Note 9).

11.625% Senior Subordinated Notes: Based on dealers’ quotes, the estimated fair value of our 11.625% senior subordinated notes was $509.0 million at June 30, 2011. Their actual carrying value totaled $438.3 million at June 30, 2011.

6.625% Senior Notes: Based on dealers’ quotes, the estimated fair value of our 6.625% senior notes was $359.6 million at June 30, 2011. Their actual carrying value totaled $350.0 million at June 30, 2011.

Notes Payable on Real Estate: As of June 30, 2011, the carrying value of our notes payable on real estate was $520.0 million (see Note 8). These borrowings mostly have floating interest rates at spreads over a market rate index. It is likely that some portion of our notes payable on real estate have fair values lower than actual carrying values. Given our volume of notes payable and the cost involved in estimating their fair value, we determined it was not practicable to determine an estimated fair value for these notes payable. Additionally, only $13.6 million of these notes payable are recourse to us as of June 30, 2011.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

5. Investments in Unconsolidated Subsidiaries

Investments in unconsolidated subsidiaries are accounted for under the equity method of accounting. Combined condensed financial information for these entities is as follows (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Global Investment Management:

        

Revenue

   $ 158,903      $ 109,590      $ 299,155      $ 275,824   

Operating loss

   $ (8,636   $ (92,723   $ (43,298   $ (355,722

Net loss

   $ (20,102   $ (113,824   $ (70,267   $ (448,650

Development Services:

        

Revenue

   $ 28,167      $ 31,625      $ 47,581      $ 52,561   

Operating income

   $ 37,424      $ 37,739      $ 76,797      $ 35,069   

Net income

   $ 26,689      $ 25,036      $ 59,131      $ 13,464   

Other:

        

Revenue

   $ 32,417      $ 31,748      $ 66,802      $ 60,894   

Operating income

   $ 4,643      $ 4,758      $ 8,433      $ 7,504   

Net income

   $ 4,640      $ 4,917      $ 8,499      $ 7,775   

Total:

        

Revenue

   $   219,487      $    172,963      $   413,538      $    389,279   

Operating income (loss)

   $ 33,431      $ (50,226   $ 41,932      $ (313,149

Net income (loss)

   $ 11,227      $ (83,871   $ (2,637   $ (427,411

During the six months ended June 30, 2010, we recorded non-cash write-downs of investments of $6.9 million within our Global Investment Management segment (see Note 4).

Our Global Investment Management segment involves investing our own capital in certain real estate investments with clients. We have provided investment management, property management, brokerage and other professional services in connection with these real estate investments on an arm’s length basis and earned revenues from these unconsolidated subsidiaries. We have also provided development, property management and brokerage services to certain of our unconsolidated subsidiaries in our Development Services segment on an arm’s length basis and earned revenues from these unconsolidated subsidiaries.

6. Real Estate and Other Assets Held for Sale and Related Liabilities

Real estate and other assets held for sale include completed real estate projects or land for sale in their present condition that have met all of the “held for sale” criteria of the “Property, Plant and Equipment” Topic of the FASB ASC (Topic 360) and other assets directly related to such projects. Liabilities related to real estate and other assets held for sale have been included as a single line item in the accompanying consolidated balance sheets.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Real estate and other assets held for sale and related liabilities were as follows (dollars in thousands):

 

     June 30, 2011      December 31, 2010  

Assets:

     

Real estate held for sale (see Note 7)

   $ 558       $ 15,399   

Other current assets

     —           20   

Property and equipment, net

     —           869   

Other assets

     —           7   
  

 

 

    

 

 

 

Total real estate and other assets held for sale

     558         16,295   

Liabilities:

     

Notes payable on real estate held for sale (see Note 8)

     —           11,650   

Accounts payable and accrued expenses

     46         370   

Other current liabilities

     —           28   

Other liabilities

     —           104   
  

 

 

    

 

 

 

Total liabilities related to real estate and other assets held for sale

     46         12,152   
  

 

 

    

 

 

 

Net real estate and other assets held for sale

   $ 512       $ 4,143   
  

 

 

    

 

 

 

7. Real Estate

We provide build-to-suit services for our clients and also develop or purchase certain projects which we intend to sell to institutional investors upon project completion or redevelopment. Therefore, we have ownership of real estate until such projects are sold or otherwise disposed. Additionally, we consolidate certain variable interest entities that hold investments in real estate. Certain real estate assets secure the outstanding balances of underlying mortgage or construction loans. Our real estate is reported in our Development Services and Global Investment Management segments and consisted of the following (dollars in thousands):

 

     June 30, 2011      December 31, 2010  

Real estate included in assets held for sale (see Note 6)

   $ 558       $ 15,399   

Real estate under development (non-current)

     90,469         112,819   

Real estate held for investment (1)

     539,920         626,395   
  

 

 

    

 

 

 

Total real estate (2)

   $ 630,947       $ 754,613   
  

 

 

    

 

 

 

 

(1) Net of accumulated depreciation of $42.4 million and $37.8 million at June 30, 2011 and December 31, 2010, respectively.
(2) Includes balances for lease intangibles and tenant origination costs of $8.9 million and $2.5 million, respectively, at June 30, 2011 and $10.1 million and $3.3 million, respectively, at December 31, 2010. We record lease intangibles and tenant origination costs upon acquiring real estate projects with in-place leases. The balances are shown net of amortization, which is recorded as an increase to, or a reduction of, rental income for lease intangibles and as amortization expense for tenant origination costs.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

8. Notes Payable on Real Estate

We had loans secured by real estate, which consisted of the following (dollars in thousands):

 

     June 30, 2011      December 31, 2010  

Current portion of notes payable on real estate

   $ 153,598       $ 154,213   

Notes payable on real estate included in liabilities related to real estate and other assets held for sale (see Note 6)

     —           11,650   
  

 

 

    

 

 

 

Total notes payable on real estate, current portion

     153,598         165,863   

Notes payable on real estate, non-current portion

     366,353         461,665   
  

 

 

    

 

 

 

Total notes payable on real estate

   $ 519,951       $ 627,528   
  

 

 

    

 

 

 

At June 30, 2011 and December 31, 2010, $11.5 million and $1.4 million, respectively, of the non-current portion of notes payable on real estate and $2.1 million and $2.3 million, respectively, of the current portion of notes payable on real estate were recourse to us, beyond being recourse to the single-purpose entity that held the real estate asset and was the primary obligor on the note payable.

