CB RICHARD ELLIS GROUP INC CBG
August 04, 2009 - 12:46pm EST by
bubs
2009 2010
Price: 10.90 EPS $0.27 $0.66
Shares Out. (in M): 289 P/E NM 16.5x
Market Cap (in $M): 3,149 P/FCF 0.0x 0.0x
Net Debt (in $M): 2,003 EBIT 286 452
TEV ($): 5,152 TEV/EBIT 18.0x 11.4x

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Description

CB Richard Ellis (Ticker: CBG)      

Recommendation: Long

Current Price: $10.90

Price Target: $15.00, 38% above current

 

 

 

 

Current Valuation ($m)

 

 

 

 

 

Current Price on 7/31/09

$10.90

x Diluted Shares Outstanding

288.9

Market Value of Equity

$3,149

Debt

 

 

2,265

Minority Interest

 

213

Less: Cash

 

 

(310)

Less: Equity in Unconsolidated Subs

(165)

Total Enterprise Value

$5,152

 

 

 

 

 

 

2010E

Mid-Cycle*

EBITDA

 

$542

$661

EV/ EBITDA

9.5x

7.8x

 

 

 

 

EPS

 

$0.66

$0.92

P/E

 

16.5x

11.9x

* See below for Mid-Cycle description & assumptions.

Investment Thesis


§          Market leader with limited competition of scale: CBRE is 1.9x its nearest competitor (Jones Lang Lasalle); fragmented competition in tier 2 markets presents consolidation opportunities.

§          High barriers to entry / business "moat": CBRE has made numerous large (Insignia in 2003 and Trammell Crow in 2006) and small (52 tuck-ins over the past several years) acquisitions that have helped it reach its current scale. They currently have 30k+ employees and 300+ offices in 50 countries, a footprint not easily matched.

§          Favorable long-term growth prospects facilities and property management business ("F&PM"): Management is currently putting majority of resources behind F&PM according to a current mid-level employee. The company continues to position itself as a global outsourcing leader and was ranked #8 on IOTA's 2009 list of global outsourcing companies. Longer-term, government real estate outsourcing represents a large opportunity - according to Goldman Sachs, the U.S. Government owns 22% of national real estate. CBRE currently only counts the state of Michigan as a customer, a contract which they won in July 2009 to manage 14m sq feet of properties.

§          High % of revenue is recurring in nature or from existing customers: F&PM business generated $1.7bn of LTM Q2 revenues (42% of total) and continues to add new customers in light of the recession (7 in Q2 09). Contracts are typically 3-5 years in length and include retainer fees paid to CBRE even if activity is low. Approximately 60% of CBRE's total revenues are from existing customers.

§          Distressed sellers could significantly drive real estate transaction volume in the near-term: According to Real Capital Analytics, there is currently $108bn of real estate in default globally and there are $244m of commercial mortgages maturing in 2009 across the US, UK and Japan. It is also important to note that CBRE formed an Asset Recovery and Restructuring group in 2008 to capitalize on the advisory side of this opportunity. CBRE is already managing the sale of $2.25bn of properties and management has commented that "distressed sales are expected to account for the lion's share of transactions in the 2nd half of 2009 and well into 2010".

§          Cost structure rationalization creates operating leverage when real estate transactions pick up: Management has targeted ~$600m of cost reductions, $485m of which will hit the P&L in 2009. They have increased their target 3 times in the past year. Whenever the bid-ask between commercial real estate buyers and sellers converges, transaction volumes will increase irrespective of whether real estate prices rise to levels seen in the past few years. Because the majority of the cost base is variable (estimated 65%) due to commissions, a return of transaction volumes on a fixed cost base that is $600m leaner will be very accretive to EBITDA and EPS.

§          Low capital intensity and ROIC > WACC even in current environment: Capex has historically averaged around 1% of revenues and 10% of EBITDA, and in 2009 it's expected to be ~$30m. Rolling LTM ROIC averaged 50% from 2004 to 2007 and for the six quarters from Q1 08 through Q2 09 has averaged above 20%. 

§          Management has been accurate at predicting the current crisis: CEO cited weakening of commercial real estate market in Q4 2007 earnings call and started cost containment initiatives early in 2008 in light of being viewed as too negative by market participants.

§          Value creation-oriented executive compensation structure: 80% of executive incentive compensation is tied to meeting EBITDA targets; in light of market deterioration in 2008, no incentive compensation was paid to top executives and they've taken a 10% cut to salaries in 2009.

§          Recent amendment of credit agreement and capital raise alleviated credit risk: In March 2009 the company amended its credit agreement with the following outcome: significant covenant relief for 2 years and the flexibility to raise additional capital and buy back the TLs at a discount. In June, the company issued $450m of senior sub notes and $150m of equity ($100 of each which was purchased by Paulson & Co.). They prepaid the majority of their 2009 TL amortization payments and some of 2010 as well as had $310 of cash on the balance sheet as of 6/30/09.

§          Sell-side analyst upgrades could act as a near-term catalyst for the stock: Although a non-fundamental driver in nature, the sell-side currently rates CBRE mixed between buy and hold and the average price target is $10.75, below the current price. Increased price targets or upgrades could drive shares higher in the near-term.

