Jones Lang LaSalle 10-Q 3-31-2007
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 March 31, 2007
Or
o
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 1-13145
Jones
Lang LaSalle Incorporated
(Exact
name of registrant as specified in
its
charter)
Maryland
(State
or
other jurisdiction of incorporation or organization)
36-4150422
(I.R.S.
Employer Identification No.)
|
200
East Randolph Drive, Chicago, IL
|
|
60601
|
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
Registrant's
telephone number, including area code: 312/782-5800
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 xNo o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
the
Exchange Act).
Large
accelerated filer x
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
No
x
The
number of shares outstanding of the registrant's common stock (par value $0.01)
as of the close of business on April 27, 2007 was 36,793,263, which includes
4,970,232 shares held by a subsidiary of the registrant.
Part
I
|
Financial
Information
|
|
|
|
|
Item
1.
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
Item
2.
|
|
16
|
|
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|
Item
3.
|
|
25
|
|
|
|
Item
4.
|
|
26
|
|
|
|
|
|
|
Part
II
|
Other
Information
|
|
|
|
|
Item
1.
|
|
27
|
|
|
|
Item
2.
|
|
27
|
|
|
|
Item
5.
|
|
28
|
|
|
|
Item
6.
|
|
31
|
Item
1.
|
Financial
Statements
|
JONES
LANG LASALLE INCORPORATED
Consolidated
Balance Sheets
March
31, 2007 and December 31, 2006
($
in
thousands, except share data)
|
|
March
31, 2007
|
|
December
31,
|
|
Assets
|
|
(unaudited)
|
|
2006
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
43,253
|
|
|
50,612
|
|
Trade
receivables, net of allowances of $10,496 and $7,845
|
|
|
565,654
|
|
|
630,121
|
|
Notes
and other receivables
|
|
|
44,163
|
|
|
30,079
|
|
Prepaid
expenses
|
|
|
23,859
|
|
|
28,040
|
|
Deferred
tax assets
|
|
|
47,806
|
|
|
49,230
|
|
Other
assets
|
|
|
27,668
|
|
|
19,363
|
|
Total
current assets
|
|
|
752,403
|
|
|
807,445
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net of accumulated depreciation of $192,327 and
$181,959
|
|
|
131,024
|
|
|
120,376
|
|
Goodwill,
with indefinite useful lives, net of accumulated amortization of
$38,826
and $38,701
|
|
|
529,912
|
|
|
520,478
|
|
Identified
intangibles, with finite useful lives, net of accumulated amortization
of
$60,756 and $58,594
|
|
|
37,959
|
|
|
37,583
|
|
Investments
in real estate ventures
|
|
|
133,227
|
|
|
131,789
|
|
Long-term
receivables, net
|
|
|
27,978
|
|
|
29,781
|
|
Deferred
tax assets
|
|
|
39,434
|
|
|
37,465
|
|
Other
assets, net
|
|
|
48,815
|
|
|
45,031
|
|
|
|
$
|
1,700,752
|
|
|
1,729,948
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
176,125
|
|
|
221,356
|
|
Accrued
compensation
|
|
|
283,099
|
|
|
514,586
|
|
Short-term
borrowings
|
|
|
29,090
|
|
|
17,738
|
|
Deferred
tax liabilities
|
|
|
1,734
|
|
|
1,426
|
|
Deferred
income
|
|
|
22,988
|
|
|
31,896
|
|
Other
current liabilities
|
|
|
41,115
|
|
|
43,444
|
|
Total
current liabilities
|
|
|
554,151
|
|
|
830,446
|
|
|
|
|
|
|
|
|
|
Noncurrent
liabilities:
|
|
|
|
|
|
|
|
Credit
facilities
|
|
|
236,770
|
|
|
32,398
|
|
Deferred
tax liabilities
|
|
|
2,090
|
|
|
648
|
|
Deferred
compensation
|
|
|
29,883
|
|
|
30,668
|
|
Pension
liabilities
|
|
|
19,749
|
|
|
19,252
|
|
Deferred
business acquisition obligations
|
|
|
40,319
|
|
|
34,178
|
|
Other
noncurrent liabilities
|
|
|
40,919
|
|
|
31,978
|
|
Total
liabilities
|
|
|
923,881
|
|
|
979,568
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Common
stock, $.01 par value per share, 100,000,000 shares authorized; 36,785,205
and 36,592,864 shares issued and outstanding
|
|
|
368
|
|
|
366
|
|
Additional
paid-in capital
|
|
|
693,572
|
|
|
676,270
|
|
Retained
earnings
|
|
|
283,158
|
|
|
255,914
|
|
Shares
held by subsidiary
|
|
|
(219,359
|
)
|
|
(197,543
|
)
|
Shares
held in trust
|
|
|
(1,427
|
)
|
|
(1,427
|
)
|
Accumulated
other comprehensive income
|
|
|
20,559
|
|
|
16,800
|
|
Total
shareholders' equity
|
|
|
776,871
|
|
|
750,380
|
|
|
|
$
|
1,700,752
|
|
|
1,729,948
|
|
See
accompanying notes to consolidated financial statements.
JONES
LANG LASALLE INCORPORATED
Consolidated
Statements of Earnings
For
the Three Months Ended March 31, 2007 and 2006
($
in
thousands, except share data) (unaudited)
|
|
Three
|
|
Three
|
|
|
|
Months
Ended
|
|
Months
Ended
|
|
|
|
March
31, 2007
|
|
March
31, 2006
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
490,054
|
|
|
337,098
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Compensation
and benefits
|
|
|
325,657
|
|
|
231,246
|
|
Operating,
administrative and other
|
|
|
115,736
|
|
|
87,663
|
|
Depreciation
and amortization
|
|
|
12,625
|
|
|
9,976
|
|
Restructuring
credits
|
|
|
(411
|
)
|
|
(501
|
)
|
Operating
expenses
|
|
|
453,607
|
|
|
328,384
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
36,447
|
|
|
8,714
|
|
|
|
|
|
|
|
|
|
Interest
expense, net of interest income
|
|
|
1,838
|
|
|
3,209
|
|
Gain
on sale of available-for-sale securities
|
|
|
2,425
|
|
|
—
|
|
Equity
in earnings (losses) from real estate ventures
|
|
|
133
|
|
|
(944
|
)
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes
|
|
|
37,167
|
|
|
4,561
|
|
Provision
for income taxes
|
|
|
9,923
|
|
|
1,181
|
|
|
|
|
|
|
|
|
|
Net
income before cumulative effect of change in accounting
principle
|
|
|
27,244
|
|
|
3,380
|
|
Cumulative
effect of change in accounting principle, net of tax
|
|
|
—
|
|
|
1,180
|
|
Net
income
|
|
$
|
27,244
|
|
|
4,560
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share before cumulative effect of change in accounting
principle
|
|
|
0.85
|
|
|
0.10
|
|
Cumulative
effect of change in accounting principle, net of tax
|
|
|
—
|
|
|
0.04
|
|
Basic
earnings per common share
|
|
$
|
0.85
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
31,929,818
|
|
|
31,511,880
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share before cumulative effect of change in accounting
principle
|
|
|
0.81
|
|
|
0.10
|
|
Cumulative
effect of change in accounting principle, net of tax
|
|
|
—
|
|
|
0.04
|
|
Diluted
earnings per common share
|
|
$
|
0.81
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average shares outstanding
|
|
|
33,687,389
|
|
|
33,681,263
|
|
See
accompanying notes to consolidated financial statements.
JONES
LANG LASALLE INCORPORATED
Consolidated
Statement of Shareholders' Equity
For
the Three Months Ended March 31, 2007
($
in
thousands, except share data) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accu-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Held
by
|
|
Shares
|
|
Compre-
|
|
|
|
|
|
Common
Stock
|
|
Paid-In
|
|
Retained
|
|
Subsi-
|
|
Held
in
|
|
hensive
|
|
|
|
|
|
Shares
(1)
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
diary
|
|
Trust
|
|
Income
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at
December 31, 2006
|
|
|
36,592,864
|
|
$
|
366
|
|
|
676,270
|
|
|
255,914
|
|
|
(197,543
|
)
|
|
(1,427
|
)
|
|
16,800
|
|
$
|
750,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,244
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued under stock compensation programs
|
|
|
192,341
|
|
|
2
|
|
|
2,578
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,580
|
|
Tax
benefits of vestings and exercises
|
|
|
—
|
|
|
—
|
|
|
3,314
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,314
|
|
Amortization
of stock compensation
|
|
|
—
|
|
|
—
|
|
|
11,410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
acquired by subsidiary (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,816
|
)
|
|
—
|
|
|
—
|
|
|
(21,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification
adjustment for gain on sale of available-for-sale securities realized
in
net income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(2,256
|
)
|
|
(2,256
|
)
|
Foreign
currency translation
adjustments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,015
|
|
|
6,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at March 31, 2007
|
|
|
36,785,205
|
|
$
|
368
|
|
|
693,572
|
|
|
283,158
|
|
|
(219,359
|
)
|
|
(1,427
|
)
|
|
20,559
|
|
$
|
776,871
|
|
(1)
Shares repurchased under our share repurchase programs are not cancelled, but
are held by one of our subsidiaries. The 4,970,232 shares we have repurchased
through March 31, 2007 are included in the 36,785,205 shares total of our common
stock account, but are deducted from our share count for purposes of calculating
earnings per share.
JONES
LANG LASALLE INCORPORATED
Consolidated
Statements of Cash Flows
For
the Three Months Ended March 31, 2007 and 2006
($
in
thousands) (unaudited)
|
|
Three
|
|
Three
|
|
|
|
Months
Ended
|
|
Months
Ended
|
|
|
|
March
31, 2007
|
|
March
31, 2006
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Cash
flows from earnings:
|
|
|
|
|
|
Net
income
|
|
$
|
27,244
|
|
|
4,560
|
|
Reconciliation
of net income to net cash provided by earnings:
|
|
|
|
|
|
|
|
Cumulative
effect of change in accounting principle, net of tax
|
|
|
—
|
|
|
(1,180
|
)
|
Depreciation
and amortization
|
|
|
12,625
|
|
|
9,976
|
|
Equity
in (earnings) losses from real estate ventures
|
|
|
(133
|
)
|
|
944
|
|
Operating
distributions from real estate ventures
|
|
|
469
|
|
|
261
|
|
Provision
for loss on receivables and other assets
|
|
|
3,180
|
|
|
2,734
|
|
Amortization
of deferred compensation
|
|
|
12,603
|
|
|
7,842
|
|
Amortization
of debt issuance costs
|
|
|
149
|
|
|
217
|
|
Net
cash provided by earnings
|
|
|
56,137
|
|
|
25,354
|
|
|
|
|
|
|
|
|
|
Cash
flows from changes in working capital:
|
|
|
|
|
|
|
|
Receivables
|
|
|
49,006
|
|
|
35,623
|
|
Prepaid
expenses and other assets
|
|
|
(8,287
|
)
|
|
1,894
|
|
Deferred
tax assets, net
|
|
|
1,205
|
|
|
4,185
|
|
Excess
tax benefits from share-based payment arrangements
|
|
|
(4,506
|
)
|
|
(8,876
|
)
|
Accounts
payable, accrued liabilities and accrued compensation
|
|
|
(275,972
|
)
|
|
(145,166
|
)
|
Net
cash flows from changes in working capital
|
|
|
(238,554
|
)
|
|
(112,340
|
)
|
Net
cash used in operating activities
|
|
|
(182,417
|
)
|
|
(86,986
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Net
capital additions - property and equipment
|
|
|
(19,342
|
)
|
|
(8,401
|
)
|
Business
acquisitions
|
|
|
(4,696
|
)
|
|
(152,350
|
)
|
Capital
contributions and advances to real estate ventures
|
|
|
(9,972
|
)
|
|
(7
|
)
|
Distributions,
repayments of advances and sale of investments
|
|
|
7,038
|
|
|
1,417
|
|
Proceeds
from sale of available-for-sale securities
|
|
|
2,425
|
|
|
—
|
|
Net
cash used in investing activities
|
|
|
(24,547
|
)
|
|
(159,341
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds
from borrowings under credit facilities
|
|
|
358,333
|
|
|
421,672
|
|
Repayments
of borrowings under credit facilities
|
|
|
(142,680
|
)
|
|
(185,924
|
)
|
Shares
repurchased for payment of employee taxes on stock awards
|
|
|
(1,657
|
)
|
|
(252
|
)
|
Shares
repurchased under share repurchase program
|
|
|
(21,816
|
)
|
|
(8,740
|
)
|
Excess
tax benefits from share-based payment arrangements
|
|
|
4,506
|
|
|
8,876
|
|
Common
stock issued under stock option plan and stock purchase
programs
|
|
|
2,919
|
|
|
12,540
|
|
Net
cash provided by financing activities
|
|
|
199,605
|
|
|
248,172
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(7,359
|
)
|
|
1,845
|
|
Cash
and cash equivalents, January 1
|
|
|
50,612
|
|
|
28,658
|
|
Cash
and cash equivalents, March 31
|
|
$
|
43,253
|
|
|
30,503
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,901
|
|
|
2,548
|
|
Income
taxes, net of refunds
|
|
|
7,942
|
|
|
12,892
|
|
Non-cash
financing activities:
|
|
|
|
|
|
|
|
Deferred
business acquisition obligations
|
|
|
6,141
|
|
|
31,518
|
|
See
accompanying notes to consolidated financial statements.