9. Debt

Since 2001, we have maintained credit facilities with Credit Suisse Group AG (CS) and other lenders to fund strategic acquisitions and to provide for our working capital needs. On November 10, 2010, we entered into a new credit agreement (as amended, the Credit Agreement) with a syndicate of banks led by CS, as administrative and collateral agent, to completely refinance our previous credit facilities. On March 4, 2011, we entered into an amendment to our Credit Agreement to, among other things, increase flexibility to various covenants to accommodate the REIM Acquisitions and to maintain the availability of the $800.0 million incremental facility under the Credit Agreement. On March 4, 2011, we also entered into an incremental assumption agreement to allow for the establishment of new tranche C and tranche D term loan facilities.

As of June 30, 2011, our Credit Agreement provides for the following: (1) a $700.0 million revolving credit facility, including revolving credit loans, letters of credit and a swingline loan facility, maturing on May 10, 2015; (2) a $350.0 million tranche A term loan facility requiring quarterly principal payments, which began on December 31, 2010 and continue through September 30, 2015, with the balance payable on November 10, 2015, (3) a $300.0 million tranche B term loan facility requiring quarterly principal payments, which began on December 31, 2010 and continue through September 30, 2016, with the balance payable on November 10, 2016; (4) a $400.0 million delayed draw seven year tranche C term loan facility with a maturity date of March 4, 2018; (5) a $400.0 million tranche D term loan facility requiring quarterly principal payments beginning September 30, 2011 and continuing through June 30, 2019, with the balance payable on September 4, 2019 and (6) an accordion provision which provides the ability to borrow an additional $800.0 million, which can be further expanded, subject to the satisfaction of what we believe are customary conditions. In regards to the tranche C and tranche D term loan facilities, we have up to 180 days from the date we entered into the incremental assumption agreement to draw on these facilities during which period we are required to pay a fee on the unused portions of each facility. After 180 days, any unused portions of these facilities would no longer be available for use. On June 30, 2011, we drew down $400.0 million of the tranche D term loan facility to finance the CRES portion of the REIM Acquisitions, which closed on July 1, 2011 (see Note 17). The acquisition of ING REIM’s operations in Europe and Asia is expected to close in the second half of 2011 and we anticipate financing it primarily with the entire $400.0 million of tranche C term loan facility and cash on hand.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

The revolving credit facility allows for borrowings outside of the United States (U.S.), with sub-facilities of $5.0 million available to one of our Canadian subsidiaries, $35.0 million in aggregate available to one of our Australian and one of our New Zealand subsidiaries and $50.0 million available to one of our United Kingdom (U.K.) subsidiaries. Additionally, outstanding borrowings under these sub-facilities may be up to 5.0% higher as allowed under the currency fluctuation provision in the Credit Agreement. Borrowings under the revolving credit facility as of June 30, 2011 bear interest at varying rates, based at our option, on either the applicable fixed rate plus 1.65% to 3.15% or the daily rate plus 0.65% to 2.15% as determined by reference to our ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement). As of June 30, 2011 and December 31, 2010, we had $111.2 million and $17.5 million, respectively, of revolving credit facility principal outstanding with related weighted average interest rates of 4.4% and 3.5%, respectively, which are included in short-term borrowings in the accompanying consolidated balance sheets. As of June 30, 2011, letters of credit totaling $13.6 million were outstanding under the revolving credit facility. These letters of credit were primarily issued in the normal course of business as well as in connection with certain insurance programs and reduce the amount we may borrow under the revolving credit facility.

Borrowings under the term loan facilities as of June 30, 2011 bear interest, based at our option, on the following: for the tranche A term loan facility, on either the applicable fixed rate plus 2.00% to 3.75% or the daily rate plus 1.00% to 2.75%, as determined by reference to our ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement), for the tranche B term loan facility, on either the applicable fixed rate plus 3.25% or the daily rate plus 2.25%, for the tranche C term loan facility, on either the applicable fixed rate plus 3.25% or the daily rate plus 2.25% and for the tranche D term loan facility, on either the applicable fixed rate plus 3.50% or the daily rate plus 2.50%. As of June 30, 2011 and December 31, 2010, we had $323.8 million and $341.3 million, respectively, of tranche A term loan facility principal outstanding and $297.7 million and $299.2 million, respectively, of tranche B term loan facility principal outstanding, which are included in the accompanying consolidated balance sheets. As of June 30, 2011, we also had $400.0 million of tranche D term loan facility principal outstanding, which is included in the accompanying consolidated balance sheets. As of June 30, 2011, there were no amounts outstanding under our tranche C term loan facility.

In March 2011, we entered into five interest rate swap agreements, all with effective dates in October 2011, and immediately designated them as cash flow hedges in accordance with FASB ASC Topic 815, “Derivatives and Hedging.” The purpose of these interest rate swap agreements is to hedge potential changes to our cash flows due to the variable interest nature of our senior secured term loan facilities. The total notional amount of these interest rate swap agreements is $400.0 million, with $200.0 million expiring on October 2, 2017 and $200.0 million expiring on September 4, 2019. There was no hedge ineffectiveness for the three and six months ended June 30, 2011. During the three and six months ended June 30, 2011, we recorded net losses of $13.2 million and $11.5 million, respectively, to other comprehensive loss in relation to these interest rate swap agreements. As of June 30, 2011, the fair values of these interest rate swap agreements were reflected as an $11.5 million liability and were included in other long-term liabilities in the accompanying consolidated balance sheets. The fair value measurements employed for these interest rate swap agreements were based on observable market data, which falls within Level 2 of the fair value hierarchy.