 

Key Risks

 

§          Near-term downside possible if consensus view on economic recovery deteriorates: The consensus view is that CBRE will return to low single digit growth in 2010. If there are market indicators that point to the commercial real estate sector experiencing more pressure than expected, this could drive down CBRE's share price. HOWEVER...even if CBRE wasn't to return to growth until 2012, management has cited the ability to cut costs beyond the announced $600m and whenever a transaction recovery occurs will be well positioned. I believe it's not a question of "if" transaction volumes return but "when" and I would take advantage of near-term weakness in the share price to add to a position.

§          Excessive cost cuts could take a toll on employee morale and/or hinder top-line growth: This question has been asked numerous times on earnings calls and management claims there will be minimal effect on revenues from the cost cuts. I spoke with a mid-level employee that works across business functions at CBRE and he stated that (1) the majority of these cost cuts are in travel and entertainment (due to the client management nature of the business) and in today's economic environment, a customer may not be thrilled that he's getting Jonas Brothers instead of Yankees tickets, but he'll be satisfied as long as he's getting the product/service he pays for (2) there's been no change in day-to-day activities, (3) morale on the F&PM side is very high and although brokers may not be the happiest due to current commission levels, the senior ones have seen these times before and understand the cyclicality inherent in the business.

§          CBRE trades ~3.0x higher than Jones Lang LaSalle on a 2010E P/E and EV/EBITDA basis: JLL is much more concentrated in Development, Investment Management and Capital markets than CBRE (43% vs CBRE's 7% for 2008) and only has 16% of revenue from F&PM. According to my CBRE contact, two of the reasons that JLL has lower margins are (1) JLL tends to employ more ex-pats in its international offices, which are more expensive than locals and (2) JLL tends to spend more on research and non-revenue generating activities than CBRE.

§          If CBRE revenues decline by another 30% from LTM Q2 09, there could be covenant issues: A decline of 30% from LTM Q2 09 puts total revenues near standalone CBRE 2005 levels (pre-Trammell Crow acquisition, which added $1.8bn of revenues in 2005 on a pro forma basis). If this were the case I'd expect management to increase cost cutting initiatives and try to get a 3rd amendment to their credit agreement. If no additional cost cuts were done beyond the $600m, I estimate CBRE would still generate $190m of EBITDA on this level of revenue.

§          Mandatory term loan amortization puts a drag on discretionary cash flow: 2009 prepayments are already taken care of, $52m of 2010 prepayments were made ($254 remaining) and CBRE has $310m of cash flow on the balance sheet. CBRE has flexibility to approach select lender groups to ask for loan modifications and as of Q2 09 has received preliminary commitments on $425m of debt, which will push out maturities out and extend the prepayment schedule if successful.

§          Leasing transactions are likely to decline until office rents stabilize and the economy reaches a trough: A key assumption in my model is that the downturn in leasing revenues lags a recovery in real estate sales revenues by a year. Leasing transactions did not fall off a cliff nearly as fast as sales transactions due to the fact that as long as a lessee is operating they'll need to renew their leases, and although they may be of shorter duration and lower $ volume due to declining rents, they are somewhat recurring in nature.

 

Valuation, Price Target & Upsides

 

§          I arrive at a price target of $15.00 based on Mid-cycle and DCF valuation analyses using what I believe are conservative (and below-the street) projections. See the appendix for valuation backup and key assumptions. The stock has traded up significantly since the beginning of the year (152%) due to eased credit concerns and the broader recovery in the overall market, however I think this is a still an opportunity to buy a market leader with limited competition, high barriers to entry, and good internal control over costs with a considerable margin of safety.

§          Upsides not factored into the model include (1) any increase in AUM or any carried interest revenue at all in the investment management business which should have a much higher EBITDA margin that the overall company, (2) any increase in development services revenue ($6.7bn of projects in process/pipeline as of Q2 09) and (3) any increase in capital markets/commercial mortgage brokerage revenue.

 

Why the equity?

 

§          I believe the equity is the most attractive way to invest in CBRE because (1) this is an upside play on the eventual recovery of commercial real estate sales and leasing transactions and any up-tick in volumes will accrete to the equity holders due to CBRE's post-cost rationalization operating leverage, (2) long-term growth prospects are attractive for the F&PM business which currently represents nearly half of revenues (3) there is an attractive margin of safety because the current price is 38% below estimated intrinsic value, and (4) there are significant upsides to the base case projections as discussed above.

§          The bank debt is trading very close to par (Revolver @ 98; TL A @ 98; TL B @ 96) and only offers YTMs of 6%-8% which is 450-500bps above comparable maturity treasuries. I don't find this that exciting and don't think the appropriate strategy to play CBRE is by buying the bank debt near par.

 

§          The senior subordinate bonds are trading above par (@ 100.3) and although clipping a ~12% yield on a relatively safe piece of paper sounds attractive, there is mostly downside from a price perspective. I wouldn't want to go long HY unsecured debt at par.

 

 

2011 Recovery Case Model Assumptions (BASE CASE)

 

§          Investment sales revenues moderately decline in Q4 09 and grow at 15% thereafter, never getting back to levels seen in 2003 before the Trammell Crowe acquisition

§          Leasing sales revenues continue to decline through Q3 2010 and grow at 10% thereafter. The assumption here is that general economic conditions will not see a significant recovery until 2011 and even then, it will be moderate. Leasing revenue are still $200m below 2006 levels (PF for Trammell Crow) in 2013

§          Property & facilities management revenue continues its current 5% decline through Q4 09, is flat for 2010 and grows at 5% thereafter. I believe this is very conservative given the long-term prospects of this business.

