CB Richard Ellis Group, Inc. Reports First Quarter 2008 Revenue of $1.2 Billion and Earnings Per Share of $0.15

CB Richard Ellis Group, Inc. (NYSE:CBG) today reported revenue of $1.2 billion for the first quarter of 2008, a slight increase over the first quarter of 2007. The Company reported net income of $20.5 million, or $0.10 per diluted share, for the first quarter of 2008, compared with net income of $12.0 million, or $0.05 per diluted share, for the same quarter last year. Excluding one-time charges1, the Company would have earned net income2 of $31.7 million, or $0.15 per diluted share, in the first quarter of 2008 compared with net income of $65.0 million, or $0.27 per diluted share, in the first quarter of 2007. This decrease was driven by two factors: the timing of carried interest revenue recognition in the Global Investment Management segment and the combined impact, in the EMEA segment, of a revenue mix shift and planned increase of costs associated with investment in growth of the business. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)3 totaled $88.5 million for the first quarter of 2008, an increase of $4.2 million, or 5%, from the same quarter last year. CB Richard Ellis’ first-quarter results were paced by significant growth in its outsourcing business activities. Reflecting the increasing strength of this business line following the December 2006 acquisition of Trammell Crow Company, revenue from this business line rose by 34% and accounted for approximately one-third of global revenue – up from approximately 25% in the same period of 2007. During the first quarter, the Company won 11 new outsourcing accounts, expanded its services for 10 existing customers and renewed its relationship with 11 others. "Generally, first-quarter 2008 results were in line with our expectations,” said Brett White, president and chief executive officer of CB Richard Ellis. "As anticipated, the weaker economy as well as the unsettled credit market environment materially impacted our capital markets businesses. Investment sales activity declined in the Americas and Europe due to limited credit availability. On the other hand, the quarter underscored our continuing success in diversifying the firm’s revenue streams. Our outsourcing business grew substantially in every region worldwide. "In addition, the global leasing business produced strong growth. Leasing revenue rose significantly in every region although continued economic weakness in the U.S. and EMEA could reduce future leasing results. Asia Pacific performed exceptionally well during the quarter, with more than 40% top- and bottom-line growth, reflecting both the relatively muted effect, thus far, of credit market uncertainty as well as market share gains and an expansion of our service offering throughout the region.” Americas Segment Results First quarter revenue for the Americas region, including the U.S., Canada and Latin America, was $783.5 million, compared with $791.9 million for the first quarter of 2007. The continued growth of our outsourcing business as well as stronger leasing performance compared to the prior year quarter almost entirely mitigated the impact of lower sales and commercial mortgage brokerage activity brought about by the continued challenges in the credit markets. Operating income for the Americas region totaled $62.4 million for the first quarter of 2008, compared with $21.6 million for the first quarter of 2007. The Americas region’s EBITDA totaled $66.3 million for the first quarter of 2008, an increase of $59.1 million from last year’s first quarter, largely due to the inclusion of higher Trammell Crow Company merger and acquisition related expenses in the prior year quarter. Excluding the impact of one-time items, operating income for the Americas region would have totaled $70.7 million for the first quarter of 2008, as compared to $74.5 million for the first quarter of last year. In the current quarter, the Company recorded an equity loss from unconsolidated subsidiaries of $10.6 million due to a write-down of its investment in CBRE Realty Finance attributable to a declined market valuation. EMEA Segment Results Revenue for the EMEA region, which mainly consists of operations in Europe, increased 7.7% to $242.8 million for the first quarter of 2008, compared with $225.4 million for the first quarter of 2007. This revenue increase reflects the continued strength of the Company’s platform across most business lines and various countries, including the Netherlands, France, the United Kingdom and Russia and the benefit from the strong Euro and British pound sterling against the U.S. dollar. Operating income for the EMEA segment totaled $8.0 million for