JONES
LANG LASALLE INCORPORATED
Notes
to Consolidated Financial Statements (Unaudited)
Readers
of this quarterly report should refer to the audited financial statements of
Jones Lang LaSalle Incorporated ("Jones Lang LaSalle", which may also be
referred to as "the Company" or as "the Firm," "we," "us" or "our") for the
year
ended December 31, 2006, which are included in Jones Lang LaSalle's 2006 Annual
Report on Form 10-K, filed with the United States Securities and Exchange
Commission ("SEC") and also available on our Web site (www.joneslanglasalle.com),
since
we have omitted from this report certain footnote disclosures which would
substantially duplicate those contained in such audited financial statements.
You should also refer to the "Summary of Critical Accounting Policies and
Estimates" section within Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, contained herein, for further
discussion of our accounting policies and estimates.
(1)
Interim Information
Our
consolidated financial statements as of March 31, 2007 and for the three months
ended March 31, 2007 and 2006 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements
for
these interim periods have been included.
Our
revenue and profits tend to be significantly higher in the third and fourth
quarters of each year than in the first two quarters. This is the result of
a
general focus in the real estate industry on completing or documenting
transactions by calendar-year-end and the fact that certain expenses are
constant throughout the year. Our Investment Management segment earns
investment-generated performance fees on clients' real estate investment returns
and co-investment equity gains, generally when assets are sold, the timing
of
which is geared towards the benefit of our clients. Non-variable operating
expenses, which are treated as expenses when they are incurred during the year,
are relatively constant on a quarterly basis. As a result, the results for
the
periods ended March 31, 2007 and 2006 are not indicative of the results to
be
obtained for the full fiscal year.
(2)
New Accounting Standards
Accounting
for Uncertainty in Income Taxes
Effective
January 1, 2007, we adopted FASB Interpretation No. 48 (FIN 48), "Accounting
for
Uncertainty in Income Taxes." FIN 48 clarifies and sets forth consistent rules
for accounting for uncertain income tax positions in accordance with SFAS 109,
"Accounting for Income Taxes." The Company did not recognize any change to
its
liability for unrecognized tax benefits as a result of the adoption. Therefore,
we have not adjusted our retained earnings as of January 1, 2007. As of the
adoption date, the amount of unrecognized tax benefits was $19.9 million, all
of
which would impact the effective tax rate of the Company if recognized. However,
we do not believe that there will be significant changes in the amount of
unrecognized tax benefits within 12 month period ended March 31,
2008.
The
Company recognizes interest accrued and penalties, if any, related to income
taxes as a component of income tax expense. As of January 1, 2007 and March
31,
2007, $0.3 million of interest expense and no penalties were
accrued.
The
Company or one of its subsidiaries files income tax returns in the United
States, the United Kingdom including England and Scotland, Australia, Germany,
The People's Republic of China including Hong Kong, France, Japan, and Singapore
as well as other jurisdictions. Generally, the Company's open tax years include
those from 2002 to the present, although in a number of jurisdictions reviews
of
taxing authorities for more recent years have been completed or are in process.
Although the ultimate outcome of tax audits is uncertain, we believe adequate
amounts of tax and interest have been provided for any adjustments that are
expected to result related to these years.
Income
Statement Presentation of Certain Taxes Collected
In
June
2006, the FASB's Emerging Issues Task Force (EITF) issued EITF Issue No. 06-3,
"How Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)." EITF 06-3 includes in its scope taxes assessed by governmental
authorities that are both imposed on and concurrent with a specific
revenue-producing transaction between a seller and a customer, such as sales,
use, value added, and some excise taxes. Effective January 1, 2007, we adopted
EITF 06-3, which requires disclosure of a company's policies relative to
accounting for such taxes; we present such taxes on net basis (excluded from
revenues) in our consolidated statements of earnings.
(3)
Revenue Recognition
We
categorize our revenues as advisory and management fees, transaction
commissions, incentive fees, project and development management and construction
management fees. We recognize advisory and management fees related to property
management services, valuation services, corporate property services, strategic
consulting and money management as income in the period in which we perform
the
related services. We recognize transaction commissions related to agency leasing
services, capital markets services and tenant representation services as income
when we provide the related service unless future contingencies exist. If future
contingencies exist, we defer recognition of this revenue until the respective
contingencies have been satisfied. We recognize incentive fees based on the
performance of underlying funds' investments and the contractual benchmarks,
formulas and timing of the measurement period with clients. We recognize project
and development management and construction management fees by applying the
"percentage of completion" method of accounting. We use the efforts expended
method to determine the extent of progress towards completion for project and
development management fees and costs incurred to total estimated costs for
construction management fees.
Construction
management fees, which are gross construction services revenues net of
subcontract costs, were $1.9 million and $2.4 million for the three months
ended
March 31, 2007 and 2006, respectively. Gross construction services revenues
totaled $38.2 million and $28.5 million, and subcontract costs totaled $36.3
million and $26.1 million, respectively, for the same periods. Costs in excess
of billings on uncompleted construction contracts of $9.9 million and $3.2
million are included in "Trade receivables," and billings in excess of costs
on
uncompleted construction contracts of $4.2 million and $6.6 million are included
in "Deferred income," respectively, in our March 31, 2007 and December 31,
2006
consolidated balance sheets.
In
certain of our businesses, primarily those involving management services, we
are
reimbursed by our clients for expenses incurred on their behalf. The treatment
of reimbursable expenses for financial reporting purposes is based upon the
fee
structure of the underlying contracts. We follow the guidance of EITF 99-19,
"Reporting Revenue Gross as a Principal versus Net as an Agent," when accounting
for reimbursable personnel and other costs. We report a contract that provides
a
fixed fee billing, fully inclusive of all personnel or other recoverable
expenses incurred but not separately scheduled, on a gross basis. When
accounting on a gross basis, our reported revenues include the full billing
to
our client and our reported expenses include all costs associated with the
client.
We
account for a contract on a net basis when the fee structure is comprised of
at
least two distinct elements, namely (i) a fixed management fee and (ii) a
separate component that allows for scheduled reimbursable personnel costs or
other expenses to be billed directly to the client. When accounting on a net
basis, we include the fixed management fee in reported revenues and net the
reimbursement against expenses. We base this accounting on the following
factors, which define us as an agent rather than a principal:
|
·
|
The
property owner, with ultimate approval rights relating to the employment
and compensation of on-site personnel, and bearing all of the economic
costs of such personnel, is determined to be the primary obligor
in the
arrangement;
|
|
·
|
Reimbursement
to Jones Lang LaSalle is generally completed simultaneously with
payment
of payroll or soon thereafter;
|
|
·
|
Because
the property owner is contractually obligated to fund all operating
costs
of the property from existing cash flow or direct funding from its
building operating account, Jones Lang LaSalle bears little or no
credit
risk; and
|
|
·
|
Jones
Lang LaSalle generally earns no margin in the reimbursement aspect
of the
arrangement, obtaining reimbursement only for actual costs incurred.
|
Most
of
our service contracts use the latter structure and are accounted for on a net
basis. We have always presented the above reimbursable contract costs on a
net
basis in accordance with U.S. GAAP. Such costs aggregated approximately $185.4
million and $151.4 million for the three months ended March 31, 2007 and 2006,
respectively. This treatment has no impact on operating income, net income
or
cash flows.
(4)
Business Segments
We
manage
and report our operations as four business segments:
|
(i)
|
Investment
Management, which offers money management services on a global basis,
and
|
The
three
geographic regions of Investor and Occupier Services ("IOS"):
|
(iii)
|
Europe,
Middle East and Africa ("EMEA") and
|
The
Investment Management segment provides money management services to
institutional investors and high-net-worth individuals. Each geographic region
offers our full range of Investor Services, Capital Markets and Occupier
Services. The IOS business consists primarily of tenant representation and
agency leasing, capital markets and valuation services (collectively
"transaction services") and property management, facilities management, project
and development management and construction management services (collectively
"management services").
Total
revenue by industry segment includes revenue derived from services provided
to
other segments. Operating income represents total revenue less direct and
indirect allocable expenses. We allocate all expenses, other than interest
and
income taxes, as nearly all expenses incurred benefit one or more of the
segments. Allocated expenses primarily consist of corporate global overhead,
including certain globally managed stock-based compensation programs. We
allocate these corporate global overhead expenses to the business segments
based
on the relative revenue of each segment.
Our
measure of segment operating results excludes "Restructuring charges (credits),"
as we have determined that it is not meaningful to investors to allocate such
charges (credits) to our segments. See Note 5 for discussion of "Restructuring
charges (credits)." Also, for segment reporting, we continue to show "Equity
in
earnings (losses) from real estate ventures" within our revenue line, especially
since it is an integral part of our Investment Management segment. The Chief
Operating Decision Maker of Jones Lang LaSalle measures the segment results
without restructuring charges, but with "Equity in earnings (losses) from real
estate ventures" included in segment revenues. We define the Chief Operating
Decision Maker collectively as our Global Executive Committee, which is
comprised of our Global Chief Executive Officer, Global Chief Operating and
Financial Officer and the Chief Executive Officers of each of our four reporting
segments.
We
have
reclassified certain prior year amounts to conform to the current
presentation.