The Credit Agreement is jointly and severally guaranteed by us and substantially all of our domestic subsidiaries. Borrowings under our Credit Agreement are secured by a pledge of substantially all of the capital stock of our U.S. subsidiaries and 65.0% of the capital stock of certain non-U.S. subsidiaries. Also, the Credit Agreement requires us to pay a fee based on the total amount of the revolving credit facility commitment.

Our Credit Agreement and the indentures governing our 6.625% senior notes and 11.625% senior subordinated notes contain numerous restrictive covenants that, among other things, limit our ability to incur

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

additional indebtedness, pay dividends or make distributions to stockholders, repurchase capital stock or debt, make investments, sell assets or subsidiary stock, create or permit liens on assets, engage in transactions with affiliates, enter into sale/leaseback transactions, issue subsidiary equity and enter into consolidations or mergers. Our Credit Agreement also currently requires us to maintain a minimum coverage ratio of EBITDA (as defined in the Credit Agreement) to total interest expense of 2.25x and a maximum leverage ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement) of 3.75x. Our coverage ratio of EBITDA to total interest expense was 13.58x for the trailing twelve months ended June 30, 2011 and our leverage ratio of total debt less available cash to EBITDA was 1.25x as of June 30, 2011.

On April 19, 2010, we entered into a Receivables Purchase Agreement, which allowed us to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide collateral for borrowings up to a maximum of $55.0 million. Borrowings under this arrangement generally bore interest at the commercial paper rate plus 2.75%. This agreement expired on April 18, 2011 and we did not renew this arrangement. As of December 31, 2010, there were no amounts outstanding under this agreement.

10. Commitments and Contingencies

We are a party to a number of pending or threatened lawsuits arising out of, or incident to, the ordinary course of our business. Our management believes that any liability imposed on us that may result from disposition of these lawsuits will not have a material effect on our business, consolidated financial position, cash flows or results of operations.

We had outstanding letters of credit totaling $13.3 million as of June 30, 2011, excluding letters of credit for which we have outstanding liabilities already accrued on our consolidated balance sheet related to our subsidiaries’ outstanding reserves for claims under certain insurance programs as well as letters of credit related to operating leases. These letters of credit are primarily executed by us in the ordinary course of business as well as in connection with certain insurance programs. The letters of credit expire at varying dates through July 2012.

We had guarantees totaling $13.7 million as of June 30, 2011, excluding guarantees related to pension liabilities, consolidated indebtedness and other obligations for which we have outstanding liabilities already accrued on our consolidated balance sheet, and operating leases. The $13.7 million primarily consists of guarantees of obligations of unconsolidated subsidiaries, which expire at varying dates through November 2013.

In addition, as of June 30, 2011, we had numerous completion and budget guarantees relating to development projects. These guarantees are made by us in the ordinary course of our Development Services business. Each of these guarantees requires us to complete construction of the relevant project within a specified timeframe and/or within a specified budget, with us potentially being liable for costs to complete in excess of such timeframe or budget. However, we generally have “guaranteed maximum price” contracts with reputable general contractors with respect to projects for which we provide these guarantees. These contracts are intended to pass the risk to such contractors. While there can be no assurance, we do not expect to incur any material losses under these guarantees.

From time to time, we act as a general contractor with respect to construction projects. We do not consider these activities to be a material part of our business. In connection with these activities, we seek to subcontract construction work for certain projects to reputable subcontractors. Should construction defects arise relating to the underlying projects, we could potentially be liable to the client for the costs to repair such defects, although we would generally look to the subcontractor that performed the work to remedy the defect and also look to insurance policies that cover this work. While there can be no assurance, we do not expect to incur material losses with respect to construction defects.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

In January 2008, CBRE Multifamily Capital, Inc. (CBRE MCI), a wholly-owned subsidiary of CBRE Capital Markets, Inc., entered into an agreement with Fannie Mae, under Fannie Mae’s DUS Lender Program (DUS Program), to provide financing for multifamily housing with five or more units. Under the DUS Program, CBRE MCI originates, underwrites, closes and services loans without prior approval by Fannie Mae, and in selected cases, is subject to sharing up to one-third of any losses on loans originated under the DUS Program. CBRE MCI has funded loans subject to such loss sharing arrangements with unpaid principal balances of $2.5 billion at June 30, 2011. Additionally, CBRE MCI has funded loans under the DUS Program that are not subject to loss sharing arrangements with unpaid principal balances of approximately $522.7 million at June 30, 2011. CBRE MCI, under its agreement with Fannie Mae, must post cash reserves under formulas established by Fannie Mae to provide for sufficient capital in the event losses occur. As of June 30, 2011 and December 31, 2010, CBRE MCI had $3.3 million and $2.2 million, respectively, of cash deposited under this reserve arrangement, and had provided approximately $4.7 million and $4.0 million, respectively, of loan loss accruals. Fannie Mae’s recourse under the DUS Program is limited to the assets of CBRE MCI, which totaled approximately $104.3 million (including $46.6 million of warehouse receivables, a substantial majority of which are pledged against warehouse lines of credit and are therefore not available to Fannie Mae) at June 30, 2011.

An important part of the strategy for our Global Investment Management business involves investing our capital in certain real estate investments with our clients. These co-investments typically range from 2.0% to 5.0% of the equity in a particular fund. As of June 30, 2011, we had aggregate commitments of $18.0 million to fund future co-investments.