the first quarter of 2008, compared with $33.6 million for the same period last year. EBITDA for the EMEA region totaled $11.7 million for the first quarter of 2008 compared to $36.8 million for last year’s first quarter. The current year quarter’s lower operating income and EBITDA is mainly due to a shift in revenue mix from investment sales to outsourcing. Approximately half of the revenue increase was due to higher reimbursements associated with our property and facilities management contracts that are included in revenue with a largely corresponding increase in reimbursable expenses, which therefore does not translate into noticeably increased operating income or EBITDA. In addition, higher compensation costs driven by investments in headcount and acquisitions as a result of our efforts to grow and diversify operations in this region impacted the current quarter’s results. The EMEA results were consistent with our expectations and support our current view that this business should post good results in 2008. The EMEA segment did not incur any significant one-time costs in the current or prior year quarter. Asia Pacific Segment Results In the Asia Pacific region, which includes operations in Asia, Australia and New Zealand, revenue totaled $137.4 million for the first quarter of 2008, a 46.2% increase from $94.0 million for the first quarter of 2007. This strong revenue increase was primarily driven by improved performance in Australia, China, Japan and Korea as well as from our acquisition of a majority interest in CBRE India during the third quarter of 2007. Operating income for the Asia Pacific segment increased to $12.3 million for the first quarter of 2008 compared to $9.9 million for the same period last year. EBITDA for the Asia Pacific segment totaled $13.7 million for the first quarter of 2008, an increase of $4.2 million, or 44.1%, from last year’s first quarter. The Asia Pacific segment did not incur any significant one-time costs in the current or prior year quarter. Global Investment Management Segment Results In the Global Investment Management segment, which consists of investment management operations in the U.S., Europe and Asia, revenue totaled $39.5 million for the first quarter of 2008, compared to $85.6 million recorded in the first quarter of 2007. This segment reported an operating loss of $2.1 million for the first quarter of 2008, compared with operating income of $38.7 million for the same period last year. EBITDA for this segment was a loss of $1.4 million for the first quarter of 2008, compared with positive EBITDA of $38.9 million in the first quarter of 2007. The lower results were mainly attributable to the timing of carried interest activity. As compared with the prior year first quarter, revenue recognized from funds liquidating (carried interest revenue) decreased by $46.4 million, partially offset by lower carried interest incentive compensation of $11.4 million. For the first quarter of 2008, the Company recorded a total of $5.3 million of incentive compensation expense related to carried interest revenue, all of which related to future periods’ revenue. Revenues associated with these expenses cannot be recognized until certain contractual hurdles are met. The Company expects that it will recognize income from funds liquidating in future quarters that will more than offset the $5.3 million of incentive compensation expense recognized. Total assets under management grew by nearly 12% from year-end 2007 to $42.2 billion at the end of the first quarter, reflecting strength in fundraising efforts and an active acquisition program. The Global Investment Management segment did not incur any one-time costs in the current or prior year quarter. Development Services Segment Results In the Development Services segment, which consists of real estate development and investment activities primarily in the U.S., revenue totaled $27.7 million for the first quarter of 2008, a 61.8% increase compared to $17.1 million recorded in the first quarter of 2007. This revenue increase was primarily driven by construction revenue, which also led to a corresponding increase in construction job costs, thereby not translating into increased operating income or EBITDA. This segment reported an operating loss of $10.3 million for the first quarter of 2008, compared with an operating loss of $10.7 million for the same period last year. EBITDA for the segment was a loss of $1.8 million for the first quarter of 2008, compared to an EBITDA loss of $8.0 million from last year’s first quarter. EBITDA was positively impacted by a reduction in minority interest expense, which is included in the calculation of EBITDA but not in the calculation of