The
following table summarizes unaudited financial information by business segment
for the three months ended March 31, 2007 and 2006 ($ in
thousands):
Investor
and Occupier Services
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Transaction
services
|
|
$
|
72,688
|
|
|
48,212
|
|
Management
services
|
|
|
70,933
|
|
|
62,261
|
|
Equity
earnings
|
|
|
150
|
|
|
149
|
|
Other
services
|
|
|
4,496
|
|
|
2,542
|
|
|
|
|
148,267
|
|
|
113,164
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Compensation,
operating and administrative expenses
|
|
|
135,884
|
|
|
108,605
|
|
Depreciation
and amortization
|
|
|
5,922
|
|
|
5,302
|
|
Operating
income (loss)
|
|
$
|
6,461
|
|
|
(743
|
)
|
|
|
|
|
|
|
|
|
EMEA
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Transaction
services
|
|
$
|
142,138
|
|
|
79,375
|
|
Management
services
|
|
|
32,083
|
|
|
21,221
|
|
Equity
losses
|
|
|
(367
|
)
|
|
(220
|
)
|
Other
services
|
|
|
3,037
|
|
|
2,969
|
|
|
|
|
176,891
|
|
|
103,345
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Compensation,
operating and administrative expenses
|
|
|
157,726
|
|
|
105,719
|
|
Depreciation
and amortization
|
|
|
4,515
|
|
|
2,508
|
|
Operating
income (loss)
|
|
$
|
14,650
|
|
|
(4,882
|
)
|
Asia
Pacific
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Transaction
services
|
|
$
|
39,596
|
|
|
28,648
|
|
Management
services
|
|
|
45,059
|
|
|
27,840
|
|
Equity
earnings
|
|
|
21
|
|
|
217
|
|
Other
services
|
|
|
1,720
|
|
|
1,197
|
|
|
|
|
86,396
|
|
|
57,902
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Compensation,
operating and administrative expenses
|
|
|
87,520
|
|
|
56,773
|
|
Depreciation
and amortization
|
|
|
1,773
|
|
|
1,822
|
|
Operating
loss
|
|
$
|
(2,897
|
)
|
|
(693
|
)
|
|
|
|
|
|
|
|
|
Investment
Management
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Transaction
and other services
|
|
$
|
2,519
|
|
|
11,020
|
|
Advisory
fees
|
|
|
53,919
|
|
|
38,269
|
|
Incentive
fees
|
|
|
21,866
|
|
|
13,544
|
|
Equity
earnings (losses)
|
|
|
329
|
|
|
(1,090
|
)
|
|
|
|
78,633
|
|
|
61,743
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Compensation,
operating and administrative expenses
|
|
|
60,263
|
|
|
47,812
|
|
Depreciation
and amortization
|
|
|
415
|
|
|
344
|
|
Operating
income
|
|
$
|
17,955
|
|
|
13,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Reconciling Items:
|
|
|
|
|
|
|
|
Total
segment revenue
|
|
$
|
490,187
|
|
|
336,154
|
|
Reclassification
of equity earnings (losses)
|
|
|
133
|
|
|
(944
|
)
|
Total
revenue
|
|
|
490,054
|
|
|
337,098
|
|
|
|
|
|
|
|
|
|
Total
operating expenses before restructuring credits
|
|
|
454,018
|
|
|
328,885
|
|
Restructuring
credits
|
|
|
(411
|
)
|
|
(501
|
)
|
Operating
income
|
|
$
|
36,447
|
|
|
8,714
|
|
(5)
Restructuring Charges (Credits)
In
2001,
we closed our non-strategic residential land business in the Americas region
of
the Investment Management segment. In the three months ended March 31, 2007
and
2006, we sold assets and collected cash from this business that resulted in
gains of $0.4 million and $0.5 million, respectively.
(6)
Investments in Real Estate Ventures
As
of
March 31, 2007, we had total investments and loans of $133.2 million in
approximately 30 separate property or fund co-investments. Within this $133.2
million are loans of $3.5 million to real estate ventures which bear an 8.0%
interest rate and are to be repaid by 2008.
We
utilize two investment vehicles to facilitate the majority of our co-investment
activity. LaSalle Investment Company I ("LIC I") is a series of four parallel
limited partnerships which serve as our investment vehicle for substantially
all
co-investment commitments made through December 31, 2005. LaSalle Investment
Company II ("LIC II"), formed in January 2006, is comprised of two parallel
limited partnerships which serve as our investment vehicle for most new
co-investments. LIC I and LIC II invest in certain real estate ventures that
own
and operate commercial real estate. We have an effective 47.85% ownership
interest in LIC I, and an effective 48.78% ownership interest in LIC II;
primarily institutional investors hold the remaining 52.15% and 51.22% interests
in LIC I and LIC II, respectively. We account for our investments in LIC I
and
LIC II under the equity method of accounting in the accompanying consolidated
financial statements. Additionally, a non-executive Director of Jones Lang
LaSalle is an investor in LIC I on equivalent terms to other
investors.
At
March
31, 2007, LIC I and LIC II have unfunded capital commitments for future fundings
of co-investments of $109.9 million and $143.6 million, respectively, of which
our 47.85% and 48.78% shares are $52.6 million and $70.0 million, respectively.
These $52.6 million and $70.0 million commitments are part of our maximum
potential unfunded commitments to LIC I and LIC II at March 31, 2007, which
are
euro 39.9 million ($53.3 million) and $457.7 million, respectively.
LIC
I's
and LIC II's exposures to liabilities and losses of the ventures are limited
to
their existing capital contributions and remaining capital commitments. We
expect that LIC I will draw down on our commitment over the next three to five
years to satisfy its existing commitments to underlying funds, and we expect
that LIC II will draw down on our commitment over the next six to eight years
as
it enters into new commitments. Our Board of Directors has endorsed the use
of
our co-investment capital in particular situations to control or bridge finance
existing real estate assets or portfolios to seed future investments within
LIC
II. The purpose is to accelerate capital raising and growth in assets under
management. Approvals for such activity are handled consistently with those
of
the Firm's co-investment capital.
As
of
March 31, 2007, LIC I maintains a euro 25 million ($33.4 million) revolving
credit facility (the "LIC I Facility"), and LIC II maintains a $200 million
revolving credit facility (the "LIC II Facility"), principally for their working
capital needs. The capacity in the LIC II Facility contemplates potential bridge
financing opportunities. Each facility contains a credit rating trigger and
a
material adverse condition clause. If either of the credit rating trigger or
the
material adverse condition clauses become triggered, the facility to which
that
condition relates would be in default and outstanding borrowings would need
to
be repaid. Such a condition would require us to fund our pro-rata share of
the
then outstanding balance on the related facility, which is the limit of our
liability. The maximum exposure to Jones Lang LaSalle, assuming that the LIC
I
Facility were fully drawn, would be euro 12.0 million ($16.0 million); assuming
that the LIC II Facility were fully drawn, the maximum exposure to Jones Lang
LaSalle would be $97.6 million. Each exposure is included within and cannot
exceed our maximum potential unfunded commitments to LIC I of euro 39.9 million
($53.3 million) and to LIC II of $457.7 million. As of March 31, 2007, LIC
I had
euro 4.3 million ($5.7 million) of outstanding borrowings on the LIC I Facility,
and LIC II had $7.3 million of outstanding borrowings on the LIC II Facility.
We
sold
our investment in LoopNet, an investment in available-for-sale securities under
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities,"
during the three months ended March 31, 2007. We recognized a "Gain on sale
of
available-for-sale securities" of $2.4 million in our consolidated statement
of
earnings for the three months ended March 31, 2007 in conjunction with this
sale.
Exclusive
of our LIC I and LIC II commitment structures, we have potential obligations
related to unfunded commitments to other real estate ventures, the maximum
of
which is $10.5 million at March 31, 2007.
We
apply
the provisions of APB 18, SAB 59, and SFAS 144 when evaluating investments
in
real estate ventures for impairment, including impairment evaluations of the
individual assets underlying our investments. We recorded no impairment charges
in the first three months of 2007 or 2006.
(7)
Business Combinations, Goodwill and Other Intangible
Assets
We
have
$567.9 million of unamortized identified intangibles and goodwill as of March
31, 2007 that are subject to the provisions of SFAS 142, "Goodwill and Other
Intangible Assets." A significant portion of these unamortized intangibles
and
goodwill are denominated in currencies other than U.S. dollars, which means
that
a portion of the movements in the reported book value of these balances are
attributable to movements in foreign currency exchange rates. The tables below
set forth further details on the foreign exchange impact on intangible and
goodwill balances. Of the $567.9 million of unamortized intangibles and
goodwill, $529.9 million represents goodwill with indefinite useful lives,
which
we ceased amortizing beginning January 1, 2002. The remaining $38.0 million
of
identifiable intangibles (principally representing customer relationships and
management contracts acquired) are amortized over their remaining finite useful
lives.
In
January 2007, we acquired 100% interests in NSC Corporate, a leading
Western Australian agency business, and Hargreaves
Goswell, a London agency business. In addition to cash proceeds paid at closing,
terms for each transaction included provisions for future consideration subject
to certain contract provisions. We recorded the fair value of future
consideration which is subject only to the passage of time as "Deferred business
acquisition obligations" on our consolidated balance sheet. We have recorded
values for contract pipeline acquired and certain restrictive agreements as
identifiable intangibles with finite useful lives; we attributed the remaining
direct costs of acquisition to goodwill. Payment of an earn-out in the NSC
Corporate acquisition is subject to the achievement of certain performance
conditions, which we will record to goodwill at the time those conditions are
met; we will not record the earn-out if the related conditions are not achieved.
Additional future consideration subject to employment-related provisions in
the
Hargreaves Goswell acquisition is recorded as compensation expense over the
term
of those provisions.
Adjustments
to the accounting for the 2006 Spaulding & Slye acquisition are reflected as
additions to goodwill in the Americas in the quarter ended March 31,
2007.