§          Appraisal & valuation revenue declines in a similar fashion to leasing revenue due to high volume and low cost of transactions. Even in an environment where the bid-ask spread is wide for properties, there are likely ongoing appraisals.

§          Commercial mortgage brokerage revenue tracks investment sales revenue on the downside but growth is capped at 0%.

§          Investment management revenue is solely fees on assets under management, which stay flat to Q2 09. There is significant upside in this business if real estate prices recover given the high margin of any carried interest revenue.

§          Development services revenue declines through Q4 09 and is flat thereafter

§          Fixed costs are approximately 35% of the company's cost base as of 2007. This assumption is based on triangulating between management's comments on earnings calls.

 

 

 

 

 

 

Fixed vs. Variable Costs

2007

2008

Change

 

 

 

 

 

 

Non-IM & Development Revenue

$5,473

$4,745

($728)

 

 

 

 

 

 

Revenues

 

 

$6,034

$5,129

($906)

 

 

 

 

 

 

Reported Cost of Services

$3,201

$2,927

($274)

% of revenues

 

53.0%

57.1%

30.3%

 

 

 

 

 

 

Reported Operating Expenses

$1,989

$1,747

($242)

% of revenues

 

33.0%

34.1%

26.7%

 

 

 

 

 

 

Non-recurring Adjustments

(66)

(146)

($80)

 

 

 

 

 

 

Total Adjusted Expenses

 

$5,123

$4,528

($595)

% of revenues

 

84.9%

88.3%

65.7%

 

 

 

 

 

 

Change Due to Cost Cuts

 

 

 

($140)

 

 

 

 

 

 

Change due to Variable Commissions

 

 

($350)

% of Non-IM & Development Revenue

 

48.1%

 

 

 

 

 

 

Change due to Other Variable Expenses

 

($105)

% of total revenue

 

 

 

11.6%

§          Management achieves its stated cost cutting plan, $435m hit the P&L in 2009 (conference call guidance) and the remaining $165m hit the P&L in 2010.

P&L

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Sales Revenue

$1,359

$1,660

$870

$415

$477

$548

$630

$725

 

 

 

% growth

 

22.1%

(47.6%)

(52.3%)

15.0%

15.0%

15.0%

15.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Revenue

$1,709

$1,870

$1,711

$1,249

$1,186

$1,305

$1,435

$1,579

 

 

 

% growth

 

9.4%

(8.5%)

(27.0%)

(5.0%)

10.0%

10.0%

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Facilities Management Revenue

$1,145

$1,396

$1,720

$1,639

$1,639

$1,721

$1,807

$1,897

 

 

 

% growth

 

21.9%

23.2%

(4.7%)

0.0%

5.0%

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appraisal & Valuation Revenue

$288

$386

$355

$269

$254

$280

$307

$338

 

 

 

% growth

 

33.8%

(8.0%)

(24.1%)

(5.6%)

10.0%

10.0%

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Mortgage Brokerage Revenue

$158

$163

$91

$56

$56

$56

$56

$56

 

 

 

% growth

 

3.2%

(44.3%)

(38.2%)

0.0%

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Management Revenue

$233

$352

$165

$125

$118

$118

$118

$118

 

 

 

% growth

 

51.3%

(53.1%)

(24.5%)

(5.6%)

0.0%

0.0%

0.0%

 

 

 

Core Asset Management Revenue

 

$120

$141

$122

$118

$118

$118

$118

 

 

 

AUM ($bn)

$28.6

$37.8

$38.5

$36.4

$36.4

$36.4

$36.4

$36.4

 

 

 

% sequential growth in AUM

 

32.2%

1.9%

(5.5%)

0.0%

0.0%

0.0%

0.0%

 

 

 

Asset Mgmt Revenues as % of AUM

 

0.3%

0.4%

0.3%

0.3%

0.3%

0.3%

0.3%

 

 

 

Acquisition, Disposition & Incentive Revenue

 

$139

$20

$7

$0

$0

$0

$0

 

 

 

Carried Interest

 

$89

$0

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development Services Revenue

$40

$126

$111

$86

$86

$86

$86

$86

 

 

 

% growth

 

212.4%

(11.9%)

(22.3%)

0.0%

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

$81

$84

$109

$110

$110

$110

$110

$110

 

 

 

% growth

 

4.2%

28.9%

1.5%

0.0%

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$5,012

$6,034

$5,129

$3,948

$3,926

$4,223

$4,550

$4,909

 

 

 

% growth

 

20.4%

(15.0%)

(23.0%)

(0.6%)

7.6%

7.7%

7.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$2,632

$2,282

$1,744

$1,737

$1,880

$2,037

$2,210

 

 

 

% of Non-IM & Development Revenue

 

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

 

 

 

% of total revenue

 

43.6%

44.5%

44.2%

44.2%

44.5%

44.8%

45.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Variable Expenses

 

$701

$596

$459

$456

$491

$529

$571

 

 

 

% of total revenue

 

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Level Fixed Costs

 

$1,790

$1,790

$1,650

$1,355

$1,226

$1,263

$1,300

 

 

 

% of total revenue

 

29.7%

34.9%

41.8%

34.5%

29.0%

27.7%

26.5%

 

 

 

% growth after cost cutting complete

 

 

 

0.0%

0.0%

3.0%

3.0%

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost Cutting Actions

 

$0

($140)

($295)

($165)

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expenses

 

$5,123

$4,528

$3,558

$3,383

$3,597

$3,829

$4,081

 