operating loss. Development projects in process as of March 31, 2008 totaled $6.3 billion, up nearly 15% from year ago levels and down slightly from year-end 2007. The inventory of pipeline deals as of March 31, 2008 stood at $2.8 billion. Conference Call Details The Company’s first-quarter earnings conference call will be held on Wednesday, April 30, 2008 at 10:30 a.m. Eastern Daylight Time (EDT). A live webcast will be accessible through the Investor Relations section of the Company’s Web site at www.cbre.com. The direct dial-in number for the conference call is 888-428-4480 for U.S. callers and 612-332-0107 for international callers. A replay of the call will be available starting at 2:00 p.m. EDT on April 30, 2008 and ending at midnight EDT on May 13, 2008. The dial-in number for the replay is 800-475-6701 for U.S. callers and 320-365-3844 for international callers. The access code for the replay is 917661. A transcript of the call will be available on the Company’s Investor Relations Web site. About CB Richard Ellis CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2007 revenue). With over 29,000 employees, the Company serves real estate owners, investors and occupiers through more than 300 offices worldwide (excluding affiliate offices). CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage brokerage; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis is the only commercial real estate services company named one of the 50 "best in class” companies by BusinessWeek, and was also named one of the 100 fastest growing companies by Fortune. Please visit our Web site at www.cbre.com. Note: This release contains forward-looking statements within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our growth momentum in 2008, future operations and future financial performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this release. Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, the Company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: general conditions of financial liquidity for real estate transactions; any general economic slow-down or recession in any of our principal operating regions; commercial real estate vacancy levels; employment conditions and their effect on vacancy rates; property values; rental rates; interest rates; realization of values in investment funds to offset related incentive compensation expense; our ability to leverage our platform to sustain revenue growth and capture market share; our ability to retain and incentivize producers; our levels of borrowing; and the integration of our acquisitions and the level of synergy savings achieved as a result. Additional information concerning factors that may influence the Company's financial information is discussed under "Risk Factors”, "Management’s Discussion and Analysis of Financial Condition and Results of Operations”, "Quantitative and Qualitative Disclosures About Market Risk” and "Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2007, as well as in the Company’s press releases and other periodic filings with the Securities and Exchange Commission. Such filings are available publicly and may be obtained off the Company’s Web site at www.cbre.com or upon request from the CB Richard Ellis Investor Relations Department at investorrelations@cbre.com. (1) One-time charges include amortization expense related to net revenue backlog, incentive fees and customer relationships resulting from acquisitions, merger-related charges, integration costs related to acquisitions, loss on trading securities acquired in the Trammell Crow Company acquisition and write-down of impaired investment.   (2) A reconciliation of net income to net income, as adjusted for one-time items, is provided in the exhibits to this release.   (3) The Company's management believes that EBITDA is useful in evaluating its operating performance compared to that of other companies in its 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 items may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company's management uses EBITDA as a measure to evaluate the operating performance of various business lines and for other discretionary purposes, including as a significant component when measuring its operating performance under its employee incentive programs.   However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles (GAAP), and when analyzing the Company's operating performance, readers should use EBITDA in addition to, and not as an alternative for, net income determined in accordance with GAAP. Because not all companies use identical calculations, the Company's 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 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 the Company's 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 the Company's ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.   