The
following table sets forth, by reporting segment, the current year movements
in
the gross carrying amount and accumulated amortization of our goodwill with
indefinite useful lives ($ in thousands):
|
|
Investor
and Occupier Services
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
Investment
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Pacific
|
|
Management
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$
|
328,628
|
|
|
104,494
|
|
|
95,563
|
|
|
30,494
|
|
|
559,179
|
|
Additions
|
|
|
418
|
|
|
4,648
|
|
|
2,917
|
|
|
—
|
|
|
7,983
|
|
Impact
of exchange rate movements
|
|
|
—
|
|
|
578
|
|
|
900
|
|
|
98
|
|
|
1,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2007
|
|
|
329,046
|
|
|
109,720
|
|
|
99,380
|
|
|
30,592
|
|
|
568,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$
|
(15,457
|
)
|
|
(6,429
|
)
|
|
(7,038
|
)
|
|
(9,777
|
)
|
|
(38,701
|
)
|
Impact
of exchange rate movements
|
|
|
—
|
|
|
(43
|
)
|
|
(67
|
)
|
|
(15
|
)
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2007
|
|
|
(15,457
|
)
|
|
(6,472
|
)
|
|
(7,105
|
)
|
|
(9,792
|
)
|
|
(38,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value as of March 31, 2007
|
|
$
|
313,589
|
|
|
103,248
|
|
|
92,275
|
|
|
20,800
|
|
|
529,912
|
|
The
following table sets forth, by reporting segment, the current year movements
in
the gross carrying amount and accumulated amortization of our intangibles with
finite useful lives ($ in thousands):
|
|
Investor
and Occupier Services
|
|
|
|
|
|
|
|
|
|
|
|
Asia
|
|
Investment
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Pacific
|
|
Management
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Carrying Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$
|
82,929
|
|
|
4,449
|
|
|
2,965
|
|
|
5,834
|
|
|
96,177
|
|
Additions
|
|
|
—
|
|
|
501
|
|
|
1,773
|
|
|
—
|
|
|
2,274
|
|
Impact
of exchange rate movements
|
|
|
—
|
|
|
157
|
|
|
81
|
|
|
26
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2007
|
|
|
82,929
|
|
|
5,107
|
|
|
4,819
|
|
|
5,860
|
|
|
98,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$
|
(47,127
|
)
|
|
(2,668
|
)
|
|
(2,965
|
)
|
|
(5,834
|
)
|
|
(58,594
|
)
|
Amortization
expense
|
|
|
(1,700
|
)
|
|
(207
|
)
|
|
(121
|
)
|
|
—
|
|
|
(2,028
|
)
|
Impact
of exchange rate movements
|
|
|
—
|
|
|
(27
|
)
|
|
(81
|
)
|
|
(26
|
)
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of March 31, 2007
|
|
|
(48,827
|
)
|
|
(2,902
|
)
|
|
(3,167
|
)
|
|
(5,860
|
)
|
|
(60,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value as of March 31, 2007
|
|
$
|
34,102
|
|
|
2,205
|
|
|
1,652
|
|
|
—
|
|
|
37,959
|
|
Remaining
estimated future amortization expense for our intangibles with finite useful
lives ($ in millions):
2007
|
|
$
|
5.9
|
|
2008
|
|
|
7.4
|
|
2009
|
|
|
4.3
|
|
2010
|
|
|
3.8
|
|
2011
|
|
|
3.8
|
|
Thereafter
|
|
|
12.8
|
|
Total
|
|
$
|
38.0
|
|
(8)
Stock-based Compensation
We
adopted SFAS 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") as of
January 1, 2006 using the modified prospective approach. The adoption of SFAS
123R primarily impacts "Compensation and benefits" expense in our consolidated
statement of earnings by changing prospectively our method of measuring and
recognizing compensation expense on share-based awards. We previously recognized
forfeitures as incurred; we now estimate forfeitures at the date of grant and
accelerate expense recognition for share-based awards to employees who are
or
will become retirement-eligible prior to the stated vesting period of the award.
The effect of the change to estimating forfeitures as it relates to periods
prior to 2006 is reflected in "Cumulative effect of change in accounting
principle, net of tax" in the consolidated statement of earnings. In the three
month period ended March 31, 2006, we recorded a $1.8 million pre-tax, $1.2
million net of tax, gain for the cumulative effect of this accounting
change.
Restricted
Stock Unit Awards
Along
with cash base salaries and performance-based annual cash incentive awards,
restricted stock unit awards represent a primary element of our compensation
program for Company officers, managers and professionals.
Restricted
stock unit activity for the three months ended March 31, 2007 is as
follows:
|
|
Shares
(thousands)
|
|
Weighted
Average
Grant
Date
Fair
Value
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic
Value
($
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
at January 1, 2007
|
|
|
2,116.5
|
|
$
|
40.29
|
|
|
|
|
|
|
|
Granted
|
|
|
540.3
|
|
|
94.68
|
|
|
|
|
|
|
|
Vested
|
|
|
(34.1
|
)
|
|
30.02
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(14.6
|
)
|
|
42.81
|
|
|
|
|
|
|
|
Unvested
at March 31, 2007
|
|
|
2,608.1
|
|
$
|
51.68
|
|
|
1.42
years
|
|
$
|
137.2
|
|
Unvested
shares expected to vest
|
|
|
2,470.1
|
|
$
|
50.90
|
|
|
1.36
years
|
|
$
|
131.8
|
|
As
of
March 31, 2007, there was $67.6 million of remaining unamortized deferred
compensation related to unvested restricted stock units. The cost is expected
to
be recognized over the remaining weighted average contractual life of the
awards.
Approximately
34,100 restricted stock unit awards vested during the first quarter of 2007,
having an aggregate fair value of $3.2 million and intrinsic value of $2.1
million. For the same period in 2006, approximately 13,500 restricted stock
unit
awards vested having an aggregate fair value of $0.7 million and intrinsic
value
of $0.3 million. As a result of these vesting events, we recognized tax benefits
of $1.1 million and $0.2 million for the three months ending March 31, 2007
and
2006, respectively.
Stock
Option Awards
We
have
generally granted stock options at the market value of our common stock at
the
date of grant. Our options vest at such times and conditions as the Compensation
Committee of our Board of Directors determined and set forth in the award
agreement; the most recent options granted (in 2003) vest over periods of up
to
five years. As a result of a change in compensation strategy, we do not
currently use stock option grants as part of our employee compensation program;
no options were granted in 2004, 2005, or 2006 and none have been granted
through March 31, 2007.
Stock
option activity for the first three months of 2007 is as
follows:
|
|
Options
(thousands)
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic
Value
($
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at January 1, 2007
|
|
|
311.3
|
|
$
|
18.28
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Exercised
|
|
|
(74.5
|
)
|
|
14.49
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1.0
|
)
|
|
12.25
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2007
|
|
|
235.8
|
|
$
|
19.50
|
|
|
2.62
years
|
|
$
|
20.0
|
|
Exercisable
at March 31, 2007
|
|
|
231.4
|
|
$
|
19.56
|
|
|
2.59
years
|
|
$
|
19.6
|
|
As
of
March 31, 2007, we have approximately 235,800 options outstanding, of which
approximately 4,400 options were unvested. We recognized less than $0.01 million
in compensation expense related to the unvested options for the first three
months of 2007. Less than $0.02 million of compensation cost remains to be
recognized on unvested options through 2008.
The
following table summarizes information about options exercises occurring during
the three months ended March 31, 2007 and 2006 ($ in millions):
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Number
of options exercised
|
|
|
74,500
|
|
|
518,183
|
|
|
|
|
|
|
|
|
|
Intrinsic
value
|
|
$
|
6.6
|
|
|
22.6
|
|
Cash
received from option exercises
|
|
|
3.0
|
|
|
11.1
|
|
Tax
benefit realized from option exercises
|
|
|
2.2
|
|
|
8.6
|
|
Other
Stock Compensation Programs
U.S.
Employee Stock Purchase Plan - In 1998, we adopted an Employee Stock Purchase
Plan ("ESPP") for eligible U.S.-based employees. Under the current plan,
employee contributions for stock purchases are enhanced by us through an
additional contribution of a 5% discount on the purchase price as of the end
of
a program period; program periods are now three months each. Employee
contributions and our contributions vest immediately. Since its inception,
1,341,526 shares have been purchased under the program through March 31, 2007.
During the first quarter of 2007, 18,520 shares having a grant date market
value
of $104.28 were purchased under the program. No compensation expense is recorded
with respect to this program.
UK
SAYE -
In November 2001, we adopted the Jones Lang LaSalle Savings Related Share Option
(UK) Plan ("Save As You Earn" or "SAYE") for eligible employees of our UK based
operations. In November 2006, the SAYE plan was extended to employees in our
Ireland operations. Under this plan, employee contributions for stock purchases
are enhanced by us through an additional contribution of a 15% discount on
the
purchase price. Both employee and employer contributions vest over a period
of
three to five years. Employees have had the opportunity to contribute to the
plan in 2002, 2005, 2006, and 2007. In the first quarter of 2007, employee
and
employer contributions resulted in the issuance of approximately 40,000 options
at an exercise price of $90.02. Our contribution of $0.6 million will be
recorded as compensation expense over the vesting period. The first vesting
of
these options will occur in 2010 with the remaining to vest in
2012.
(9)
Retirement Plans
We
maintain contributory defined benefit pension plans in the United Kingdom,
Ireland and Holland to provide retirement benefits to eligible employees. It
is
our policy to fund the minimum annual contributions required by applicable
regulations. We use a December 31 measurement date for our plans.
Net
periodic pension cost consisted of the following for the three months ended
March 31, 2007 and 2006 ($ in thousands):
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Employer
service cost - benefits earned during the year
|
|
$
|
990
|
|
|
749
|
|
Interest
cost on projected benefit obligation
|
|
|
2,580
|
|
|
2,169
|
|
Expected
return on plan assets
|
|
|
(3,086
|
)
|
|
(2,503
|
)
|
Net
amortization/deferrals
|
|
|
486
|
|
|
504
|
|
Recognized
actual loss
|
|
|
18
|
|
|
54
|
|
Net
periodic pension cost
|
|
$
|
988
|
|
|
973
|
|
In
the
three months ended March 31, 2007, we have made $2.3 million in payments to
our
defined benefit pension plans. We expect to contribute a total of $5.7 million
to our defined benefit pension plans in 2007. We made $6.4 million of
contributions to these plans in the twelve months ended December 31,
2006.
(10)
Comprehensive Income
For
the
three months ended March 31, 2007 and 2006, comprehensive income was as follows
($ in thousands):
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
27,244
|
|
|
4,560
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
Reclassification
adjustment for gain on sale of available-for-sale securities realized
in
net income
|
|
|
(2,256
|
)
|
|
—
|
|
Foreign
currency translation adjustments
|
|
|
6,015
|
|
|
4,380
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
31,003
|
|
|
8,940
|
|
(11)
Commitments and Contingencies
We
are a
defendant in various litigation matters arising in the ordinary course of
business, some of which involve claims for damages that are substantial in
amount. Many of these litigation matters are covered by insurance (including
insurance provided through a captive insurance company), although they may
nevertheless be subject to large deductibles or retentions and the amounts
being
claimed may exceed the available insurance. Although the ultimate liability
for
these matters cannot be determined, based upon information currently available,
we believe the ultimate resolution of such claims and litigation will not have
a
material adverse effect on our financial position, results of operations or
liquidity.
(12)
Subsequent Event - Dividends Declared
The
Company announced on May 1, 2007 that its Board of Directors has declared a
semi-annual cash dividend of $0.35 per share of its Common Stock. The dividend
payment will be made on June 15, 2007 to holders of record at the close of
business on May 15, 2007. A dividend-equivalent in the same amount also will
be
paid simultaneously on outstanding but unvested shares of restricted stock
units
granted under the Company's Stock Award and Incentive Plan. The
current dividend plan approved by the Board anticipates a total annual dividend
of $0.70 per common share, however there can be no assurance that future
dividends will be declared since the actual declaration of future dividends,
and
the establishment of record and payment dates, remains subject to final
determination by the Company's Board of Directors.
Item
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements, including the notes thereto, for the three
months ended March 31, 2007, included herein, and Jones Lang LaSalle's audited
consolidated financial statements and notes thereto for the fiscal year ended
December 31, 2006, which have been filed with the SEC as part of our 2006 Annual
Report on Form 10-K and are also available on our Web site (www.joneslanglasalle.com).
The
following discussion and analysis contains certain forward-looking statements
which are generally identified by the words anticipates, believes, estimates,
expects, plans, intends and other similar expressions. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause Jones Lang LaSalle's actual results, performance, achievements,
plans and objectives to be materially different from any future results,
performance, achievements, plans and objectives expressed or implied by such
forward-looking statements. See the Cautionary Note Regarding Forward-Looking
Statements in Part II, Item 5. Other Information.
Our
quarterly Management's Discussion and Analysis is presented in five sections,
as
follows:
(1)
A
summary of our critical accounting policies and estimates,
(2)
Certain items affecting the comparability of results and certain market and
other risks that we face,
(3)
The
results of our operations, first on a consolidated basis and then for each
of
our business segments,
(4)
Consolidated cash flows, and
(5)
Liquidity and capital resources.