Additionally, an important part of our Development Services business strategy is to invest in unconsolidated real estate subsidiaries as a principal (in most cases co-investing with our clients). As of June 30, 2011, we had committed to fund $21.4 million of additional capital to these unconsolidated subsidiaries.

11. Income Per Share Information

The following is a calculation of income per share (dollars in thousands, except share data):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Computation of basic income per share attributable to CB Richard Ellis Group, Inc. shareholders:

           

Net income attributable to CB Richard Ellis Group, Inc. shareholders

   $ 61,223       $ 54,790       $ 95,592       $ 48,163   

Weighted average shares outstanding for basic income per share

     317,698,275         312,910,934         317,133,967         312,895,372   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic income per share attributable to CB Richard Ellis Group, Inc. shareholders

   $ 0.19       $ 0.17       $ 0.30       $ 0.15   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Computation of diluted income per share attributable to CB Richard Ellis Group, Inc. shareholders:

           

Net income attributable to CB Richard Ellis Group, Inc. shareholders

   $ 61,223       $ 54,790       $ 95,592       $ 48,163   

Weighted average shares outstanding for basic income per share

     317,698,275         312,910,934         317,133,967         312,895,372   

Dilutive effect of contingently issuable shares

     4,040,084         2,918,526         3,776,379         2,346,809   

Dilutive effect of stock options

     2,354,683         2,595,767         2,599,723         2,494,663   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding for diluted income per share

     324,093,042         318,425,227         323,510,069         317,736,844   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted income per share attributable to CB Richard Ellis Group, Inc. shareholders

   $ 0.19       $ 0.17       $ 0.30       $ 0.15   
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three and six months ended June 30, 2011, options to purchase 55,587 shares of common stock were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect.

For the three and six months ended June 30, 2010, options to purchase 838,830 shares of common stock were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. Additionally, 398,047 and 397,577 of contingently issuable shares were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect for the three and six months ended June 30, 2010, respectively.

12. Comprehensive Income (Loss)

The following table provides a summary of comprehensive income (loss) (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Net income

   $ 74,867      $ 44,686      $ 119,353      $ 28,499   

Other comprehensive income (loss):

        

Foreign currency translation gain (loss)

     15,550        (36,468     45,545        (60,594

Unrealized (losses) gains on interest rate swaps and interest rate caps, net

     (7,833     174        (6,777     296   

Other, net

     998        (75     506        2,213   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     8,715        (36,369     39,274        (58,085

Comprehensive income (loss)

     83,582        8,317        158,627        (29,586

Less: Comprehensive income (loss) attributable to non-controlling interests

     14,116        (10,468     24,591        (20,388
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to CB Richard Ellis Group, Inc.

   $ 69,466      $ 18,785      $ 134,036      $ (9,198
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

13. Pensions

We have two contributory defined benefit pension plans in the U.K., which we acquired in connection with previous acquisitions. Our subsidiaries based in the U.K. maintain the plans to provide retirement benefits to existing and former employees participating in these plans. During 2007, we reached agreements with the active members of these plans to freeze future pension plan benefits. In return, the active members became eligible to enroll in the CBRE Group Personal Pension Plan, a defined contribution plan in the U.K.

Net periodic pension cost consisted of the following (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Interest cost

   $ 4,209      $ 3,884      $ 8,322      $ 7,947   

Expected return on plan assets

     (4,337     (3,605     (8,573     (7,376

Amortization of unrecognized net loss

     345        530        682        1,085   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic pension cost

   $ 217      $ 809      $ 431      $ 1,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

We contributed $0.9 million and $1.8 million to fund our pension plans during the three and six months ended June 30, 2011, respectively. We expect to contribute a total of $3.7 million to fund our pension plans for the year ending December 31, 2011.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

14. Discontinued Operations

In the ordinary course of business, we dispose of real estate assets, or hold real estate assets for sale, that may be considered components of an entity in accordance with Topic 360. If we do not have, or expect to have, significant continuing involvement with the operation of these real estate assets after disposition, we are required to recognize operating profits or losses and gains or losses on disposition of these assets as discontinued operations in our consolidated statements of operations in the periods in which they occur. Real estate operations and dispositions accounted for as discontinued operations for the three and six months ended June 30, 2011 and 2010 were reported in our Global Investment Management and Development Services segments as follows (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011      2010     2011      2010  

Revenue

   $ 1,355       $ 978      $ 2,385       $ 978   

Costs and expenses:

          

Operating, administrative and other

     852         356        1,234         356   

Depreciation and amortization

     234         168        525         168   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total costs and expenses

     1,086         524        1,759         524   

Gain on disposition of real estate

     6,601         11,879        17,638         11,879   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     6,870         12,333        18,264         12,333   

Interest income

     —           1        —           1   

Interest expense

     603         715        1,353         715   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from discontinued operations, before provision for income taxes

     6,267         11,619        16,911         11,619   

Provision for income taxes

     —           4,479        —           4,479   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from discontinued operations, net of income taxes

     6,267         7,140        16,911         7,140   

Less: Income (loss) from discontinued operations attributable to non-controlling interests

     6,267         (371     16,911         (371
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from discontinued operations attributable to CB Richard Ellis Group, Inc.

   $ —         $ 7,511      $ —         $ 7,511   
  

 

 

    

 

 

   

 

 

    

 

 

 

15. Industry Segments

We report our operations through the following segments: (1) Americas, (2) EMEA, (3) Asia Pacific, (4) Global Investment Management and (5) Development Services.

The Americas segment is our largest segment of operations and provides a comprehensive range of services throughout the U.S. and in the largest regions of Canada and selected parts of Latin America. The primary services offered consist of the following: real estate services, mortgage loan origination and servicing, valuation services, asset services and corporate services.