For a reconciliation of EBITDA with the most comparable financial measures calculated and presented in accordance with GAAP, see the section of this press release titled "Non-GAAP Financial Measures." CB RICHARD ELLIS GROUP, INC. OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (Dollars in thousands, except share data) (Unaudited)   Three Months Ended March 31,   2008       2007   Revenue $ 1,230,925 $ 1,213,961   Costs and expenses: Cost of services 704,446 649,673 Operating, administrative and other 432,345 411,937 Depreciation and amortization 23,802 27,368 Merger-related charges   -     31,855 Total costs and expenses 1,160,593 1,120,833   Operating income 70,332 93,128 Equity (loss) income from unconsolidated subsidiaries (10,762 ) 4,249 Minority interest (income) expense (5,125 ) 2,900 Other loss - 37,534 Interest income 5,226 7,013 Interest expense   43,005     41,982   Income before provision for income taxes 26,916 21,974 Provision for income taxes   6,462     9,997   Net income $ 20,454   $ 11,977   Basic income per share $ 0.10   $ 0.05   Weighted average shares outstanding for basic income per share   203,110,675     229,663,454   Diluted income per share $ 0.10   $ 0.05   Weighted average shares outstanding for diluted income per share   207,730,837     236,932,240   EBITDA $ 88,497   $ 84,311 CB RICHARD ELLIS GROUP, INC. SEGMENT RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (Dollars in thousands) (Unaudited)   Three Months Ended March 31,   2008       2007   Americas Revenue $ 783,524 $ 791,885 Costs and expenses: Cost of services 484,368 480,892 Operating, administrative and other 222,455 238,448 Depreciation and amortization 14,308 19,071 Merger-related charges   -     31,855   Operating income $ 62,393   $ 21,619   EBITDA $ 66,285   $ 7,149     EMEA Revenue $ 242,761 $ 225,353 Costs and expenses: Cost of services 142,037 119,597 Operating, administrative and other 89,509 69,171 Depreciation and amortization   3,235     2,949   Operating income $ 7,980   $ 33,636   EBITDA $ 11,671   $ 36,766     Asia Pacific Revenue $ 137,432 $ 94,002 Costs and expenses: Cost of services 78,041 49,184 Operating, administrative and other 45,321 33,450 Depreciation and amortization   1,753     1,432   Operating income $ 12,317   $ 9,936   EBITDA $ 13,682   $ 9,498     Global Investment Management Revenue $ 39,489 $ 85,590 Costs and expenses: Operating, administrative and other 40,794 46,303 Depreciation and amortization   799     620   Operating (loss) income $ (2,104 ) $ 38,667   EBITDA $ (1,375 ) $ 38,934     Development Services Revenue $ 27,719 $ 17,131 Costs and expenses: Operating, administrative and other 34,266 24,565 Depreciation and amortization   3,707     3,296   Operating loss $ (10,254 ) $ (10,730 ) EBITDA $ (1,766 ) $ (8,036 ) The following measures are considered "non-GAAP financial measures" under SEC guidelines:   (i) Net income, as adjusted for one-time items   (ii) Diluted earnings per share, as adjusted for one-time items   (iii) EBITDA   (iv) Operating income (loss), as adjusted for one-time items   The Company believes that these non-GAAP financial measures provide a more complete understanding of ongoing operations and enhance comparability of current results to prior periods as well as presenting the effects of one-time items in all periods presented. The Company believes that investors may find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of one-time items that may obscure trends in the underlying performance of its business.   Net income, as adjusted for one-time items and diluted earnings per share, as adjusted for one-time items are calculated as follows (dollars in thousands, except per share data):   Three Months Ended March 31,   2008     2007   Net income $ 20,454 $ 11,977 Amortization expense related to net revenue backlog, incentive fees and customer relationships acquired, net of tax 1,749 6,401 Integration costs related to acquisitions, net of tax 3,293 7,274 Write-down of impaired investment, net of tax 6,210 - Loss on sale of trading securities acquired in the Trammell Crow Company acquisition, net of tax - 20,231 Merger-related charges, net of tax   -   19,113 Net income, as adjusted $ 31,706 $ 64,996   Diluted income per share, as adjusted $ 0.15 $ 0.27   Weighted average shares outstanding for diluted income per share   207,730,837   236,932,240 EBITDA for the Company is calculated as follows (dollars in thousands):   Three Months Ended March 31, 2008     2007   Net income $ 20,454 $ 11,977 Add: Depreciation and amortization 23,802 27,368 Interest