Summary
of Critical Accounting Policies and Estimates
An
understanding of our accounting policies is necessary for a complete analysis
of
our results, financial position, liquidity and trends. See Note 1 of the notes
to consolidated financial statements in our 2006 Annual Report on Form 10-K
for
a summary of our significant accounting policies.
The
preparation of our financial statements requires management to make certain
critical accounting estimates that impact the stated amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the
financial statements, and the reported amount of revenues and expenses during
the reporting periods. These accounting estimates are based on management's
judgment and are considered to be critical because of their significance to
the
financial statements and the possibility that future events may differ from
current judgments, or that the use of different assumptions could result in
materially different estimates. We review these estimates on a periodic basis
to
ensure reasonableness. Although actual amounts likely differ from such estimated
amounts, we believe such differences are not likely to be material.
Interim
Period Accounting for Incentive Compensation
An
important part of our overall compensation package is incentive compensation,
which we typically pay to our employees in the first quarter of the year after
it is earned. In our interim financial statements we accrue for most incentive
compensation based on a percentage of compensation costs and an adjusted
operating income recorded to date relative to forecasted compensation costs
and
adjusted operating income for the full year, as substantially all incentive
compensation pools are based upon full year results. As noted in "Interim
Information" of Note 1 of the notes to co nsolidated financial statements,
quarterly revenues and profits tend to be significantly higher in the third
and
fourth quarters of each year than in the first two quarters. The impact of
this
incentive compensation accrual methodology is that we accrue smaller percentages
of incentive compensation in the first half of the year, compared to the
percentage of our incentive compensation accrued in the third and fourth
quarters. We adjust the incentive compensation accrual in those unusual cases
where earned incentive compensation has been paid to employees. Incentive
compensation pools that are not subject to the normal performance criteria
are
excluded from the standard accrual methodology and accrued for on a
straight-line basis.
Certain
employees receive a portion of their incentive compensation in the form of
restricted stock units of our common stock. We recognize this compensation
over
the vesting period of these restricted stock units, which has the effect of
deferring a portion of incentive compensation to later years. We recognize
the
benefit of deferring certain compensation under the stock ownership program
in a
manner consistent with the accrual of the underlying incentive compensation
expense.
Given
that individual incentive compensation awards are not finalized until after
year-end, we must estimate the portion of the overall incentive compensation
pool that will qualify for this program. This estimation factors in the
performance of the Company and individual business units, together with the
target bonuses for qualified individuals. Then, when we determine, announce
and
pay incentive compensation in the first quarter of the year following that
to
which the incentive compensation relates, we true-up the estimated stock
ownership program deferral and related amortization.
The
table
below sets forth the deferral estimated at year end, and the adjustment made
in
the first quarter of the following year to true-up the deferral and related
amortization ($ in millions):
|
|
December
31, 2006
|
|
December
31, 2005
|
|
|
|
|
|
|
|
Deferral
of compensation, net of related amortization expense
|
|
$
|
24.7
|
|
|
15.8
|
|
Increase
(decrease) to deferred compensation in the first quarter of
the following year
|
|
|
1.6
|
|
|
(0.3
|
)
|
The
table
below sets forth the amortization expense related to the stock ownership program
for the three months ended March 31, 2007 and 2006 ($ in millions):
|
|
|
|
|
|
|
|
March
31, 2007
|
|
March
31, 2006
|
|
|
|
|
|
|
|
Current
compensation expense amortization for prior year programs
|
|
$
|
7.9
|
|
|
4.6
|
|
Current
deferral net of related amortization
|
|
|
(7.3
|
)
|
|
(3.6
|
)
|
Accounting
for Self-insurance Programs
In
our
Americas business, and in common with many other American companies, we have
chosen to retain certain risks regarding health insurance and workers'
compensation rather than purchase third-party insurance. Estimating our exposure
to such risks involves subjective judgments about future developments. We engage
the services of an independent actuary on an annual basis to assist us in
quantifying our potential exposure. Additionally, we supplement our traditional
global insurance program by the use of a captive insurance company to provide
professional indemnity and employment practices insurance on a "claims made"
basis. As professional indemnity claims can be complex and take a number of
years to resolve, we are required to estimate the ultimate cost of
claims.
• Health
Insurance - We self-insure our health benefits for all U.S.-based employees,
although we purchase stop loss coverage on an annual basis to limit our
exposure. We self-insure because we believe that on the basis of our historic
claims experience, the demographics of our workforce and trends in the health
insurance industry, we incur reduced expense by self-insuring our health
benefits as opposed to purchasing health insurance through a third party. We
engage an actuary who specializes in health insurance to estimate our likely
full-year cost at the beginning of the year and expense this cost on a
straight-line basis throughout the year. In the fourth quarter, we employ the
same actuary to estimate the required reserve for unpaid health costs we would
need at year-end.
Given
the
nature of medical claims, it may take up to 24 months for claims to be processed
and recorded. The reserve balances for the programs related to 2007 and 2006
are
$5.5 million and $2.4 million, respectively, at March 31, 2007.
The
table
below sets out certain information related to the cost of this program for
the
three months ended March 31, 2007 and 2006 ($ in millions):
|
|
|
|
|
|
|
|
March
31, 2007
|
|
March
31, 2006
|
|
|
|
|
|
|
|
Expense
to Company
|
|
$
|
3.8
|
|
|
3.3
|
|
Employee
contributions
|
|
|
0.9
|
|
|
0.9
|
|
Total
program cost
|
|
$
|
4.7
|
|
|
4.2
|
|
• Workers'
Compensation Insurance - Given our belief, based on historical experience,
that
our workforce has experienced lower costs than is normal for our industry,
we
have been self-insured for worker's compensation insurance for a number of
years. We purchase stop loss coverage to limit our exposure to large, individual
claims. On a periodic basis we accrue using various state rates based on job
classifications. On an annual basis in the third quarter, we engage an
independent actuary who specializes in workers' compensation to estimate our
exposure based on actual experience. Given the significant judgmental issues
involved in this evaluation, the actuary provides us a range of potential
exposure and we reserve within that range. We accrue for the estimated
adjustment to revenues for the differences between the actuarial estimate and
our reserve on a periodic basis. The credits taken to revenue through the three
months ended March 31, 2007 and 2006 were $0.7 million and $0.7 million,
respectively.
The
reserves, which can relate to multiple years, were $9.3 million and $8.4
million, as of March 31, 2007 and December 31, 2006, respectively.
• Captive
Insurance Company - In order to better manage our global insurance program
and
support our risk management efforts, we supplement our traditional insurance
program by the use of a wholly-owned captive insurance company to provide
professional indemnity and employment practices liability insurance coverage
on
a "claims made" basis. The level of risk retained by our captive is up to $2.5
million per claim (depending upon the location of the claim) and up to $12.5
million in the aggregate.
Professional
indemnity insurance claims can be complex and take a number of years to resolve.
Within our captive insurance company, we estimate the ultimate cost of these
claims by way of specific claim reserves developed through periodic reviews
of
the circumstances of individual claims, as well as reserves against current
year
exposures on the basis of our historic loss ratio. The increase in the level
of
risk retained by the captive means we would expect that the amount and the
volatility of our estimate of reserves will be increased over time. With respect
to the consolidated financial statements, when a potential loss event occurs,
management estimates the ultimate cost of the claims and accrues the related
cost in accordance with SFAS 5, "Accounting for Contingencies."
The
reserves estimated and accrued in accordance with SFAS 5, which relate to
multiple years, were $5.8 million and $9.3 million, net of receivables from
third party insurers, as of March 31, 2007 and December 31, 2006,
respectively.
Income
Taxes
We
account for income taxes under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of
existing assets and liabilities and their respective tax bases and of operating
loss and tax credit carryforwards. We measure deferred tax assets and
liabilities using enacted tax rates expected to apply to taxable income in
the
years in which those temporary differences are expected to be recovered or
settled. We recognize the effect on deferred tax assets and liabilities of
a
change in tax rates in income in the period that includes the enactment date.
Because
of the global and cross border nature of our business, our corporate tax
position is complex. We generally provide for taxes in each tax jurisdiction
in
which we operate based on local tax regulations and rules. Such taxes are
provided on net earnings and include the provision of taxes on substantively
all
differences between financial statement amounts and amounts used in tax returns,
excluding certain non-deductible items and permanent differences.
Our
global effective tax rate is sensitive to the complexity of our operations
as
well as to changes in the mix of our geographic profitability, as local
statutory tax rates range from 10% to 42% in the countries in which we have
significant operations. We evaluate our estimated effective tax rate on a
quarterly basis to reflect forecasted changes in:
|
(i)
|
Our
geographic mix of income,
|
|
(ii)
|
Legislative
actions on statutory tax rates,
|
|
(iii)
|
The
impact of tax planning to reduce losses in jurisdictions where
we cannot
recognize the tax benefit of those losses,
and
|
|
(iv)
|
Tax
planning for jurisdictions affected by double
taxation.
|
We
continuously seek to develop and implement potential strategies and/or actions
that would reduce our overall effective tax rate. We reflect the benefit
from
tax planning actions when we believe that they meet the recognition criteria
under FIN 48, which usually requires that certain actions have been initiated.
We provide for the effects of income taxes on interim financial statements
based
on our estimate of the effective tax rate for the full year.
Based
on
our forecasted results for the full year, we have estimated an effective
tax
rate of 26.7% for 2007. We believe that this is an achievable rate due to
the
mix of our income and the impact of tax planning activities. For the three
months ended March 31, 2006, we used an effective tax rate of 25.9%; we
ultimately achieved an effective tax rate of 26.7% for the year ended December
31, 2006.
Items
Affecting Comparability
LaSalle
Investment Management Revenues
Our
money
management business is in part compensated through the receipt of incentive
fees
where performance of underlying funds' investments exceeds agreed-to benchmark
levels. Depending upon performance and the contractual timing of measurement
periods with clients, these fees can be significant and vary substantially
from
period to period.
"Equity
in earnings (losses) from real estate ventures" may also vary substantially
from
period to period for a variety of reasons, including as a result of: (i)
impairment charges, (ii) realized gains on asset dispositions, or (iii)
incentive fees recorded as equity earnings. The timing of recognition of
these
items may impact comparability between quarters, in any one year, or compared
to
a prior year.
The
comparability of these items can be seen in Note 4 of the notes to consolidated
financial statements and is discussed further in Segment Operating Results
included herein.
IOS
Revenues
As
we
attempt to further expand our real estate investment banking activities within
our Investor and Occupier Services businesses, which will tend to increase
the
revenues we receive that relate to the size and timing of our clients'
transactions, we would also expect the timing of recognition of these items
to
increasingly impact comparability between quarters, in any one year, or compared
to a prior year.
Foreign
Currency
We
conduct business using a variety of currencies, and most of our revenue is
from
currencies other than U.S. dollars, but we report our results in U.S. dollars.
As a result, our reported results may be positively or negatively impacted
by
the volatility of currencies against the U.S. dollar. This volatility can
make
it more difficult to perform period-to-period comparisons of the reported
U.S.
dollar results of operations, as such results demonstrate a growth rate that
might not have been consistent with the real underlying growth rate in the
local
operations. We therefore provide information about the impact of foreign
currencies in the period-to-period comparisons of the reported results of
operations in our discussion and analysis of financial condition in the Results
of Operations section below.