 

% of revenue

 

84.9%

88.3%

90.1%

86.2%

85.2%

84.1%

83.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on Disposition of Real Estate

 

($24)

($19)

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj EBITDA (Excluding Equity Income)

$625

$935

$620

$390

$542

$626

$721

$828

 

 

% margin

12.5%

15.5%

12.1%

9.9%

13.8%

14.8%

15.9%

16.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D&A

$68

$113

$103

$104

$90

$80

$74

$71

 

 

 

% of PPE & Amortizable Intangibles

27.3%

18.2%

16.6%

20.0%

20.0%

20.0%

20.0%

20.0%

 

 

 

PPE & Amortizable Intangibles (Beg of Pd)

$247

$622

$620

$519

$452

$401

$371

$357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj. EBIT

$558

$822

$517

$286

$452

$546

$647

$757

 

 

% margin

11.1%

13.6%

10.1%

7.2%

11.5%

12.9%

14.2%

15.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

$171

$163

$156

$145

$112

 

 

 

Interest Income

 

 

 

($9)

($10)

($8)

($12)

($12)

 

 

Net Interest Expense

 

 

 

$163

$153

$147

$132

$100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Earnings

 

 

 

$123

$299

$399

$515

$656

 

 

% margin

 

 

 

3.1%

7.6%

9.4%

11.3%

13.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

 

$44

$108

$144

$185

$236

 

 

 

% tax rate

 

 

 

36.0%

36.0%

36.0%

36.0%

36.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

$79

$192

$255

$330

$420

 

 

% margin

 

 

 

2.0%

4.9%

6.0%

7.2%

8.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BoP Diluted Shares Outstanding

 

 

 

--

289.444

290.444

291.444

292.444

 

 

Shares Issued for Stock-based Comp

 

 

 

--

1.000

1.000

1.000

1.000

 

EoP Diluted Shares Outstanding

 

 

 

289.444

290.444

291.444

292.444

293.444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

 

 

$0.27

$0.66

$0.88

$1.13

$1.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

$8

$10

$11

$11

$11

$11

$11

$11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capex

$55

$93

$51

$30

$40

$50

$60

$70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2H 09

 

 

 

 

 

 

Net Income

 

 

 

$76

$192

$255

$330

$420

 

 

D&A

 

 

 

54

90

80

74

71

 

 

Stock-based compensation

 

 

 

6

11

11

11

11

 

 

Capex

 

 

 

(22)

(40)

(50)

(60)

(70)

 

 

Change in Net Working Capital

 

 

 

2

(0)

4

5

5

 

 

Cash Restructuring / Cost Containment Expenses

 

 

 

(15)

(17)

0

0

0

 

 

Tax Savings on Cash Restructuring / Cost Containment Expenses

 

 

5

6

0

0

0

 

Levered Free Cash Flow

 

 

 

$106

$242

$301

$360

$438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A Payments

 

 

 

(6)

(240)

(288)

0

0

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A-1 Payments

 

 

 

0

(3)

(3)

(3)

(113)

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan B Payments

 

 

 

0

(11)

(11)

(11)

(663)

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facility Paydown

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Warehouse Receivable Payment Received

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Cash Balance

 

 

 

310

361

249

224

520

 

 

 

 

 

 

 

 

 

 

 

Minimum Cash Balance

 

 

 

(200)

(200)

(200)

(200)

(200)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discretionary Free Cash

 

 

 

$210

$149

$48

$370

($19)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver Draw / (Paydown)

 

 

 

(49)

0

0

0

19

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A (Paydown)

 

 

 

0

(50)

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A-1 (Paydown)

 

 

 

0

(50)

(24)

(50)

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan B (Paydown)

 

 

 

0

(99)

(48)

(100)

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash Above Minimum Balance

 

 

 

$161

$49

$24

$320

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Cash Balance

 

 

 

$361

$249

$224

$520

$200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan A + A-1 Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan B Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt & Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver

 

 

$26

$0

$0

$0

$0

$19

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.750%

4.250%

4.978%

5.586%

6.042%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

2.750%

2.250%

1.750%

1.750%

1.750%

 

 

 

 

 

 

 

 

 

 

 

Unfunded Revolver Fee %

 

 

 

0.500%

0.500%

0.500%

0.500%

0.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$3

$3

$4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A

 

 

$827

$578

$288

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.250%

4.750%

5.478%

6.086%

6.542%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.250%

2.750%

2.250%

2.250%

2.250%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$21

$8

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A-1

 

 

$298

$246

$193

$166

$113

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

5.500%

6.728%

7.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

3.500%

3.500%

3.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$12

$12

$10

$4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan B

 

 

$949

$944

$833

$774

$663

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

5.500%

6.728%

7.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

3.500%

3.500%

3.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$49

$54

$53

$26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Senior Secured Debt

 

 

$2,100

$1,767

$1,314

$940

$776

$19

 

 

 

 

 

 

 

 

 

 

 

x Adj EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Subordinated Debt

 

 

$0

$436

$436

$436

$436

$436

 

 

 

 

 

 

 

 

 

 

 

% interest rate

 

 

 

11.625%

11.625%

11.625%

11.625%

11.625%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$52

$52

$52

$52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Recourse Debt

 

 

$10

$7

$7

$7

$7

$7

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

6.000%

6.000%

6.000%

6.000%

6.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Recourse Debt

 

 