Our EMEA and Asia Pacific segments provide services similar to the Americas business segment. The EMEA segment has operations primarily in Europe, while the Asia Pacific segment has operations primarily in Asia, Australia and New Zealand.

Our Global Investment Management business provides investment management services to clients seeking to generate returns and diversification through direct and indirect investments in real estate in the U.S., Europe and Asia.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Our Development Services business consists of real estate development and investment activities primarily in the U.S.

Summarized financial information by segment is as follows (dollars in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

Revenue

           

Americas

   $ 897,828       $ 722,255       $ 1,647,943       $ 1,367,866   

EMEA

     261,087         225,378         466,055         413,538   

Asia Pacific

     188,546         158,678         349,046         293,110   

Global Investment Management

     57,554         46,896         107,876         86,303   

Development Services

     17,203         18,712         36,403         36,985   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,422,218       $ 1,171,919       $ 2,607,323       $ 2,197,802   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2011      2010      2011      2010  

EBITDA

           

Americas

   $ 115,375       $ 89,847       $ 193,503       $ 151,835   

EMEA

     21,375         19,865         24,381         23,990   

Asia Pacific

     17,437         12,777         29,879         21,035   

Global Investment Management

     2,470         10,766         8,460         5,836   

Development Services

     9,438         28,380         22,916         33,898   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 166,095       $ 161,635       $ 279,139       $ 236,594   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA represents earnings before net interest expense, income taxes, depreciation and amortization. Our management believes EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions. Such items may vary for different companies for reasons unrelated to overall operating performance. As a result, our management uses EBITDA as a measure to evaluate the operating performance of our various business segments and for other discretionary purposes, including as a significant component when measuring our operating performance under our employee incentive programs. Additionally, we believe EBITDA is useful to investors to assist them in getting a more accurate picture of our results from operations.

However, EBITDA is not a recognized measurement under GAAP and when analyzing our operating performance, readers should use EBITDA in addition to, and not as an alternative for, net income as determined in accordance with GAAP. Because not all companies use identical calculations, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments. The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

Net interest expense has been expensed in the segment incurred. Provision for (benefit of) income taxes has been allocated among our segments by using applicable U.S. and foreign effective tax rates. EBITDA for our segments is calculated as follows (dollars in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2011     2010     2011     2010  

Americas

        

Net income attributable to CB Richard Ellis Group, Inc.

   $ 52,015      $ 35,038      $ 81,524      $ 37,584   

Add:

        

Depreciation and amortization

     14,831        14,997        27,662        29,687   

Interest expense

     25,740        38,972        51,572        78,686   

Royalty and management service income

     (6,895     (5,347     (13,515     (9,492

Provision for income taxes

     30,951        7,062        49,327        17,431   

Less:

        

Interest income

     1,267        875        3,067        2,061   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 115,375      $ 89,847      $ 193,503      $ 151,835   
  

 

 

   

 

 

   

 

 

   

 

 

 

EMEA

        

Net income attributable to CB Richard Ellis Group, Inc.

   $ 10,541      $ 5,278      $ 10,392      $ 6,250   

Add:

        

Depreciation and amortization

     2,253        2,384        4,515        4,774   

Interest expense

     18        36        157        125   

Royalty and management service expense

     3,422        3,329        6,153        5,541   

Provision for income taxes

     5,248        9,189        3,788        7,984   

Less:

        

Interest income

     107        351        624        684   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 21,375      $ 19,865      $ 24,381      $ 23,990   
  

 

 

   

 

 

   

 

 

   

 

 

 

Asia Pacific

        

Net income attributable to CB Richard Ellis Group, Inc.

   $ 6,186      $ 5,907      $ 9,087      $ 6,650   

Add:

        

Depreciation and amortization

     1,988        2,007        3,971        4,119   

Interest expense

     809        613        1,229        1,170   

Royalty and management service expense

     3,239        1,745        6,846        3,538   

Provision for income taxes

     5,745        4,288        9,535        7,488   

Less:

        

Interest income

     530        1,783        789        1,930   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 17,437      $ 12,777      $ 29,879      $ 21,035   
  

 

 

   

 

 

   

 

 

   

 

 

 

Global Investment Management

        

Net loss attributable to CB Richard Ellis Group, Inc.

   $ (9,777   $ (1,119   $ (12,232   $ (9,587

Add:

        

Depreciation and amortization (1)

     3,405        3,613        7,191        6,470   

Interest expense (2)

     5,688        6,063        10,453        10,478   

Royalty and management service expense

     234        273        516        413   

Provision for (benefit of) income taxes

     3,093        1,992        2,933        (1,770

Less:

        

Interest income

     173        56        401        168   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (3)

   $ 2,470      $ 10,766      $ 8,460      $ 5,836   
  

 

 

   

 

 

   

 

 

   

 

 

 

Development Services

        

Net income attributable to CB Richard Ellis Group, Inc.

   $ 2,258      $ 9,686      $ 6,821      $ 7,266   

Add:

        

Depreciation and amortization (4)

     3,142        4,783        5,749        9,029   

Interest expense (5)

     2,753        5,306        6,240        10,323   

Provision for income taxes (6)

     1,299        8,652        4,159        7,349   

Less:

        

Interest income

     14        47        53        69   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (7)

   $ 9,438      $ 28,380      $ 22,916      $ 33,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

21


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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

 

(1) Includes depreciation and amortization related to discontinued operations of $0.2 million and $0.5 million for the three and six months ended June 30, 2011, respectively.
(2) Includes interest expense related to discontinued operations of $0.6 million and $1.4 million for the three and six months ended June 30, 2011, respectively.
(3) Includes EBITDA related to discontinued operations of $0.8 million and $1.9 million for the three and six months ended June 30, 2011, respectively.
(4) Includes depreciation and amortization related to discontinued operations of $0.2 million for the three and six months ended June 30, 2010.
(5) Includes interest expense related to discontinued operations of $0.7 million for the three and six months ended June 30, 2010.
(6) Includes provision for income taxes related to discontinued operations of $4.5 million for the three and six months ended June 30, 2010.
(7) Includes EBITDA related to discontinued operations of $12.9 million for the three and six months ended June 30, 2010.

