Press Release: Trammell Crow Company
May 9, 2002
DALLAS, TX -- Trammell Crow Company (NYSE: TCC), one of the nation's largest diversified commercial real estate
services companies, yesterday announced its financial results for the quarter ended March 31, 2002.
Diluted earnings per share for the first quarter of 2002 were $0.01. For the first quarter of the prior year, the
company reported diluted earnings per share of $0.00. For the first quarter of 2002, revenues totaled $170.2 million,
compared with revenues of $174.5 million for the corresponding quarter of 2001. EBITDA for the first quarter of
2002 totaled $8.1 million, compared with EBITDA of $11.3 million for the first quarter of 2001.
Commenting on the quarter, Robert Sulentic, the company's President and Chief Executive Officer, noted, "Given
market conditions, we are pleased to be able to report results in line with expectations. We achieved these results
with significant help from our cost cutting work in 2001. We expected we would need a reduced cost structure in
2002, and in fact, the difficult market environment that we continue to face has borne out this expectation. While
it appears on the face of our income statement that we had very modest cost decreases -- and cost increases in
some categories, that is due to the impact of increased cost reimbursements, which flow dollar-for-dollar through
our revenue lines, principally facilities and property management revenues. Unreimbursed costs, which directly
impact our bottom line, were down substantially quarter-to-quarter. Specifically, unreimbursed salary and benefits
expense was down approximately 13% from the first quarter of 2001, and general and administrative expenses were
down 6.5%."
Mr. Sulentic continued "The 2.4% decline in total revenues was driven by an 18.3% decline in combined brokerage
and corporate advisory services revenues and a 16.8% decline in development and investment revenues. On a top line
basis, these declines were largely offset by a 27.4% increase in facilities management revenues. However, incremental
transactional revenues generally have a greater bottom line impact than incremental facilities management revenues,
with their high cost reimbursement component. Despite this shift in revenue mix, and its resulting negative impact
on the bottom line, we were able to maintain profitability due to our progress on the cost side."
First quarter 2002 results were also positively impacted by the non-amortization of goodwill as a result of the
adoption of FAS 142, effective January 1, 2002, and interest expense reduction resulting from the company's mark-to-market
of its interest rate swap agreement in 2001 in accordance with FAS 133. Amortization of goodwill totaled $1.1 million
during the first quarter of 2001; consistent with FAS 142, no goodwill was amortized during the first quarter of
2002. Approximately $1.0 million of interest that would have otherwise been expensed by the company during the
first quarter of 2002 was booked against the liability established in connection with the swap mark-to-market charges
as required by FAS 133.
Revenues for the company's Global Services segment decreased slightly from $155.0 million in the first quarter
of 2001 to $154.0 million in the first quarter of 2002. Quarter-to-quarter increases in facilities management revenues
were fueled by new contracts and contract expansions won during 2001. Brokerage and corporate advisory services
revenues declined from the first quarter of 2001 due largely to the fact that there was still revenue momentum
flowing into the first quarter of 2001, before the impact of the economic downturn had been felt.
Effective January 1, 2002, the company transferred operational responsibility for its e-commerce initiatives to
management of the Global Services group. Accordingly, e-commerce activities reported separately in the E-Commerce
segment in 2001 have been included in the Global Services segment for 2002. Segment information for the three months
ended March 31, 2001, has been restated to reflect the inclusion of the company's e-commerce activities within
the Global Services segment. This restatement had no impact on Global Services revenues but did impact segment
expenses and operating results. The Global Services segment posted a pre-tax loss of approximately $0.5 million
for the quarter ended March 31, 2002, compared with income before income taxes of approximately $2.8 million (as
restated) in the first quarter of 2001.
Development and Investment segment revenues declined from $19.5 million in the first quarter of 2001 to $16.2 million
in the first quarter of 2002. Despite the revenue decline, Development and Investment segment results improved
from a loss of $2.7 million in the first quarter of 2001 to income of $0.8 million in the first quarter of 2002.
The improved operating results on decreased revenues reflect progress on costs made during 2001 along with the
elimination of certain unprofitable business units.
Commenting on the outlook for the remainder of the year, Mr. Sulentic stated, "We continue to believe that
the market for our services will be slow throughout 2002. We have seen no material evidence to the contrary. As
a whole, businesses are not yet adding jobs or taking space. The outlook will improve only when profits increase
such that corporations generally have the confidence to make long-term real estate commitments."