$2,109

$2,210

$1,757

$1,383

$1,219

$462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facilities

 

 

$210

$146

$146

$146

$146

$146

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$3

$3

$3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable on Real Estate

 

 

$614

$567

$567

$567

$567

$567

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.000%

4.000%

4.000%

4.000%

4.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$23

$23

$23

$23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Non-Recourse Debt

 

 

$8

$8

$8

$8

$8

$8

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Interest Expense

 

 

 

NM

$163

$156

$145

$112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash & Cash Equivalents

 

 

$159

$361

$249

$224

$520

$200

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$9

$7

$11

$11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted Cash & Equivalents

 

 

$36

$43

$43

$43

$43

$43

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$1

$1

$1

$1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Net Interest Expense

 

 

 

NM

$153

$147

$132

$100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Month LIBOR Curve

 

 

 

1.460%

1.383%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

LIBOR Floor

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

$390

$542

$626

$721

$828

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Cost Savings

 

 

 

165

0

0

0

0

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA

 

 

 

$555

$542

$626

$721

$828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Interest Expense

 

 

 

$145

$137

$130

$119

$86

 

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA / Covenant Interest Expense

 

 

 

3.81x

3.95x

4.83x

6.08x

9.57x

 

 

 

 

 

 

 

 

 

 

 

Coverage Covenant

 

 

 

2.00x

2.00x

2.25x

2.25x

2.25x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$264

$268

$334

$454

$633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Total Debt (Net of Cash)

 

 

 

$1,850

$1,508

$1,159

$699

$262

 

 

 

 

 

 

 

 

 

 

 

x Covenant EBITDA

 

 

 

3.33x

2.78x

1.85x

0.97x

0.32x

 

 

 

 

 

 

 

 

 

 

 

Leverage Covenant

 

 

 

4.25x

4.25x

3.75x

3.75x

3.75x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$119

$187

$317

$535

$758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                         

 

PPE & Amortizable Intangibles

$622

$620

$519

$452

$401

$371

$357

$355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

$881

$1,082

$752

$579

$576

$619

$667

$720

 

 

 

 

 

 

 

 

 

 

 

 

Days Sales Outstanding

64 days

65 days

54 days

54 days

54 days

54 days

54 days

54 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid Expenses

$74

$80

$94

$61

$61

$65

$70

$76

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.5%

1.3%

1.8%

1.5%

1.5%

1.5%

1.5%

1.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Assets

$71

$80

$76

$56

$55

$59

$64

$69

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.4%

1.3%

1.5%

1.4%

1.4%

1.4%

1.4%

1.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Assets

$1,025

$1,242

$922

$695

$692

$744

$801

$865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

$478

$488

$396

$305

$303

$326

$351

$379

 

 

 

 

 

 

 

 

 

 

 

 

Days Payables Outstanding (on revs)

35 days

30 days

28 days

28 days

28 days

28 days

28 days

28 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Bonus and Profit Sharing

$524

$727

$295

$227

$226

$243

$262

$283

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

10.5%

12.1%

5.8%

5.8%

5.8%

5.8%

5.8%

5.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and Employee Benefits Payable

$331

$308

$255

$197

$195

$210

$227

$244

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

6.6%

5.1%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Liabilities

$36

$24

$27

$22

$21

$23

$25

$27

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

0.7%

0.4%

0.5%

0.5%

0.5%

0.5%

0.5%

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

$1,369

$1,547

$973

$750

$746

$802

$864

$933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Working Capital

($343)

($305)

($51)

($55)

($54)

($58)

($63)

($68)

 

 

 

 

 

 

 

 

 

 

 

Change in NWC

 

($39)

($253)

$3

($0)

$4

$5

$5

 

 

 

 

 

 

 

 

 

 

 

2012 Recovery Case Model Assumptions (DOWNSIDE CASE)

 

§          All assumptions in the 2011 Recovery Case model are pushed out one year

§          Fixed costs are approximately 35% of the company's cost base as of 2007. This assumption is based on triangulating between management's comments on earnings calls. See above for assumptions.

§          Management achieves its stated cost cutting plan, $435m hit the P&L in 2009 (conference call guidance) and the remaining $165m hit the P&L in 2010 and is able to cut an additional $100m of costs which hit the P&L in 2011.

 

P&L

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Sales Revenue

$1,359

$1,660

$870

$382

$290

$334

$384

$441

 

 

 

% growth

 

22.1%

(47.6%)

(56.1%)

(24.0%)

15.0%

15.0%

15.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Revenue

$1,709

$1,870

$1,711

$1,249

$1,061

$1,008

$1,109

$1,220

 

 

 

% growth

 

9.4%

(8.5%)

(27.0%)

(15.0%)

(5.0%)

10.0%

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Facilities Management Revenue

$1,145

$1,396

$1,720

$1,639

$1,557

$1,557

$1,635

$1,717

 

 

 

% growth

 

21.9%

23.2%

(4.7%)

(5.0%)

0.0%

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appraisal & Valuation Revenue

$288

$386

$355

$269

$229

$216

$238

$261

 

 

 

% growth

 

33.8%

(8.0%)

(24.1%)

(15.0%)

(5.6%)

10.0%

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Mortgage Brokerage Revenue

$158

$163

$91

$52

$39

$39

$39

$39

 

 

 

% growth

 

3.2%

(44.3%)

(42.3%)

(25.0%)

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Management Revenue

$233

$352

$165

$125

$118

$118

$118

$118

 