16. Guarantor and Nonguarantor Financial Statements

The following condensed consolidating financial information includes:

(1) Condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010; condensed consolidating statements of operations for the three and six months ended June 30, 2011 and 2010; and condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010, of (a) CB Richard Ellis Group, Inc. as the parent, (b) CB Richard Ellis Services, Inc. (CBRE) as the subsidiary issuer, (c) the guarantor subsidiaries, (d) the nonguarantor subsidiaries and (e) CB Richard Ellis Group, Inc. on a consolidated basis; and

(2) Elimination entries necessary to consolidate CB Richard Ellis Group, Inc. as the parent, with CBRE and its guarantor and nonguarantor subsidiaries.

Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and intercompany balances and transactions.

 

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CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 30, 2011

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Current Assets:

           

Cash and cash equivalents

  $ 66      $ 118,592      $ 434,546      $ 198,905      $ —        $ 752,109   

Restricted cash

    —          4,840        16,386        27,995        —          49,221   

Receivables, net

    —          —          411,097        557,488        —          968,585   

Warehouse receivables (a)

    —          —          308,249        —          —          308,249   

Income taxes receivable

    7,137        450        9,542        19,227        —          36,356   

Prepaid expenses

    —          1,749        40,696        57,806        —          100,251   

Deferred tax assets, net

    —          —          92,205        20,764        —          112,969   

Real estate and other assets held for sale

    —          —          558        —          —          558   

Other current assets

    —          —          31,884        18,872        —          50,756   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

    7,203        125,631        1,345,163        901,057        —          2,379,054   

Property and equipment, net

    —          —          146,730        69,854        —          216,584   

Goodwill

    —          —          804,283        603,260        —          1,407,543   

Other intangible assets, net

    —          —          306,533        27,407        —          333,940   

Investments in unconsolidated subsidiaries

    —          —          96,387        48,771        —          145,158   

Investments in consolidated subsidiaries

    1,345,654        1,612,308        1,130,868        —          (4,088,830     —     

Intercompany loan receivable

    —          1,468,486        635,000        103,453        (2,206,939     —     

Deferred tax assets, net

    —          —          —          40,801        (34,501     6,300   

Real estate under development

    —          —          7,573        82,896        —          90,469   

Real estate held for investment

    —          —          4,223        535,697        —          539,920   

Available for sale securities

    —          —          33,930        —          —          33,930   

Other assets, net

    —          47,593        38,546        43,695        —          129,834   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

  $ 1,352,857      $ 3,254,018      $ 4,549,236      $ 2,456,891      $ (6,330,270   $ 5,282,732   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current Liabilities:

           

Accounts payable and accrued expenses

  $ —        $ 9,936      $ 130,767      $ 301,096      $ —        $ 441,799   

Compensation and employee benefits payable

    —          626        200,924        135,512        —          337,062   

Accrued bonus and profit sharing

    —          —          139,405        85,564        —          224,969   

Short-term borrowings:

           

Warehouse lines of credit (a)

    —          —          302,490        —          —          302,490   

Revolving credit facility

    —          76,449        —          34,771        —          111,220   

Other

    —          —          16        —          —          16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term borrowings

    —          76,449        302,506        34,771        —          413,726   

Current maturities of long-term debt

    —          42,000        —          38        —          42,038   

Notes payable on real estate

    —          —          —          153,598        —          153,598   

Liabilities related to real estate and other assets held for sale

    —          —          46        —          —          46   

Other current liabilities

    —          —          15,444        2,154        —          17,598   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Liabilities

    —          129,011        789,092        712,733        —          1,630,836   

Long-Term Debt:

           

Senior secured term loans

    —          979,500        —          —          —          979,500   

11.625% senior subordinated notes, net

    —          438,329        —          —          —          438,329   

6.625% senior notes

    —          350,000        —          —          —          350,000   

Other long-term debt

    —          —          —          85        —          85   

Intercompany loan payable

    269,853        —          1,937,086        —          (2,206,939     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Long-Term Debt

    269,853        1,767,829        1,937,086        85        (2,206,939     1,767,914   

Deferred tax liabilities, net

    —          —          34,501        —          (34,501     —     

Pension liability

    —          —          —          40,061        —          40,061   

Non-current tax liabilities

    —          —          81,217        —          —          81,217   

Notes payable on real estate

    —          —          —          366,353        —          366,353   

Other liabilities

    —          11,524        95,032        50,137        —          156,693   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

    269,853        1,908,364        2,936,928        1,169,369        (2,241,440     4,043,074   

Commitments and contingencies

    —          —          —          —          —          —     

Equity:

           

CB Richard Ellis Group, Inc. Stockholders’ Equity

    1,083,004        1,345,654        1,612,308        1,130,868        (4,088,830     1,083,004   

Non-controlling interests

    —          —          —          156,654        —          156,654   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equity

    1,083,004        1,345,654        1,612,308        1,287,522        (4,088,830     1,239,658   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

  $ 1,352,857      $ 3,254,018      $ 4,549,236      $ 2,456,891      $ (6,330,270   $ 5,282,732   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Although CBRE Capital Markets is included among our domestic subsidiaries, which jointly and severally guarantee our 11.625% senior subordinated notes, our 6.625% senior notes and our Credit Agreement, a substantial majority of warehouse receivables funded under the JP Morgan Chase Bank, N.A. (JP Morgan), Kemps Landing Capital Company, LLC (Kemps Landing), Bank of America (BofA) and TD Bank, N.A. (TD Bank) lines of credit are pledged to JP Morgan, Kemps Landing, BofA and TD Bank, and accordingly, are not included as collateral for these notes or our other outstanding debt.