Seasonality
Our
revenue and profits tend to be significantly higher in the third and fourth
quarters of each year than in the first two quarters. This is the result
of a
general focus in the real estate industry on completing or documenting
transactions by calendar-year-end and the fact that certain expenses are
constant throughout the year. Our Investment Management segment earns
investment-generated performance fees on clients' real estate investment
returns
and co-investment equity gains, generally when assets are sold, the timing
of
which is geared towards the benefit of our clients. Non-variable operating
expenses, which are treated as expenses when they are incurred during the
year,
are relatively constant on a quarterly basis. As a result, the results for
the
periods ended March 31, 2007 and 2006 are not indicative of the results to
be
obtained for the full fiscal year.
Results
of Operations
Reclassifications
We
report
"Equity in earnings (losses) from real estate ventures" in the consolidated
statement of earnings after "Operating income (loss)." However, for segment
reporting we reflect "Equity in earnings (losses) from real estate ventures"
within "Total revenue." See Note 4 of the notes to consolidated financial
statements for "Equity in earnings (losses) from real estate ventures" reflected
within segment revenues, as well as discussion of how the Chief Operating
Decision Maker (as defined in Note 4) measures segment results with "Equity
in
earnings (losses) from real estate ventures" included in segment
revenues.
Three
Months Ended March 31, 2007 Compared to Three Months Ended March 31,
2006
In
order
to provide more meaningful year-to-year comparisons of the reported results,
we
have included in the table below the U.S. dollar and local currency movements
in
the consolidated statements of earnings ($ in millions).
|
|
2007
|
|
2006
|
|
Increase
(Decrease)
in
U.S. Dollars
|
|
%
Change
in
Local
Currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
$
|
490.1
|
|
$
|
337.1
|
|
$
|
153.0
|
|
|
45
|
%
|
|
39
|
%
|
Compensation
and benefits
|
|
|
325.7
|
|
|
231.2
|
|
|
94.5
|
|
|
41
|
%
|
|
35
|
%
|
Operating,
administrative and other
|
|
|
115.7
|
|
|
87.7
|
|
|
28.0
|
|
|
32
|
%
|
|
27
|
%
|
Depreciation
and amortization
|
|
|
12.6
|
|
|
10.0
|
|
|
2.6
|
|
|
26
|
%
|
|
22
|
%
|
Restructuring
credits
|
|
|
(0.4
|
)
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
20
|
%
|
|
20
|
%
|
Total
operating expenses
|
|
|
453.6
|
|
|
328.4
|
|
|
125.2
|
|
|
38
|
%
|
|
32
|
%
|
Operating
income
|
|
$
|
36.4
|
|
$
|
8.7
|
|
$
|
27.7
|
|
|
n.m.
|
|
|
n.m.
|
|
(n.m.
-
not meaningful; change greater than 100%)
Revenue
for the first quarter of 2007 was $490.1 million, an increase of 45 percent
in
U.S. dollars and 39 percent in local currencies from the prior year. Continued
favorable market conditions, positive returns from strategic investments
made in
2005 and 2006, and the size and timing of transactions contributed to revenue
growth in all operating segments. Operating income for the first quarter
of 2007
was $36.4 million compared with $8.7 million for the prior year. Revenue
and
operating income growth were particularly strong in EMEA, which had operating
income of $14.7 million in the first quarter of 2007 compared with a loss
of
$4.9 million for the same period last year. Asia Pacific's revenue and LaSalle
Investment Management's advisory fees also had healthy increases over the
prior
year. Operating income in the Americas region increased to $6.5 million from
a
loss of $0.7 million in 2006.
Operating
expenses of $453.6 million for the first quarter of 2007 represented an increase
of 38 percent in U.S. dollars and 32 percent in local currencies compared
with
the prior year's expenses of $328.4 million. The increase in operating expenses
continued to be driven by significant additions to Global Capital Markets
and
Leasing broker teams, additional client-service staff, and the expansion
of
offices. Higher incentive compensation costs related to the strong revenue
and
profit performance also contributed to the increase.
Interest
expense of $1.8 million for the first quarter of 2007 compared favorably
with
$3.2 million of interest expense for the first quarter of 2006, as the debt
balance was higher in 2006 primarily due to the financing of the Spaulding
&
Slye acquisition in January 2006.
The
current-quarter tax provision of $9.9 million reflects a 26.7% effective
tax
rate, compared with a $1.2 million provision reflecting a 25.9% effective
tax
rate in the comparable prior year quarter. The 26.7% effective tax rate is
consistent with our full year 2006 effective tax rate and reflects our expected
full year 2007 effective tax rate as a result of continued discipline in
managing the global tax position.
Net
income
was $27.2 million for the quarter ended March 31, 2007, compared with net
income
of $4.6 million for the first quarter of 2006.
Segment
Operating Results
We
manage
and report our operations as four business segments:
|
(i)
|
Investment
Management, which offers money management services on a global
basis, and
|
The
three
geographic regions of Investor and Occupier Services ("IOS"):
|
(iii)
|
Europe,
Middle East and Africa ("EMEA") and
|
The
Investment Management segment provides money management services to
institutional investors and high-net-worth individuals. Each geographic region
offers our full range of Investor Services, Capital Markets and Occupier
Services. The IOS business consists primarily of tenant representation and
agency leasing, capital markets, real estate investment banking and valuation
services (collectively "transaction services") and property management,
facilities management, project and development management and construction
management services (collectively "management services").
We
have
not allocated "Restructuring charges (credits)" to the business segments
for
segment reporting purposes; therefore, these costs are not included in the
discussions below. Also, for segment reporting we continue to show "Equity
in
earnings (losses) from real estate ventures" within our revenue line, especially
since it is a very integral part of our Investment Management
segment.
Investor
and Occupier Services
Americas
|
|
2007
|
|
2006
|
|
Increase(Decrease)
|
|
Revenue
|
|
$
|
148.3
|
|
$
|
113.2
|
|
$
|
35.1
|
|
|
31
|
%
|
Operating
expense
|
|
|
141.8
|
|
|
113.9
|
|
|
27.9
|
|
|
24
|
%
|
Operating
income (loss)
|
|
$
|
6.5
|
|
$
|
(0.7
|
)
|
$
|
7.2
|
|
|
n.m.
|
|
(n.m.
-
not meaningful; change greater than 100%)
In
the
Americas region, revenue for the first quarter of 2007 was $148.3 million,
an
increase of 31 percent over the same period last year. The growth was driven
mainly by Transaction Services, which grew 51 percent for the quarter, while
Management Services grew 14 percent for the same period over the prior
year.
The
current quarter's growth benefited from activity in both the Markets group,
whose focus is to maximize the Firm's competitive position in key local markets,
and the Accounts organization, whose focus is on delivering services and
strategic advice to corporate clients. The Markets group revenue growth of
29
percent resulted from strong leasing markets and an increased number of large
transactions that closed in 2007. The Accounts group revenue grew 28 percent
over the prior year due, in part, to transactions being accelerated into
the
first quarter of 2007. Strong performance was also seen in Capital Markets,
where year-over-year revenue growth was 84 percent. Revenue in Regional
Operations (Canada and Latin America) increased 28 percent for the quarter
compared with the prior year, primarily as the result of transactions closing
in
the quarter that had been delayed from the last quarter of 2006.
Total
operating expenses increased 24 percent for the first quarter compared with
2006. Contributing to the increase was the addition of significant staff,
including 60 new strategic hires, and higher incentive compensation expenses
as
a result of the growth in both revenue-generating activities and profit
performance.
EMEA
|
|
2007
|
|
2006
|
|
Increase(Decrease)
in
U.S. dollars
|
|
%
Change
in
Local
Currencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
176.9
|
|
$
|
103.3
|
|
$
|
73.6
|
|
|
71
|
%
|
|
55
|
%
|
Operating
expense
|
|
|
162.2
|
|
|
108.2
|
|
|
54.0
|
|
|
50
|
%
|
|
36
|
%
|
Operating
income (loss)
|
|
$
|
14.7
|
|
$
|
(4.9
|
)
|
$
|
19.6
|
|
|
n.m.
|
|
|
n.m.
|
|
(n.m.
-
not meaningful; change greater than 100%)
EMEA's
revenue for the first quarter of 2007 was $176.9 million, an increase of
71
percent in U.S. dollars and 55 percent in local currencies over the same
period
in 2006. Transaction Services revenue grew 79 percent to $142 million for
the
quarter, while Management Services revenue grew 51 percent to $32
million.
The
region's growth benefited from an increased number of revenue generators,
strong
underlying market conditions and a large Capital Markets portfolio transaction
completed in Germany. As a result, revenue in Germany increased nearly 300
percent compared with the prior year. Throughout the region, Advisory Services
and Agency Leasing also had solid revenue growth in 2007 compared with the
prior
year, with revenue up 72 and 23 percent, respectively. The United Kingdom,
the
largest market in the region, also had strong growth in 2007, as revenue
increased 25 percent year over year. The EMEA Hotels business had robust
growth
in the first quarter, with revenue up over 200 percent compared with the
prior
year.
Operating
expenses increased by 50 percent in U.S. dollars and 36 percent in local
currencies for the first quarter of 2007 compared with the prior year. The
increase was primarily due to acquisitions, staff additions to service clients
and grow market share, and increased incentive compensation driven by improved
revenue and profit performance.
Asia
Pacific
|
|
2007
|
|
2006
|
|
Increase(Decrease)
in
U.S. dollars
|
|
%
Change
in
Local
Currencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
86.4
|
|
$
|
57.9
|
|
$
|
28.5
|
|
|
49
|
%
|
|
44
|
%
|
Operating
expense
|
|
|
89.3
|
|
|
58.6
|
|
|
30.7
|
|
|
52
|
%
|
|
47
|
%
|
Operating
loss
|
|
$
|
(2.9
|
)
|
$
|
(0.7
|
)
|
$
|
(2.2
|
)
|
|
n.m.
|
|
|
n.m.
|
|
(n.m.
-
not meaningful; change greater than 100%)
Revenue
for the Asia Pacific region for the first quarter of 2007 was $86.4 million,
an
increase of 49 percent in U.S. dollars and 44 percent in local currencies
over
the prior year. Growth for the quarter resulted from both Management Services
revenue, which increased 62 percent, and Transaction Services revenue, which
increased 38 percent.
Geographically,
the strongest revenue contributions were from the growth markets of India,
Japan, China and Korea. Revenue for this group grew over 100 percent in 2007
compared with the prior year. India and Japan led the growth, representing
a
combined 85 percent of the group's growth. The core markets of Australia,
Hong
Kong and Singapore also had healthy growth, with revenue up 21 percent compared
with the prior year.
Operating
expenses for the region increased 52 percent in U.S. dollars and 47 percent
in
local currencies over the prior year. The increase in operating expenses
at a
faster pace than revenue was the result of continued expansion of the geographic
platform, client service capabilities and technology infrastructure throughout
the region during 2006. These additional expenses support market expansion
through the opening of new offices and continued investment in people, to
maintain the Firm's leading market position and capitalize on continued growth
opportunities in the region.