With regard to the company's earnings targets, Mr. Sulentic noted, "Our full-year earnings target remains
unchanged. We do, however, expect our second quarter earnings to be adversely impacted by approximately $.02 per
share associated with the write-off of capitalized pursuit costs in Trammell Crow Savills. We have been working
for over a year on an international pursuit that had elements of both an acquisition and a very large outsourcing
contract. The pursuit concluded unsuccessfully when the party with whom we had been negotiating withdrew from the
transaction last week. We now expect second quarter diluted earnings per share to be in the range of $.10 to $.15."
At 11:00 a.m., Eastern Daylight Time, yesterday, Mr. Sulentic and other members of company management hosted a
Webcast conference call to review the company's first quarter results. The call may be accessed via the Investor
Relations section of Trammell Crow Company's Web site at http://www.trammellcrow.com . A replay of the call will
also be accessible in the same manner through May 14.
Founded in 1948, Trammell Crow Company is one of the largest diversified commercial real estate services companies
in the United States. In offices throughout the United States and Canada, Trammell Crow Company is organized to
deliver management services, transaction services and development and project management services to both investors
in and users of commercial real estate. The company's Global Services Group delivers all management, transaction
and project management services domestically and internationally. Development and investment activities are conducted
through the Development and Investment Group. The company delivers services in Europe and Asia through its strategic
alliance with Savills plc, a leading property services company based in the United Kingdom, and the jointly owned
outsourcing company Trammell Crow Savills Limited. In addition, the company has offices in Chile, Argentina, Brazil
and Mexico. Trammell Crow Company is traded on the New York Stock Exchange under the ticker symbol "TCC"
and is located on the World Wide Web at http://www.trammellcrow.com .
Certain statements contained in this press release, including without limitation statements containing the words
"believe," "anticipate," "expect," "envision," "project," "budget,"
"target," "should," "foresee" and words of similar import, are forward-looking statements
within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks,
uncertainties and other matters which may cause the actual results, performance or achievements of the company
or industry results to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and other matters include, but are not limited
to (i) the timing of individual transactions, (ii) the ability of the company to identify and implement cost reduction
measures (including those undertaken in connection with the previously announced internal reorganization) and achieve
economies of scale, (iii) the ability of the company to implement and manage effectively its e-commerce initiatives,
(iv) the ability of the company to compete effectively in the international arena, (v) the ability of the company
to attract new corporate and institutional customers, (vi) the ability of the company to manage fluctuations in
net earnings and cash flow which could result from the company's participation as a principal in real estate investments,
(vii) the company's ability to continue to pursue its growth strategy, (viii) the company's ability to compete
in highly competitive national and local business lines and (ix) the company's ability to attract and retain qualified
personnel in all areas of its business (particularly management). In addition, the company's ability to achieve
certain anticipated results will be subject to other factors affecting the company's business that are beyond the
company's control, including but not limited to general economic conditions (including the cost and availability
of capital for investment in real estate and customers' willingness to make real estate commitments) and the effect
of government regulation on the conduct of the company's business. Given these uncertainties, readers are cautioned
not to place undue reliance on such forward-looking statements. The company disclaims any obligation to update
any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained
herein to reflect any change in the company's expectation with regard thereto or any change in events, conditions,
circumstances or assumptions underlying such statements. Reference is hereby made to the disclosures contained
under the heading "Risk-Factors" in "Item 1. Business" of the company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 29, 2002.