 

23


Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2010

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Current Assets:

           

Cash and cash equivalents

  $ 4      $ 223,845      $ 96,862      $ 185,863      $ —        $ 506,574   

Restricted cash

    —          4,830        16,086        31,341        —          52,257   

Receivables, net

    —          —          364,634        575,533        —          940,167   

Warehouse receivables (a)

    —          —          485,433        —          —          485,433   

Income taxes receivable

    16,581        28,957        —          3,915        (49,453     —     

Prepaid expenses

    —          —          40,653        56,298        —          96,951   

Deferred tax assets, net

    —          —          92,205        20,099        —          112,304   

Real estate and other assets held for sale

    —          —          558        15,737        —          16,295   

Other current assets

    —          —          31,401        19,488        —          50,889   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

    16,585        257,632        1,127,832        908,274        (49,453     2,260,870   

Property and equipment, net

    —          —          118,425        69,972        —          188,397   

Goodwill

    —          —          803,075        520,726        —          1,323,801   

Other intangible assets, net

    —          —          304,639        28,216        —          332,855   

Investments in unconsolidated subsidiaries

    —          —          82,593        56,380        —          138,973   

Investments in consolidated subsidiaries

    1,132,091        856,753        1,042,686        —          (3,031,530     —     

Intercompany loan receivable

    —          1,434,571        635,000        177,302        (2,246,873     —     

Deferred tax assets, net

    —          —          —          40,185        (29,865     10,320   

Real estate under development

    —          —          —          112,819        —          112,819   

Real estate held for investment

    —          —          4,214        622,181        —          626,395   

Available for sale securities

    —          —          31,936        —          —          31,936   

Other assets, net

    —          31,274        22,985        40,943        —          95,202   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

  $ 1,148,676      $ 2,580,230      $ 4,173,385      $ 2,576,998      $ (5,357,721   $ 5,121,568   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Current Liabilities:

           

Accounts payable and accrued expenses

  $ —        $ 9,211      $ 138,613      $ 297,513      $ —        $ 445,337   

Compensation and employee benefits payable

    —          626        204,034        141,879        —          346,539   

Accrued bonus and profit sharing

    —          —          235,694        219,829        —          455,523   

Income taxes payable

    —          —          67,851        —          (49,453     18,398   

Short-term borrowings:

           

Warehouse lines of credit (a)

    —          —          453,835        —          —          453,835   

Revolving credit facility

    —          10,120        —          7,396        —          17,516   

Other

    —          —          16        —          —          16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term borrowings

    —          10,120        453,851        7,396        —          471,367   

Current maturities of long-term debt

    —          38,000        —          86        —          38,086   

Notes payable on real estate

    —          —          —          154,213        —          154,213   

Liabilities related to real estate and other assets held for sale

    —          —          86        12,066        —          12,152   

Other current liabilities

    —          —          12,621        2,532        —          15,153   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Liabilities

    —          57,957        1,112,750        835,514        (49,453     1,956,768   

Long-Term Debt:

           

Senior secured term loans

    —          602,500        —          —          —          602,500   

11.625% senior subordinated notes, net

    —          437,682        —          —          —          437,682   

6.625% senior notes

    —          350,000        —          —          —          350,000   

Other long-term debt

    —          —          —          54        —          54   

Intercompany loan payable

    240,461        —          2,006,412        —          (2,246,873     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Long-Term Debt

    240,461        1,390,182        2,006,412        54        (2,246,873     1,390,236   

Deferred tax liabilities, net

    —          —          29,865        —          (29,865     —     

Pension liability

    —          —          —          40,007        —          40,007   

Non-current tax liabilities

    —          —          78,306        —          —          78,306   

Notes payable on real estate

    —          —          —          461,665        —          461,665   

Other liabilities

    —          —          89,299        39,492        —          128,791   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities

    240,461        1,448,139        3,316,632        1,376,732        (2,326,191     4,055,773   

Commitments and contingencies

    —          —          —          —          —          —     

Equity:

           

CB Richard Ellis Group, Inc. Stockholders’ Equity

    908,215        1,132,091        856,753        1,042,686        (3,031,530     908,215   

Non-controlling interests

    —          —          —          157,580        —          157,580   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Equity

    908,215        1,132,091        856,753        1,200,266        (3,031,530     1,065,795   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Equity

  $ 1,148,676      $ 2,580,230      $ 4,173,385      $ 2,576,998      $ (5,357,721   $ 5,121,568   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Although CBRE Capital Markets is included among our domestic subsidiaries, which jointly and severally guarantee our 11.625% senior subordinated notes, our 6.625% senior notes and our Credit Agreement, a substantial majority of warehouse receivables funded under the Kemps Landing, JP Morgan, BofA and Fannie Mae ASAP lines of credit are pledged to Kemps Landing, JP Morgan, BofA and Fannie Mae, and accordingly, are not included as collateral for these notes or our other outstanding debt.