expense 43,005 41,982 Provision for income taxes 6,462 9,997 Less: Interest income   5,226   7,013   EBITDA $ 88,497 $ 84,311 Operating income (loss), as adjusted for one-time items is calculated as follows (dollars in thousands):   Three Months Ended March 31,   2008       2007     Americas   Operating income $ 62,393 $ 21,619 Amortization expense related to net revenue backlog and customer relationships acquired 2,965 9,428 Integration costs related to acquisitions 5,373 11,599 Merger-related charges   -     31,855     Operating income, as adjusted $ 70,731   $ 74,501     EMEA   Operating income $ 7,980 $ 33,636 Integration costs related to acquisitions   208     524     Operating income, as adjusted $ 8,188   $ 34,160     Asia Pacific The Asia Pacific segment did not incur any one-time costs associated with acquisitions in the current or prior year period.   Global Investment Management The Global Investment Management segment did not incur any one-time costs associated with acquisitions in the current or prior year period.   Development Services Operating loss $ (10,254 ) $ (10,730 ) Amortization expense related to incentive fees acquired   -       1,241     Operating loss, as adjusted $ (10,254 )   $ (9,489 ) EBITDA for segments is calculated as follows (dollars in thousands):   Three Months Ended March 31,   2008       2007   Americas Net income (loss) $ 14,955 $ (23,418 ) Add: Depreciation and amortization 14,308 19,071 Interest expense 34,805 41,084 Royalty and management service income (7,288 ) - Provision (benefit) for income taxes 11,164 (24,898 ) Less: Interest income   1,659     4,690   EBITDA $ 66,285   $ 7,149     EMEA Net income $ 6,270 $ 24,326 Add: Depreciation and amortization 3,235 2,949 Interest expense 358 79 Royalty and management service expense 4,276 - (Benefit) provision for income taxes (806 ) 15,153 Less: Interest income   1,662     5,741   EBITDA $ 11,671   $ 36,766     Asia Pacific Net income $ 3,831 $ 3,332 Add: Depreciation and amortization 1,753 1,432 Interest expense 930 611 Royalty and management service expense 2,565 - Provision for income taxes 4,986 4,215 Less: Interest income   383     92   EBITDA $ 13,682   $ 9,498     Global Investment Management Net income $ 2,203 $ 16,497 Add: Depreciation and amortization 799 620 Interest expense 340 895 Royalty and management service expense 447 - (Benefit) provision for income taxes (4,918 ) 21,196 Less: Interest income   246     274   EBITDA $ (1,375 ) $ 38,934     Three Months Ended March 31,   2008       2007   Development Services Net loss $ (6,805 ) $ (8,760 ) Add: Depreciation and amortization 3,707 3,296 Interest expense 6,572 4,025 Benefit for income taxes (3,964 ) (5,669 ) Less: Interest income   1,276     928   EBITDA $ (1,766 ) $ (8,036 ) CB RICHARD ELLIS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited)   March 31,   December 31, 2008 2007(1) Assets: Cash and cash equivalents $ 313,162 $ 342,874 Restricted cash 24,900 44,438 Receivables, net 950,648 1,081,653 Warehouse receivables(2) 244,205 255,777 Real estate assets(3) 782,700 696,745 Goodwill and other intangibles, net 2,692,657 2,578,814 Investments in and advances to unconsolidated subsidiaries 226,640 236,892 Deferred compensation assets 270,757 264,190 Other assets, net   803,319   741,190   Total assets $ 6,308,988 $ 6,242,573   Liabilities: Current liabilities, excluding debt $ 1,257,688 $ 1,626,780 Warehouse lines of credit(2) 244,205 255,777 Revolving credit facility 311,219 227,065 Senior secured term loans 2,084,250 1,787,000 Other debt(4) 70,412 57,564 Notes payable on real estate(5) 519,613 466,032 Deferred compensation liability 265,668 278,266 Other long-term liabilities   287,752   291,933   Total liabilities 5,040,807 4,990,417   Minority interest 248,213 263,613   Stockholders’ equity   1,019,968   988,543   Total liabilities and stockholders’ equity $ 6,308,988 $ 6,242,573       (1) In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets”, certain assets and liabilities at December 31, 2007 have been reclassified to conform to the presentation at March 31, 2008.   (2) Represents Freddie Mac loan receivables, which are offset by the related non-recourse warehouse line of credit facility.   (3) Includes real estate and other assets held for sale, real estate under development and real estate held for investment.   (4) Includes a non-recourse revolving credit line balance of $54.6 million and $42.6 million in Development Services as of March 31, 2008 and December 31, 2007, respectively.   (5) Represents notes payable on real estate in Development Services of which $7.4 million and $6.6 million are recourse to the Company as of March 31, 2008 and December 31, 2007, respectively.