Investment
Management
|
|
2007
|
|
2006
|
|
Increase(Decrease)
in
U.S. dollars
|
|
%
Change
in
Local
Currencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
78.3
|
|
$
|
62.8
|
|
$
|
15.5
|
|
|
25
|
%
|
|
21
|
%
|
Equity
earnings (losses)
|
|
|
0.3
|
|
|
(1.1
|
)
|
|
1.4
|
|
|
n.m.
|
|
|
n.m.
|
|
Total
revenue
|
|
|
78.6
|
|
|
61.7
|
|
|
16.9
|
|
|
27
|
%
|
|
23
|
%
|
Operating
expense
|
|
|
60.7
|
|
|
48.2
|
|
|
12.5
|
|
|
26
|
%
|
|
22
|
%
|
Operating
income
|
|
$
|
17.9
|
|
$
|
13.5
|
|
$
|
4.4
|
|
|
33
|
%
|
|
28
|
%
|
(n.m.
-
not meaningful; change greater than 100%)
LaSalle
Investment Management's first-quarter revenue grew to $78.6 million, up 27
percent in U.S. dollars and 23 percent in local currencies over the prior
year.
The increase in revenue was driven both by the continued growth of the
annuity-based business and by incentive fees generated from strong performance
of clients' investments managed by the Firm. The Firm's continued focus on
the
growth in annuity revenue led to a year-over-year increase in Advisory fees
of
41 percent over 2006. The growth in the annuity business was principally
due to
a healthy increase in assets under management.
Incentive
fees vary significantly from period to period due to both the performance
of the
underlying investments and the contractual timing of the measurement periods
for
different clients. During the first quarter of 2007, incentive fees were
$21.9
million, up 61 percent from 2006.
LaSalle
Investment Management raised over $1.4 billion of client investment capital
in
the first quarter of 2007, with global securities mandates accounting for
approximately 80 percent of the capital. Investments made on behalf of clients
in the first quarter of 2007 were $1.3 billion, approximately the same amount
as
2006. Over the last 12 months, assets under management grew to $44.3 billion
from $34.0 billion, an increase of 30 percent.
Summary
The
Firm
experienced strong top-line growth across all segments in the first quarter
of
2007, the result of continued strength of the real estate markets as well
as its
globally diverse business platform and service lines. The first quarter of
2007
benefited from increased incentive fees, as well as the size and timing of
Capital Markets transactions. The aggressive strategic investments we have
made
over the last two years, which have included several acquisitions and the
addition of a significant number of revenue-generators, service lines and
infrastructure, also have started to show a positive impact on
margins.
Consolidated
Cash Flows
Cash
Flows From Operating Activities
During
the three months ended March 31, 2007, cash flows used in operating activities
totaled $182.4 million compared to $87.0 million in the first quarter of
2006.
The cash flows from operating activities can be further divided into $56.1
million of cash generated from earnings (compared to $25.3 million in 2006)
and
$238.6 million of cash flows from changes in working capital (compared to
$112.3
million in 2006). The increase in our net income ($27.2 million for the three
months ended March 31, 2007 compared to $4.6 million for the three months
ended
March 31, 2006) was most responsible for the $30.8 million increase in cash
generated from earnings for the quarter. The $126.3 million year-over-year
increase in cash outflows from changes in working capital is primarily due
to
bonus payments made in the first quarter of 2007 of much higher amounts than
those made in the first quarter of 2006.
Cash
Flows From Investing Activities
We
used
$24.5 million of cash in investing activities in the first quarter of 2007,
which represents a $134.8 million decrease in cash used from the $159.3 million
used in investing activities in the first three months of 2006. The decrease
is
principally due to $147.7 million more cash used to complete business
acquisitions in the first quarter of 2006 (Spaulding & Slye) as compared to
those completed in the first quarter of 2007 (NSC Corporate and Hargreaves
Goswell). The decrease in cash used for business acquisitions was partially
offset by a $10.9 million increase in cash used for net property and equipment
additions in the first quarter of 2007 compared with the first quarter of
2006.
Cash
Flows From Financing Activities
Financing
activities provided $199.6 million of net cash in the first three months
of 2007
compared with $248.2 million in the same period of 2006. The $48.6 million
decrease in cash provided by financing activities from 2006 was the result
of a
variety of factors: primarily, $20.1 million less of net borrowings under
credit
facilities in the current year (borrowings used to pay for the Spaulding
&
Slye acquisition in 2006, largely offset by borrowings used to pay for increases
in first quarter 2007 bonus payments made as compared to 2006), $13.1 million
more shares repurchased under our Board-approved share repurchase program
in the
first quarter of 2007, and $9.6 million less in common stock issued in the
first
quarter of 2007 as compared to the first quarter of 2006.
Liquidity
and Capital Resources
Historically,
we have financed our operations, acquisitions and co-investment activities
with
internally generated funds, issuances of our common stock and borrowings
under
our credit facilities.
Credit
Facility
Our
unsecured revolving credit facility provides us capacity to borrow up to
$450
million through March 2011. We also have capacity to borrow up to an additional
$41.8 million under local overdraft facilities. Pricing on the $450 million
facility ranges from LIBOR plus 55 basis points to LIBOR plus 130 basis points.
As of March 31, 2007, our pricing on the revolving credit facility was LIBOR
plus 55 basis points. This facility will continue to be utilized for working
capital needs (including payment of accrued bonus compensation during the
first
quarter of each year), co-investment activity, share repurchases and dividend
payments, capital expenditures and acquisitions. Interest and principal payments
on outstanding borrowings against the facility will fluctuate based on our
level
of borrowing needs.
As
of
March 31, 2007, we had $236.8 million outstanding under the revolving credit
facility. The average borrowing rate on the revolving credit agreement was
5.5%
in the first quarter of 2007, as compared with an average borrowing rate
of 5.0%
in the first quarter of 2006. We also had short-term borrowings (including
capital lease obligations) of $29.1 million outstanding at March 31, 2007,
with
$18.8 million of those borrowings attributable to local overdraft
facilities.
With
respect to the revolving credit facility, we must maintain a consolidated
net
worth of at least $450 million, a leverage ratio not exceeding 3.25 to 1,
and a
minimum interest coverage ratio of 2.5 to 1. Additionally, we are restricted
from, among other things, incurring certain levels of indebtedness to lenders
outside of the facility and disposing of a significant portion of our assets.
Lender approval or waiver is required for certain levels of co-investment
and
acquisition. We are in compliance with all covenants as of March 31, 2007.
The
revolving credit facility bears variable rates of interest based on market
rates. We are authorized to use interest rate swaps to convert a portion
of the
floating rate indebtedness to a fixed rate; however, none were used during
2006
or the first three months of 2007, and none were outstanding as of March
31,
2007.
We
believe that the revolving credit facility, together with local borrowing
facilities and cash flow generated from operations will provide adequate
liquidity and financial flexibility to meet our needs to fund working capital,
co-investment activity, share repurchases and dividend payments, capital
expenditures and acquisitions.
Co-investment
Activity
With
respect to our co-investment activity, we had total investments and loans
of
$133.2 million as of March 31, 2007 in approximately 30 separate property
or
fund co-investments. Within this $133.2 million are loans of $3.5 million
to
real estate ventures which bear an 8.0% interest rate and are to be repaid
by
2008.
We
utilize two investment vehicles to facilitate the majority of our co-investment
activity. LaSalle Investment Company I ("LIC I") is a series of four parallel
limited partnerships which serve as our investment vehicle for substantially
all
co-investment commitments made through December 31, 2005. LaSalle Investment
Company II ("LIC II"), formed in January 2006, is comprised of two parallel
limited partnerships which serve as our investment vehicle for most new
co-investments. LIC I and LIC II invest in certain real estate ventures that
own
and operate commercial real estate. As of March 31, 2007, we have an effective
47.85% ownership interest in LIC I, and an effective 48.78% ownership interest
in LIC II; primarily institutional investors hold the remaining 52.15% and
51.22% interests in LIC I and LIC II, respectively. We account for our
investments in LIC I and LIC II under the equity method of accounting in
the
accompanying consolidated financial statements. Additionally, a non-executive
Director of Jones Lang LaSalle is an investor in LIC I on equivalent terms
to
other investors.
At
March
31, 2007, LIC I and LIC II have unfunded capital commitments for future fundings
of co-investments of $109.9 million and $143.6 million, respectively, of
which
our 47.85% and 48.78% shares are $52.6 million and $70.0 million, respectively.
These $52.6 million and $70.0 million commitments are part of our maximum
potential unfunded commitments to LIC I and LIC II at March 31, 2007, which
are
euro 39.9 million ($53.3 million) and $457.7 million,
respectively.
LIC
I's
and LIC II's exposures to liabilities and losses of the ventures are limited
to
their existing capital contributions and remaining capital commitments. We
expect that LIC I will draw down on our commitment over the next three to
five
years to satisfy its existing commitments to underlying funds, and that LIC
II
will draw down on our commitment over the next six to eight years as it enters
into new commitments. Our Board of Directors has endorsed the use of our
co-investment capital in particular situations to control or bridge finance
existing real estate assets or portfolios to seed future investments within
LIC
II. The purpose is to accelerate capital raising and growth in assets under
management. Approvals for such activity are handled consistently with those
of
the Firm's co-investment capital.
As
of
March 31, 2007, LIC I maintains a euro 25 million ($33.4 million) revolving
credit facility (the "LIC I Facility"), and LIC II maintains a $200 million
revolving credit facility (the "LIC II Facility"), principally for their
working
capital needs. The capacity in the LIC II Facility contemplates potential
bridge
financing opportunities. Each facility contains a credit rating trigger and
a
material adverse condition clause. If either of the credit rating trigger
or the
material adverse condition clauses become triggered, the facility to which
that
condition relates would be in default and outstanding borrowings would need
to
be repaid. Such a condition would require us to fund our pro-rata share of
the
then outstanding balance on the related facility, which is the limit of our
liability. The maximum exposure to Jones Lang LaSalle, assuming that the
LIC I
Facility were fully drawn, would be euro 12.0 million ($16.0 million); assuming
that the LIC II Facility were fully drawn, the maximum exposure to Jones
Lang
LaSalle would be $97.6 million. Each exposure is included within and cannot
exceed our maximum potential unfunded commitments to LIC I of euro 39.9 million
($53.3 million) and to LIC II of $457.7 million discussed above. As of March
31,
2007, LIC I had euro 4.3 million ($5.7 million) of outstanding borrowings
on the
LIC I Facility, and LIC II had $7.3 million of outstanding borrowings on
the LIC
II Facility.
Exclusive
of our LIC I and LIC II commitment structures, we have potential obligations
related to unfunded commitments to other real estate ventures, the maximum
of
which is $10.5 million at March 31, 2007.
We
expect
to continue to pursue co-investment opportunities with our real estate money
management clients in the Americas, EMEA and Asia Pacific, as co-investment
remains very important to the continued growth of Investment Management.
The net
co-investment funding for 2007 is anticipated to be between $50 and $60 million
(planned co-investment less return of capital from liquidated co-investments).
Share
Repurchase and Dividend Programs
We
repurchased 220,581 shares in the first three months of 2007 at an average
price
of $98.90 per share under a share repurchase program approved by our Board
of
Directors on September 15, 2005. Board approval allows for purchase of our
outstanding common stock in the open market and in privately negotiated
transactions. Under our current share repurchase program, we are authorized
to
repurchase up to 2,000,000 shares, of which 1,641,681 total shares have been
repurchased through March 31, 2007. The repurchase of shares is primarily
intended to offset dilution resulting from both stock and stock option grants
made under our existing stock plans. Given that shares repurchased under
each of
the programs are not cancelled, but are held by one of our subsidiaries,
we
include them in our equity account. However, these shares are excluded from
our
share count for purposes of calculating earnings per share. We have repurchased
a total of 4,970,232 shares since the first repurchase program approved by
our
Board of Directors on October 30, 2002. See Part II, Item 2, for additional
details regarding our share repurchase activity in the first three months
of
2007.