 

 

% growth

 

51.3%

(53.1%)

(24.5%)

(5.6%)

0.0%

0.0%

0.0%

 

 

 

Core Asset Management Revenue

 

$120

$141

$122

$118

$118

$118

$118

 

 

 

AUM ($bn)

$28.6

$37.8

$38.5

$36.4

$36.4

$36.4

$36.4

$36.4

 

 

 

% sequential growth in AUM

 

32.2%

1.9%

(5.5%)

0.0%

0.0%

0.0%

0.0%

 

 

 

Asset Mgmt Revenues as % of AUM

 

0.3%

0.4%

0.3%

0.3%

0.3%

0.3%

0.3%

 

 

 

Acquisition, Disposition & Incentive Revenue

 

$139

$20

$7

$0

$0

$0

$0

 

 

 

Carried Interest

 

$89

$0

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development Services Revenue

$40

$126

$111

$82

$68

$68

$68

$68

 

 

 

% growth

 

212.4%

(11.9%)

(25.9%)

(17.5%)

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

$81

$84

$109

$110

$110

$110

$110

$110

 

 

 

% growth

 

4.2%

28.9%

1.5%

0.0%

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$5,012

$6,034

$5,129

$3,907

$3,472

$3,449

$3,700

$3,974

 

 

 

% growth

 

20.4%

(15.0%)

(23.8%)

(11.1%)

(0.6%)

7.3%

7.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$2,632

$2,282

$1,727

$1,528

$1,517

$1,637

$1,769

 

 

 

% of Non-IM & Development Revenue

 

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

 

 

 

% of total revenue

 

43.6%

44.5%

44.2%

44.0%

44.0%

44.3%

44.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Variable Expenses

 

$701

$596

$454

$404

$401

$430

$462

 

 

 

% of total revenue

 

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Level Fixed Costs

 

$1,790

$1,790

$1,650

$1,355

$1,190

$1,123

$1,156

 

 

 

% of total revenue

 

29.7%

34.9%

42.2%

39.0%

34.5%

30.3%

29.1%

 

 

 

% growth after cost cutting complete

 

 

 

0.0%

0.0%

0.0%

3.0%

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost Cutting Actions

 

$0

($140)

($295)

($165)

($100)

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expenses

 

$5,123

$4,528

$3,536

$3,121

$3,008

$3,190

$3,387

 

 

% of revenue

 

84.9%

88.3%

90.5%

89.9%

87.2%

86.2%

85.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on Disposition of Real Estate

 

($24)

($19)

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj EBITDA (Excluding Equity Income)

$625

$935

$620

$371

$351

$442

$510

$586

 

 

% margin

12.5%

15.5%

12.1%

9.5%

10.1%

12.8%

13.8%

14.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D&A

$68

$113

$103

$104

$90

$80

$74

$71

 

 

 

% of PPE & Amortizable Intangibles

27.3%

18.2%

16.6%

20.0%

20.0%

20.0%

20.0%

20.0%

 

 

 

PPE & Amortizable Intangibles (Beg of Pd)

$247

$622

$620

$519

$452

$401

$371

$357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj. EBIT

$558

$822

$517

$268

$260

$361

$436

$515

 

 

% margin

11.1%

13.6%

10.1%

6.8%

7.5%

10.5%

11.8%

13.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

$171

$185

$177

$172

$152

 

 

 

Interest Income

 

 

 

($9)

($10)

($7)

($7)

($7)

 

 

Net Interest Expense

 

 

 

$163

$175

$169

$165

$144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Earnings

 

 

 

$105

$85

$192

$271

$371

 

 

% margin

 

 

 

2.7%

2.4%

5.6%

7.3%

9.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

 

$38

$31

$69

$97

$133

 

 

 

% tax rate

 

 

 

36.0%

36.0%

36.0%

36.0%

36.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

$67

$54

$123

$173

$237

 

 

% margin

 

 

 

1.7%

1.6%

3.6%

4.7%

6.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BoP Diluted Shares Outstanding

 

 

 

--

289.444

290.444

291.444

292.444

 

 

Shares Issued for Stock-based Comp

 

 

 

--

1.000

1.000

1.000

1.000

 

EoP Diluted Shares Outstanding

 

 

 

289.444

290.444

291.444

292.444

293.444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

 

 

$0.23

$0.19

$0.42

$0.59

$0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

$8

$10

$11

$11

$11

$11

$11

$11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capex

$55

$93

$51

$30

$40

$50

$60

$70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2H 09

 

 

 

 

 

 

Net Income

 

 

 

$65

$54

$123

$173

$237

 

 

D&A

 

 

 

54

90

80

74

71

 

 

Stock-based compensation

 

 

 

6

11

11

11

11

 

 

Capex

 

 

 

(22)

(40)

(50)

(60)

(70)

 

 

Change in Net Working Capital

 

 

 

1

(6)

(0)

3

4

 

 

Cash Restructuring / Cost Containment Expenses

 

 

 

(15)

(17)

(10)

0

0

 

 

Tax Savings on Cash Restructuring / Cost Containment Expenses

 

 

5

6

4

0

0

 

Levered Free Cash Flow

 

 

 

$94

$99

$158

$202

$254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A Payments

 

 

 

(6)

(240)

(338)

0

0

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A-1 Payments

 

 

 

0

(3)

(3)

(3)

(237)

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan B Payments

 

 

 

0

(11)

(11)

(11)

(911)

