Press Release: Trammell Crow Company
August 10, 2001
DALLAS, TX -- Trammell Crow Company (NYSE:TCC), one of the nation's largest diversified commercial real estate
services companies, August 8 announced financial results for the second quarter of 2001. Diluted earnings per share
of $.12 exceeded company and analyst expectations.
Second Quarter Results
For the quarter ended June 30, 2001, revenues totaled $193.5 million; revenues for the corresponding quarter of
2000 were $186.1 million. EBITDA for the second quarter of 2001 totaled $18.0 million compared with EBITDA of $24.6
million for the second quarter of 2000. Net income for the second quarter of 2001 was $4.3 million compared with
net income of $8.4 million for 2000's second quarter.
Quarter-to-quarter comparisons for net income, earnings per share and EBITDA for both the company as a whole and
its constituent segments are affected by the institution of a new bonus plan for 2001 which requires that a substantial
majority of employee bonuses be paid from a pool, the size of which will be determined by the company's pre-bonus
income before income taxes. Consistent with the new plan, the portion of the subject bonuses accrued each quarter
is based on the percentage of targeted pre-bonus income before income taxes achieved in that quarter. In 2000 and
prior years, employee bonuses were driven solely by individual bonus plans; there was no company-wide bonus plan
overlay. As a result, in prior years estimated employee annual incentive bonuses were generally accrued evenly
throughout the year. The new bonus plan benefited 2001 second quarter net income by approximately $3.6 million,
or $.10 on an earnings per share basis.
Commenting on the results, company President and Chief Executive Officer Robert E. Sulentic noted, ``The increase
in revenue from the second quarter of 2000 to the second quarter of this year is primarily due to our success growing
our facilities and property management businesses. Our customers' consolidation of providers for these services
continues to yield wins for us, which in turn serve to validate our platform. Facilities management revenues were
up 37% from the second quarter of 2000, and property management revenues were up 16% from the same period. The
management services revenue increases were partially offset by declines in brokerage revenues; most notably, corporate
advisory services (primarily tenant representation) revenues were off 30% from the second quarter of 2000. Net
income declined from quarter-to-quarter primarily due to the loss of brokerage revenues, as incremental brokerage
revenues yield a much higher margin than facilities or property management business. Second quarter 2001 profitability
was also impacted by reduced profitability customarily encountered in the ''ramp-up`` phase of new outsourcing
contracts (when variable transaction revenues have not yet been earned to offset the cost of dedicated, unreimbursed
personnel) and by an increase in expenses in support of our international operations, where we have been investing
to facilitate significant pursuits.
Company-wide cost reduction efforts undertaken in mid-quarter had a modest impact prior to June 30 but should begin
to make a much more meaningful impact in the last half of the year. Our $14.2 million net expense increase from
last year's second quarter is largely due to a $13.4 million increase in reimbursed salaries associated with new
facilities and property management assignments.``
Segment Results
For the second quarter of 2001, the company reported total Global Services segment revenues of $168.2 million,
which compares with revenues of $163.1 million for the comparable period of 2000. Second quarter 2001 EBITDA and
income before income taxes for the Global Services segment were $13.2 million and $6.1 million, respectively, compared
with EBITDA of $22.9 million and income before income taxes of $16.1 million for the second quarter of 2000.
For the second quarter of 2001, the company reported total Development and Investment segment revenues of $25.3
million, which compares with revenues of $23.0 million for the comparable period of 2000. Second quarter 2001 EBITDA
and income before income taxes for the Development and Investment segment were $5.3 million and $1.6 million, respectively,
compared with EBITDA of $2.2 million and a loss before income taxes of $1.6 million for the second quarter of 2000.
Reflecting on segment results, Mr. Sulentic noted ``Global Services results clearly reflect the shift of revenue
from brokerage to facilities and property management, with the consequences previously noted. Development and Investment
profits are up sharply quarter-to-quarter, but that should not imply that the near-term outlook for this business
has improved in the last quarter. As we have often noted, the results from this business are impacted significantly
by the timing of transactions, and development activity is heavily back-end loaded with the overwhelming majority
of transactions customarily closed in the last half of any given year. Given this, timing shifts in a very small
percentage of our annual development activity can have a large impact in the first two quarters of the year.''
Second quarter results for the e-commerce segment reflect a loss before income taxes of $454,000, compared with
a loss before income taxes of $547,000 for the second quarter of 2000. All of the company's activity in this area
is driven by the desire to achieve operational improvements and efficiencies in its facilities and property management
and brokerage businesses rather than a desire to make venture capital-type investments.