 

24


Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2011

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Revenue

  $ —        $ —        $ 834,952      $ 587,266      $ —        $ 1,422,218   

Costs and expenses:

           

Cost of services

    —          —          502,310        337,512        —          839,822   

Operating, administrative and other

    9,437        1,701        231,817        189,901        —          432,856   

Depreciation and amortization

    —          —          14,320        11,065        —          25,385   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    9,437        1,701        748,447        538,478        —          1,298,063   

Gain on disposition of real estate

    —          —          —          6,027        —          6,027   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    (9,437     (1,701     86,505        54,815        —          130,182   

Equity income from unconsolidated subsidiaries

    —          —          11,979        5,089        —          17,068   

Interest income

    —          26,492        400        2,039        (27,029     1,902   

Interest expense

    —          25,979        27,656        7,610        (27,029     34,216   

Royalty and management service (income) expense

    —          —          (7,988     7,988        —          —     

Income from consolidated subsidiaries

    67,158        67,906        15,327        —          (150,391     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before (benefit of) provision for income taxes

    57,721        66,718        94,543        46,345        (150,391     114,936   

(Benefit of) provision for income taxes

    (3,502     (440     26,637        23,641        —          46,336   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

    61,223        67,158        67,906        22,704        (150,391     68,600   

Income from discontinued operations, net of income taxes

    —          —          —          6,267        —          6,267   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    61,223        67,158        67,906        28,971        (150,391     74,867   

Less: Net income attributable to non-controlling interests

    —          —          —          13,644        —          13,644   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 61,223      $ 67,158      $ 67,906      $ 15,327      $ (150,391   $ 61,223   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2010

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Revenue

  $ —        $ —        $ 670,790      $ 501,129      $ —        $ 1,171,919   

Costs and expenses:

           

Cost of services

    —          —          397,544        281,170        —          678,714   

Operating, administrative and other

    10,734        2,151        189,287        169,861        —          372,033   

Depreciation and amortization

    —          —          14,517        13,099        —          27,616   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    10,734        2,151        601,348        464,130        —          1,078,363   

Gain on disposition of real estate

    —          —          3,313        310        —          3,623   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    (10,734     (2,151     72,755        37,309        —          97,179   

Equity income from unconsolidated subsidiaries

    —          —          12,398        1,837        —          14,235   

Interest income

    —          45        626        2,599        (159     3,111   

Interest expense

    —          39,453        117        10,864        (159     50,275   

Royalty and management service (income) expense

    —          —          (6,096     6,096        —          —     

Income from consolidated subsidiaries

    61,260        86,312        27,966        —          (175,538     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before (benefit of) provision for income taxes

    50,526        44,753        119,724        24,785        (175,538     64,250   

(Benefit of) provision for income taxes

    (4,264     (16,507     33,412        14,063        —          26,704   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

    54,790        61,260        86,312        10,722        (175,538     37,546   

Income from discontinued operations, net of income taxes

    —          —          —          7,140        —          7,140   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    54,790        61,260        86,312        17,862        (175,538     44,686   

Less: Net loss attributable to non-controlling interests

    —          —          —          (10,104     —          (10,104
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 54,790      $ 61,260      $ 86,312      $ 27,966      $ (175,538   $ 54,790   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Revenue

  $ —        $ —        $ 1,531,087      $ 1,076,236      $ —        $ 2,607,323   

Costs and expenses:

           

Cost of services

    —          —          923,270        630,307        —          1,553,577   

Operating, administrative and other

    19,242        1,888        440,240        348,511        —          809,881   

Depreciation and amortization

    —          —          26,605        21,958        —          48,563   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    19,242        1,888        1,390,115        1,000,776        —          2,412,021   

Gain on disposition of real estate

    —          —          —          7,999        —          7,999   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    (19,242     (1,888     140,972        83,459        —          203,301   

Equity income from unconsolidated subsidiaries

    —          —          28,427        3,820        —          32,247   

Interest income

    —          52,547        1,241        3,541        (52,759     4,570   

Interest expense

    —          51,873        52,150        16,670        (52,759     67,934   

Royalty and management service (income) expense

    —          —          (16,235     16,235        —          —     

Income from consolidated subsidiaries

    107,697        108,461        20,757        —          (236,915     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before (benefit of) provision for income taxes

    88,455        107,247        155,482        57,915        (236,915     172,184   

(Benefit of) provision for income taxes

    (7,137     (450     47,021        30,308        —          69,742   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

    95,592        107,697        108,461        27,607        (236,915     102,442   

Income from discontinued operations, net of income taxes

    —          —          —          16,911        —          16,911   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    95,592        107,697        108,461        44,518        (236,915     119,353   

Less: Net income attributable to non-controlling interests

    —          —          —          23,761        —          23,761   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to CB Richard Ellis Group, Inc.

  $ 95,592      $ 107,697      $ 108,461      $ 20,757      $ (236,915   $ 95,592   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

27


Table of Contents

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2010

(Dollars in thousands)

 

    Parent     CBRE     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Elimination     Consolidated
Total
 

Revenue

  $ —        $ —        $ 1,273,224      $ 924,578      $ —        $ 2,197,802   

Costs and expenses:

           

Cost of services

    —          —          764,690        529,218        —          1,293,908   

Operating, administrative and other

    21,110        2,514        364,479        322,636        —          710,739   

Depreciation and amortization

    —          —          28,734        25,177        —          53,911   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    21,110        2,514        1,157,903        877,031        —          2,058,558   

Gain on disposition of real estate

    —          —          3,313        310        —          3,623   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    (21,110     (2,514     118,634        47,857        —          142,867   

Equity income (loss) from unconsolidated subsidiaries

    —          —          8,807        (1,156     —          7,651   

Interest income

    —          103        1,486        3,671        (349     4,911   

Interest expense

    —          79,589        239        20,588        (349     100,067   

Royalty and management service (income) expense

    —          —          (11,097     11,097        —          —     

Income from consolidated subsidiaries

    60,888        110,318        21,854        —          (193,060     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before (benefit of) provision for income taxes

    39,778        28,318        161,639        18,687        (193,060     55,362   

(Benefit of) provision for income taxes

    (8,385     (32,570     51,321        23,637        —          34,003   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations

    48,163        60,888        110,318        (4,950     (193,060     21,359   

Income from discontinued operations, net of income taxes

    —          —          —          7,140        —          7,140   
 

 

 

&n