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facility Paydown

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Warehouse Receivable Payment Received

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Cash Balance

 

 

 

310

349

200

200

200

 

 

 

 

 

 

 

 

 

 

 

Minimum Cash Balance

 

 

 

(200)

(200)

(200)

(200)

(200)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discretionary Free Cash

 

 

 

$198

($6)

($194)

$188

($894)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver Draw / (Paydown)

 

 

 

(49)

6

194

(188)

894

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A-1 (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan B (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash Above Minimum Balance

 

 

 

$149

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Cash Balance

 

 

 

$349

$200

$200

$200

$200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan A + A-1 Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan B Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt & Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver

 

 

$26

$0

$6

$200

$12

$906

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.750%

5.250%

5.978%

6.086%

6.042%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

2.750%

3.250%

2.750%

2.250%

1.750%

 

 

 

 

 

 

 

 

 

 

 

Unfunded Revolver Fee %

 

 

 

0.500%

0.500%

0.500%

0.500%

0.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$9

$9

$28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A

 

 

$827

$578

$338

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.250%

5.750%

6.478%

6.586%

6.542%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.250%

3.750%

3.250%

2.750%

2.250%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$26

$11

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A-1

 

 

$298

$246

$243

$240

$237

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

6.500%

6.728%

7.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

4.500%

3.500%

3.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$16

$16

$17

$9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan B

 

 

$949

$944

$933

$922

$911

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

6.500%

6.728%

7.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

4.500%

3.500%

3.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$61

$62

$67

$35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Senior Secured Debt

 

 

$2,100

$1,767

$1,519

$1,361

$1,159

$906

 

 

 

 

 

 

 

 

 

 

 

x Adj EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Subordinated Debt

 

 

$0

$436

$436

$436

$436

$436

 

 

 

 

 

 

 

 

 

 

 

% interest rate

 

 

 

11.625%

11.625%

11.625%

11.625%

11.625%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$52

$52

$52

$52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Recourse Debt

 

 

$10

$7

$7

$7

$7

$7

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

6.000%

6.000%

6.000%

6.000%

6.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Recourse Debt

 

 

$2,109

$2,210

$1,962

$1,804

$1,602

$1,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facilities

 

 

$210

$146

$146

$146

$146

$146

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$3

$3

$3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable on Real Estate

 

 

$614

$567

$567

$567

$567

$567

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.000%

4.000%

4.000%

4.000%

4.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$23

$23

$23

$23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Non-Recourse Debt

 

 

$8

$8

$8

$8

$8

$8

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Interest Expense

 

 

 

NM

$185

$177

$172

$152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash & Cash Equivalents

 

 

$159

$349

$200

$200

$200

$200

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$8

$6

$6

$6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted Cash & Equivalents

 

 

$36

$43

$43

$43

$43

$43

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$1

$1

$1

$1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Net Interest Expense

 

 

 

NM

$175

$169

$165

$144

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Month LIBOR Curve

 

 

 

1.460%

1.383%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

LIBOR Floor

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

$371

$351

$442

$510

$586

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Cost Savings

 

 

 

165

100

0

0

0

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA

 

 

 

$536

$451

$442

$510

$586

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Interest Expense

 

 

 

$145

$159

$151

$146

$126

 

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA / Covenant Interest Expense

 

 

 

3.69x

2.83x

2.93x

3.48x

4.66x

 

 

 

 

 

 

 

 

 

 

 

Coverage Covenant

 

 

 

2.00x

2.00x

2.25x

2.25x

2.25x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$246

$133

$102

$181

$303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Total Debt (Net of Cash)

 

 

 

$1,861

$1,762

$1,604

$1,402

$1,149

 

 

 

 

 

 

 

 

 

 

 

x Covenant EBITDA

 

 

 

3.47x

3.91x

3.63x

2.75x

1.96x

 

 

 

 

 

 

 

 

 

 

 

Leverage Covenant

 

 

 

4.25x

4.25x

3.75x

3.75x

3.75x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$98

$36

$14

$136

$280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NWC & Other Balance Sheet Items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPE & Amortizable Intangibles

$622

$620

$519

$452

$401

$371

$357

$355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

$881

$1,082

$752

$573

$509

$506

$542

$583

 

 

 

 

 

 

 

 

 

 

 

 

Days Sales Outstanding

64 days

65 days

54 days

54 days

54 days

54 days

54 days

54 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid Expenses

$74

$80

$94

$60

$54

$53

$57

$61

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.5%

1.3%

1.8%

1.5%

1.5%

1.5%

1.5%

1.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Assets

$71

$80

$76

$55

$49

$49

$52

$56

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.4%

1.3%

1.5%

1.4%

1.4%

1.4%

1.4%

1.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Assets

$1,025

$1,242

$922

$688

$612

$608

$652

$700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

$478

$488

$396

$301

$268

$266

$285

$307

 

 

 

 

 

 

 

 

 

 

 

 

Days Payables Outstanding (on revs)

35 days

30 days

28 days

28 days

28 days

28 days

28 days

28 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Bonus and Profit Sharing

$524

$727

$295

$225

$200

$199

$213

$229

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

10.5%

12.1%

5.8%

5.8%

5.8%

5.8%

5.8%

5.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and Employee Benefits Payable