Reorganization Update
Commenting on the company's 2001 reorganization, Mr. Sulentic noted, ``Our reorganization into our new Global Services
and Development and Investment groups is proceeding smoothly. Customers and employees have both reacted favorably
to the reorganization. The enhanced focus on each side of the business should enable us to capitalize on the opportunities
we're provided going forward, and during the market-driven downturn in our business, our new organizational structure
is facilitating a more analytical approach to cutting costs.''
Full Year Outlook
With regard to the remainder of the year, Mr. Sulentic advised, ``We have seen further deterioration in market
conditions directly impacting our transaction businesses and diminishing our outlook for the full year. Concurrent
with this deterioration we have been implementing more significant cost reduction measures, but absent positive
surprises on the revenue side, it is unlikely that our cost-cutting efforts will enable us to achieve the bottom
end of the range we previously announced as our target for 2001 EPS. For the remainder of the year, our expense-side
focus will be concentrated on achievement of the expected savings from previously initiated measures and identifying
further reductions in the fixed cost structure underlying our transaction-driven businesses. Unfortunately, the
outlook for the transactional pieces of our business - in particular, brokerage - has become clouded to the extent
that we are uncomfortable articulating a new range for full-year EPS at this time.''
Stock Buyback
With regard to the company's previously announced $15 million stock repurchase program, the company announced that
through June 30, 2001, it had purchased 213,400 shares, all in open market transactions, at an average price of
approximately $10.50.
At 11:00 a.m., Eastern Daylight Time, today, Mr. Sulentic and other members of company management will host a Webcast
conference call to review the company's second quarter results. The call may be accessed via Streetfusion at www.streetfusion.com.
A replay of the call will also be available through August 15th via Trammell Crow Company's Web site at www.trammellcrow.com.
Founded in 1948, Trammell Crow Company is one of the largest diversified commercial real estate services companies
in the United States. Through 14 ``mega markets,'' spanning 170 offices in 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 facilities and property management, transaction and project management services domestically and internationally.
Development and investment activities are conducted through the Development and Investment Group. The company has
international service delivery 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 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 containment 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, 2001.
Trammell Crow Company
Statements of Income
(in thousands, except share and per share data)
(UNAUDITED)
For the Six Months For the Three Months
Ended June 30, Ended June 30,
--------------------- ----------------------
2001 2000 2001 2000
--------------------- ----------------------
Revenues:
Global Services:
Corporate:
Facilities management $ 84,868 $ 60,680 $ 43,040 $ 31,305
Corporate advisory
services 52,785 64,517 26,900 38,398
Project management
services 25,578 19,530 12,968 9,798
--------------------- ----------------------
163,231 144,727 82,908 79,501
Institutional:
Property management 89,066 79,491 46,079 39,625
Brokerage 61,715 67,713 34,776 38,660
Construction management 7,966 9,559 3,545 5,180
--------------------- ----------------------
158,747 156,763 84,400 83,465
Income (loss) from
investments in
unconsolidated
subsidiaries 810 - 651 (233)
Other 387 464 205 330
--------------------- ----------------------
323,175 301,954 168,164 163,063
Development and
Investment:
Development and
construction fees 34,730 35,652 18,321 18,499
Income from investments
in unconsolidated
subsidiaries 4,719 2,563 4,366 1,157
Gain on disposition of
real estate 4,567 8,472 2,294 2,873
Other 779 693 334 498
--------------------- ----------------------
44,795 47,380 25,315 23,027
--------------------- ----------------------
367,970 349,334 193,479 186,090
Costs and expenses:
Salaries, wages and
benefits 234,223 201,165 116,790 100,302
Commissions 46,451 52,267 26,228 30,920
General and
administrative 57,231 53,802 31,413 28,323
Depreciation and
amortization 13,891 11,017 6,993 6,351
Interest 8,221 7,744 3,873 4,243
Minority interest (199) 3,180 63 1,961
Restructuring charges 947 - 947 -
--------------------- ----------------------
360,765 329,175 186,307 172,100
Income before income
taxes 7,205 20,159 7,172 13,990
Income tax expense 2,920 8,066 2,907 5,597
--------------------- ----------------------
Net income $ 4,285 $ 12,093 $ 4,265 $ 8,393
==================== ======================
Diluted earnings per
share $ 0.12 $ 0.34 $ 00.12 $ 0.23