The
Company announced on May 1, 2007 that its Board of Directors has declared
a
semi-annual cash dividend of $0.35 per share of its Common Stock. The dividend
payment will be made on June 15, 2007 to holders of record at the close of
business on May 15, 2007. A
dividend-equivalent in the same amount also will be paid simultaneously on
outstanding but unvested shares of restricted stock units granted under the
Company's Stock Award and Incentive Plan. The
current dividend plan approved by the Board anticipates a total annual dividend
of $0.70 per common share, however there can be no assurance that future
dividends will be declared since the actual declaration of future dividends,
and
the establishment of record and payment dates, remains subject to final
determination by the Company's Board of Directors.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
Market
and Other Risk Factors
Market
Risk
The
principal market risks (namely, the risk of loss arising from adverse changes
in
market rates and prices) to which we are exposed are:
• |
Interest
rates on our multi-currency credit facility;
and
|
In
the
normal course of business, we manage these risks through a variety of
strategies, including the use of hedging transactions using various derivative
financial instruments such as foreign currency forward contracts. We enter
into
derivative instruments with high credit quality counterparties and diversify
our
positions across such counterparties in order to reduce our exposure to credit
losses. We do not enter into derivative transactions for trading or speculative
purposes.
Interest
Rates
We
centrally manage our debt, considering investment opportunities and risks,
tax
consequences and overall financing strategies. We are primarily exposed to
interest rate risk on our revolving multi-currency credit facility that is
available for working capital, investments, capital expenditures and
acquisitions. Our average outstanding borrowings under the revolving credit
facility were $101.5 million during the three months ended March 31, 2007,
and
the effective interest rate on that facility was 5.5%. As of March 31, 2007,
we
had $236.8 million outstanding under the revolving credit facility. This
facility bears a variable rate of interest based on market rates. The interest
rate risk management objective is to limit the impact of interest rate changes
on earnings and cash flows and to lower overall borrowing costs. To achieve
this
objective, in the past we have entered into derivative financial instruments
such as interest rate swap agreements when appropriate and may do so in the
future. We entered into no such agreements in 2006 or the first three months
of
2007, and we had no such agreements outstanding at March 31, 2007.
Foreign
Exchange
Foreign
exchange risk is the risk that we will incur economic losses due to adverse
changes in foreign currency exchange rates. Our revenues outside of the United
States totaled 63% and 55% of our total revenues for the three months ended
March 31, 2007 and 2006, respectively. Operating in international markets
means
that we are exposed to movements in foreign exchange rates, primarily the
British pound (19% of revenues for the three months ended March 31, 2007)
and
the euro (21% of revenues for the three months ended March 31, 2007).
We
mitigate our foreign currency exchange risk principally by establishing local
operations in the markets we serve and invoicing customers in the same currency
as the source of the costs. The British pound expenses incurred as a result
of
our European region headquarters being located in London act as a partial
operational hedge against our translation exposure to British pounds.
We
enter
into forward foreign currency exchange contracts to manage currency risks
associated with intercompany loan balances. At March 31, 2007, we had forward
exchange contracts in effect with a gross notional value of $400.3 million
($379.8 million on a net basis) with a market and carrying gain of $5.6 million.
This carrying gain is offset by a carrying loss in associated intercompany
loans
such that the net impact to earnings is not significant.
Disclosure
of Limitations
As
the
information presented above includes only those exposures that exist as of
March
31, 2007, it does not consider those exposures or positions which could arise
after that date. The information represented herein has limited predictive
value. As a result, the ultimate realized gain or loss with respect to interest
rate and foreign currency fluctuations will depend on the exposures that
arise
during the period, the hedging strategies at the time and interest and foreign
currency rates.
For
other
risk factors inherent in our business, see Item 1A. Risk Factors in our 2006
Annual Report on Form 10-K.
Jones
Lang LaSalle (the Company) has established disclosure controls and procedures
to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the officers who certify the
Company's financial reports and to the members of senior management and the
Board of Directors.
Under
the
supervision and with the participation of the Company's management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the Company's disclosure controls and procedures (as defined
in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).
Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of
the
end of the period covered by this report. There were no changes in the Company's
internal control over financial reporting during the quarter ended March
31,
2007 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial
reporting.
Part
II
Item
1.
Legal Proceedings
See
Note
11 of the notes to consolidated financial statements for discussion of the
Company's legal proceedings.
Item
2.
Share Repurchases
The
following table provides information with respect to approved share repurchase
programs for Jones Lang LaSalle:
|
|
Total
number
of
shares
purchased
|
|
Average
price
paid
per
share
(1)
|
|
Cumulative
number
of shares
purchased
as
part
of publicly
announced
plan
|
|
Shares
remaining
to
be
purchased
under
plan (2)
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2007 -
January
31, 2007
|
|
|
—
|
|
|
—
|
|
|
1,421,100
|
|
|
578,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1, 2007 -
February
28, 2007
|
|
|
—
|
|
|
—
|
|
|
1,421,100
|
|
|
578,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
1, 2007 -
March
31, 2007
|
|
|
220,581
|
|
$
|
98.90
|
|
|
1,641,681
|
|
|
358,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
220,581
|
|
$
|
98.90
|
|
|
|
|
|
|
|
(1) Total
average price paid
per share is a weighted average for the three month period.
(2) Since
October 2002, our
Board of Directors has approved four share repurchase programs. Each succeeding
program has replaced the prior repurchase program, such that the program
approved on September 15, 2005 is the only repurchase program in effect as
of
March 31, 2007. Board approval allows for purchase of our outstanding common
stock in the open market and in privately negotiated transactions. The
repurchase of shares is primarily intended to offset dilution resulting from
both stock and stock option grants made under our existing stock plans. Given
that shares repurchased under each of the programs are not cancelled, but
are
held by one of our subsidiaries, we include them in our equity account. However,
these shares are excluded from our share count for purposes of calculating
earnings per share. The following table details the activities for each of
our
approved share repurchase programs:
Repurchase
Plan Approval Date
|
|
Shares
Approved
for
Repurchase
|
|
Shares
Repurchased
through
March
31, 2007
|
|
|
|
|
|
|
|
October
30, 2002
|
|
|
1,000,000
|
|
|
700,000
|
|
February
27, 2004
|
|
|
1,500,000
|
|
|
1,500,000
|
|
November
29, 2004
|
|
|
1,500,000
|
|
|
1,128,551
|
|
September
15, 2005
|
|
|
2,000,000
|
|
|
1,641,681
|
|
|
|
|
|
|
|
4,970,232
|
|
Corporate
Governance
Our
policies and practices reflect corporate governance initiatives that we believe
comply with the listing requirements of the New York Stock Exchange, on which
our common stock is traded, the corporate governance requirements of the
Sarbanes-Oxley Act of 2002 as currently in effect, various regulations issued
by
the United States Securities and Exchange Commission and certain provisions
of
the General Corporation Law in the State of Maryland, where Jones Lang LaSalle
is incorporated.
We
maintain a corporate governance section on our public website which includes
key
information about our corporate governance initiatives, such as our Corporate
Governance Guidelines, Charters for the three Committees of our Board of
Directors, a Statement of Qualifications of Members of the Board of Directors
and our Code of Business Ethics. The Board of Directors regularly reviews
corporate governance developments and modifies our Guidelines and Charters
as
warranted. The corporate governance section can be found on our website at
www.joneslanglasalle.com
by
clicking "Investor Relations" and then "Board of Directors and Corporate
Governance."
Corporate
Officers
The
names
and titles of our corporate executive officers are as follows:
Global
Executive Committee
Colin
Dyer
Chief
Executive Officer and President
Lauralee
E. Martin
Executive
Vice President, Chief Operating and Financial Officer
Peter
A.
Barge
Chief
Executive Officer, Asia Pacific
Alastair
Hughes
Chief
Executive Officer, EMEA
Jeff
A.
Jacobson
Chief
Executive Officer, LaSalle Investment Management
Peter
C.
Roberts
Chief
Executive Officer, Americas
Additional
Global Corporate Officers
Brian
P.
Hake
Treasurer
James
S.
Jasionowski
Chief
Tax
Officer
David
A.
Johnson
Chief
Information Officer
Molly
A.
Kelly
Chief
Marketing and Communications Officer
Mark
J.
Ohringer
General
Counsel and Corporate Secretary
Marissa
R. Prizant
Director
of Internal Audit
Nazneen
Razi
Chief
Human Resources Officer
Stanley
Stec
Controller
Cautionary
Note Regarding Forward-Looking Statements
Certain
statements in this filing and elsewhere (such as in reports, other filings
with
the United States Securities and Exchange Commission, press releases,
presentations and communications by Jones Lang LaSalle or its management
and
written and oral statements) regarding, among other things, future financial
results and performance, achievements, plans and objectives, dividend payments
and share repurchases may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties
and
other factors that may cause Jones Lang LaSalle's actual results, performance,
achievements, plans and objectives to be materially different from any of
the
future results, performance, achievements, plans and objectives expressed
or
implied by such forward-looking statements.
We
discuss those risks, uncertainties and other factors in (i) our Annual Report
on
Form 10-K for the year ended December 31, 2006 in Item 1A. Risk Factors;
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations; Item 7A. Quantitative and Qualitative Disclosures About Market
Risk;
Item 8. Financial Statements and Supplementary Data - Notes to Consolidated
Financial Statements; and elsewhere, (ii) in this Quarterly Report on Form
10-Q
in Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations; Item 3. Quantitative and Qualitative Disclosures About
Market Risk; and elsewhere, and (iii) the other reports we file with the
United
States Securities and Exchange Commission. Important factors that could cause
actual results to differ from those in our forward-looking statements include
(without limitation):
|
•
|
The
effect of political, economic and market conditions and geopolitical
events;
|
|
•
|
The
logistical and other challenges inherent in operating in numerous
different countries;
|
|
•
|
The
actions and initiatives of current and potential
competitors;
|
|
•
|
The
level and volatility of real estate prices, interest rates, currency
values and other market indices;
|
|
•
|
The
outcome of pending litigation; and
|
|
•
|
The
impact of current, pending and future legislation and
regulation.
|
Moreover,
there can be no assurance that future dividends will be declared since the
actual declaration of future dividends, and the establishment of record and
payment dates, remain subject to final determination by the Company's Board
of
Directors.
Accordingly,
we caution our readers not to place undue reliance on forward-looking
statements, which speak only as of the date on which they are made. Jones
Lang
LaSalle expressly disclaims any obligation or undertaking to update or revise
any forward-looking statements to reflect any changes in events or circumstances
or in its expectations or results.
Signature
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of
1934, the Registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized, on the 3rd day of May,
2007.
|
JONES
LANG LASALLE INCORPORATED
|
|
|
|
/s/
Lauralee E. Martin
|
|
|
|
By:
Lauralee
E. Martin
|
|
Executive
Vice President and
Chief Operating and Financial Officer
|
|
(Authorized
Officer and Principal Financial
Officer)
|
Exhibit
|
Amended
and Restated Jones Lang LaSalle Incorporated Stock Ownership Program
description under the Amended and Restated Stock Award and Incentive
Plan
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
*
Filed
herewith.
31