Trammell Crow Company
Statements of Operations
(in thousands, except share and per share data)
For the Three Months
Ended March 31,
2002 2001
(UNAUDITED)
Revenues:
Global Services:
Corporate:
Facilities management $53,293 $41,828
Corporate advisory services 22,904 25,885
Project management services 13,268 12,610
89,465 80,323
Institutional:
Property management 41,092 42,987
Brokerage 20,260 26,939
Construction management 2,496 4,421
63,848 74,347
Income from investments in
unconsolidated subsidiaries 555 159
Other 138 182
154,006 155,011
Development and Investment:
Development and construction fees 14,604 16,409
Income from investments in
unconsolidated subsidiaries 423 353
Gain on disposition of real estate 912 2,273
Other 273 445
16,212 19,480
------- -------
170,218 174,491
Costs and expenses:
Salaries, wages and benefits 120,479 117,433
Commissions 17,627 20,223
General and administrative 24,478 25,818
Depreciation 4,031 3,785
Amortization 1,213 3,113
Interest 2,574 4,348
Minority interest (511) (262)
169,891 174,458
Income before income taxes 327 33
Income tax expense 131 13
Net income $196 $20
Diluted earnings per share $0.01 $--
Weighted average common shares outstanding 36,660,394 36,530,930
Net income $196 $20
Depreciation and amortization 5,244 6,898
Interest 2,574 4,348
Income tax expense 131 13
EBITDA $8,145 $11,279
Trammell Crow Company
Balance Sheet
(in thousands)
March 31, December 31,
2002 2001
(UNAUDITED)
Assets:
Current assets
Cash and cash equivalents $29,419 $38,059
Accounts receivable, net of
allowance for doubtful accounts 140,301 160,639
Receivables from affiliates 3,073 4,999
Notes and other receivables 13,231 19,752
Income taxes recoverable 4,201 -
Deferred income taxes 3,150 3,182
Real estate held for sale 218,263 234,853
Other current assets 22,355 20,235
Total current assets 433,993 481,719
Furniture and equipment, net 31,150 33,790
Deferred income taxes 26,243 26,239
Investments in unconsolidated
subsidiaries (Note 1) 59,800 55,084
Goodwill, net 74,218 74,230
Other assets 26,197 28,083
$651,601 $699,145
Liabilities and Stockholders' Equity:
Current liabilities
Accounts payable $31,584 $37,875
Accrued expenses 76,520 108,616
Payables to affiliates 1,609 1,609
Income taxes payable -- 2,973
Current portion of long-term debt 21,334 11,167
Current portion of capital lease
obligations 4,567 4,689
Notes payable on real estate held
for sale 132,135 158,226
Other current liabilities 10,285 11,214
Total current liabilities 278,034 336,369
Long-term debt, less current portion 55,000 43,000
Capital lease obligations, less
current portion 2,499 3,157
Other liabilities 170 537
Total liabilities 335,703 383,063
Minority interest 27,632 29,959
Stockholders' equity
Preferred stock -- --
Common stock 359 359
Paid-in capital 176,354 176,354
Retained earnings 114,696 115,084
Accumulated other comprehensive
income (loss) (1,161) (1,331)
Less: Treasury stock (803) (2,951)
Unearned stock compensation, net (1,179) (1,392)
Total stockholders' equity 288,266 286,123
$651,601 $699,145
Note 1: Investments in unconsolidated subsidiaries consist of the
following:
March 31, December 31,
2002 2001
Real Estate Development $37,339 $32,918
Other 22,461 22,166
$59,800 $55,084
Trammell Crow Company
Summarized Operating Data by Segment
(in thousands)
For the Three Months
Ended March 31,
2002 2001
(UNAUDITED)
(A)
Global Services:
Total revenues $154,006 $155,011
Operating costs and expenses 154,501 152,250
Income (loss) before income taxes $(495) $2,761
EBITDA $5,036 $10,663
Development and Investment:
Total revenues $16,212 $19,480
Operating costs and expenses 15,390 22,208
Income (loss) before income taxes $822 $(2,728)
EBITDA $3,109 $616
Total:
Total revenues $170,218 $174,491
Operating costs and expenses 169,891 174,458
Income before income taxes $327 $33
EBITDA $8,145 $11,279
(A) Global Services segment information for 2002 and 2001 includes the
Company's e-commerce operations that were previously reported as a
separate segment.
Trammell Crow Company
Other Data
(UNAUDITED)
March 31, December 31,
2002 2001
Corporate Service Clients 97 99
Number of Brokers 511 515
Managed /Leased Portfolio (in thousands):
Property management square footage 274,417 291,673
Facilities management square footage 244,448 247,748
Leased only square footage 92,801 95,828
Total Portfolio 611,666 635,249
Development Inventory (in millions):
In process inventory $4,640 $4,903
Pipeline inventory 2,310 2,294
Total Inventory $6,950 $7,197
SOURCE: Trammell Crow Company