===================== ======================
Weighted average common
shares outstanding 36,470,085 35,961,043 36,408,303 36,018,449
===================== ======================
Net income $ 4,285 $ 12,093 $ 4,265 $ 8,393
Depreciation and
amortization 13,891 11,017 6,993 6,351
Interest 8,221 7,744 3,873 4,243
Income tax expense 2,920 8,066 2,907 5,597
---------------------- ----------------------
EBITDA $ 29,317 $ 38,920 $ 18,038 $ 24,584
====================== ======================
Trammell Crow Company
Balance Sheet
(in thousands)
June 30, December 31,
2001 2000
---------- ------------
(UNAUDITED)
Assets:
Current assets
Cash and cash equivalents $ 19,932 $ 55,637
Accounts receivable, net of allowance
for doubtful accounts 139,479 151,069
Receivables from affiliates 7,528 4,306
Notes and other receivables 19,027 22,072
Income taxes recoverable 1,094 -
Deferred income taxes 2,219 2,219
Real estate held for sale 236,234 220,021
Other current assets 27,702 28,345
--------- ---------
Total current assets 453,215 483,669
Furniture and equipment, net 35,716 35,200
Deferred income taxes 13,931 13,088
Investments in unconsolidated
subsidiaries (Note 1) 65,805 55,603
Goodwill, net 99,458 100,440
Other assets 35,925 38,434
--------- ---------
$704,050 $726,434
========= =========
Liabilities and Stockholders' Equity:
Current liabilities
Accounts payable $ 47,179 $ 44,114
Accrued expenses 82,318 101,157
Payables to affiliates 1,604 1,891
Income taxes payable - 3,592
Current portion of long-term debt 1,808 1,377
Current portion of capital
lease obligations 4,358 5,219
Notes payable on real estate
held for sale 156,915 148,098
Other current liabilities 7,519 6,808
--------- ---------
Total current liabilities 301,701 312,256
Long-term debt, less current portion 67,200 75,105
Capital lease obligations,
less current portion 4,874 6,541
Other liabilities 572 572
--------- ---------
Total liabilities 374,347 394,474
Minority interest 34,679 41,001
Stockholders' equity
Preferred stock - -
Common stock 359 358
Paid-in capital 176,457 176,374
Retained earnings 125,539 123,207
Accumulated other comprehensive
income (loss) (1,790) (366)
Less: Treasury stock (3,454) (5,841)
Unearned stock
compensation, net (2,087) (2,773)
--------- ---------
Total stockholders' equity 295,024 290,959
--------- ---------
$704,050 $726,434
========= =========
Note 1: Investments in unconsolidated
subsidiaries consist of the following June 30, December 31,
2001 2000
-------- ------------
Real Estate Development $ 37,971 $ 29,443
E-Commerce and other 27,834 26,160
--------- ---------
$ 65,805 $ 55,603
========= =========
Trammell Crow Company
Summarized Operating Data by Segment
(in thousands)
(UNAUDITED)
For the Six Months For the Three Months
Ended June 30, Ended June 30,
------------------- -------------------
2001 2000 2001 2000
Global Services:
Total revenues $323,175 $301,954 $168,164 $163,063
Operating costs and expenses 313,549 280,922 162,101 146,973
------------------- -------------------
Income before income taxes $ 9,626 $ 21,032 $ 6,063 $ 16,090
=================== ===================
EBITDA $ 24,670 $ 32,963 $ 13,205 $ 22,929
=================== ===================
Development and Investment:
Total revenues $ 44,795 $ 47,380 $ 25,315 $ 23,027
Operating costs and expenses 45,960 47,706 23,752 24,580
------------------- -------------------
Income (loss) before
income taxes $ (1,165) $ (326) $ 1,563 $ (1,553)
=================== ===================
EBITDA $ 5,903 $ 6,504 $ 5,287 $ 2,202
=================== ===================
E-Commerce:
Total revenues $ - $ - $ - $ -
Operating costs and expenses 1,256 547 454 547
------------------- -------------------
Income (loss) before
income taxes $ (1,256) $ (547) $ (454) $ (547)
=================== ===================
EBITDA $ (1,256) $ (547) $ (454) $ (547)
=================== ===================
Total:
Total revenues $367,970 $349,334 $193,479 $186,090
Operating costs and expenses 360,765 329,175 186,307 172,100
------------------- -------------------
Income before income taxes $ 7,205 $ 20,159 $ 7,172 $ 13,990
=================== ===================
EBITDA $ 29,317 $ 38,920 $ 18,038 $ 24,584
=================== ===================
Trammell Crow Company
Other Data
(UNAUDITED)
June 30, December 31,
2001 2000
---------- -----------
Corporate Service Clients 97 97
Number of Brokers 561 574
Managed /Leased Portfolio (in thousands):
Property management square footage 319,561 312,668
Facilities management square footage 208,456 198,136
Leased only square footage 96,446 86,969
---------- -----------
Total Portfolio 624,463 597,773
========== ===========
Development Inventory (in millions):
In process inventory $ 4,563 $ 4,914
Pipeline inventory 2,401 1,958
---------- -----------
Total Inventory $ 6,964 $ 6,872
========== ===========
------------------------------------
Contact:
Trammell Crow Company
William Leiser
Barbara Bower
Derek McClain
214/863-3000
or
TorranceCo
Gerard Carney
212/521-5233