$331

$308

$255

$195

$173

$172

$184

$198

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

6.6%

5.1%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Liabilities

$36

$24

$27

$21

$19

$19

$20

$22

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

0.7%

0.4%

0.5%

0.5%

0.5%

0.5%

0.5%

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

$1,369

$1,547

$973

$742

$660

$655

$703

$755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Working Capital

($343)

($305)

($51)

($54)

($48)

($48)

($51)

($55)

 

 

 

 

 

 

 

 

 

 

 

Change in NWC

 

($39)

($253)

$3

($6)

($0)

$3

$4

 

 

 

 

 

 

 

 

 

 

 

2012 Recovery Case Model Assumptions (MELTDOWN CASE)

 

§          All assumptions in the 2011 Recovery Case model are pushed out two years

§          Fixed costs are approximately 35% of the company's cost base as of 2007. This assumption is based on triangulating between management's comments on earnings calls. See above for assumptions

§          Management achieves its stated cost cutting plan, $435m hit the P&L in 2009 (conference call guidance) and the remaining $165m hit the P&L in 2010 and is able to cut an additional $200m of costs, $125m which hits the P&L in 2011 and $75m which hits the P&L in 2012.

 

P&L

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Sales Revenue

$1,359

$1,660

$870

$382

$267

$203

$234

$269

 

 

 

% growth

 

22.1%

(47.6%)

(56.1%)

(30.0%)

(24.0%)

15.0%

15.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Revenue

$1,709

$1,870

$1,711

$1,249

$1,061

$902

$857

$943

 

 

 

% growth

 

9.4%

(8.5%)

(27.0%)

(15.0%)

(15.0%)

(5.0%)

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property & Facilities Management Revenue

$1,145

$1,396

$1,720

$1,639

$1,557

$1,479

$1,479

$1,553

 

 

 

% growth

 

21.9%

23.2%

(4.7%)

(5.0%)

(5.0%)

0.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appraisal & Valuation Revenue

$288

$386

$355

$269

$229

$194

$184

$202

 

 

 

% growth

 

33.8%

(8.0%)

(24.1%)

(15.0%)

(15.0%)

(5.6%)

10.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Mortgage Brokerage Revenue

$158

$163

$91

$52

$37

$27

$27

$27

 

 

 

% growth

 

3.2%

(44.3%)

(42.3%)

(30.0%)

(25.0%)

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Management Revenue

$233

$352

$165

$125

$118

$118

$118

$118

 

 

 

% growth

 

51.3%

(53.1%)

(24.5%)

(5.6%)

0.0%

0.0%

0.0%

 

 

 

Core Asset Management Revenue

 

$120

$141

$122

$118

$118

$118

$118

 

 

 

AUM ($bn)

$28.6

$37.8

$38.5

$36.4

$36.4

$36.4

$36.4

$36.4

 

 

 

% sequential growth in AUM

 

32.2%

1.9%

(5.5%)

0.0%

0.0%

0.0%

0.0%

 

 

 

Asset Mgmt Revenues as % of AUM

 

0.3%

0.4%

0.3%

0.3%

0.3%

0.3%

0.3%

 

 

 

Acquisition, Disposition & Incentive Revenue

 

$139

$20

$7

$0

$0

$0

$0

 

 

 

Carried Interest

 

$89

$0

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development Services Revenue

$40

$126

$111

$82

$66

$54

$54

$54

 

 

 

% growth

 

212.4%

(11.9%)

(25.9%)

(20.0%)

(17.5%)

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenue

$81

$84

$109

$110

$110

$110

$110

$110

 

 

 

% growth

 

4.2%

28.9%

1.5%

0.0%

0.0%

0.0%

0.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

$5,012

$6,034

$5,129

$3,907

$3,444

$3,088

$3,063

$3,276

 

 

 

% growth

 

20.4%

(15.0%)

(23.8%)

(11.9%)

(10.3%)

(0.8%)

7.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$2,632

$2,282

$1,727

$1,515

$1,350

$1,337

$1,440

 

 

 

% of Non-IM & Development Revenue

 

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

48.1%

 

 

 

% of total revenue

 

43.6%

44.5%

44.2%

44.0%

43.7%

43.7%

44.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Variable Expenses

 

$701

$596

$454

$400

$359

$356

$381

 

 

 

% of total revenue

 

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

11.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Level Fixed Costs

 

$1,790

$1,790

$1,650

$1,355

$1,190

$1,065

$1,020

 

 

 

% of total revenue

 

29.7%

34.9%

42.2%

39.3%

38.5%

34.8%

31.1%

 

 

 

% growth after cost cutting complete

 

 

 

0.0%

0.0%

0.0%

0.0%

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost Cutting Actions

 

$0

($140)

($295)

($165)

($125)

($75)

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expenses

 

$5,123

$4,528

$3,536

$3,106

$2,774

$2,683

$2,840

 

 

% of revenue

 

84.9%

88.3%

90.5%

90.2%

89.8%

87.6%

86.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on Disposition of Real Estate

 

($24)

($19)

$0

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj EBITDA (Excluding Equity Income)

$625

$935

$620

$371

$339

$315

$379

$435

 

 

% margin

12.5%

15.5%

12.1%

9.5%

9.8%

10.2%

12.4%

13.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D&A

$68

$113

$103

$104

$90

$80

$74

$71

 

 

 

% of PPE & Amortizable Intangibles

27.3%

18.2%

16.6%

20.0%

20.0%

20.0%

20.0%

20.0%

 

 

 

PPE & Amortizable Intangibles (Beg of Pd)

$247

$622

$620

$519

$452

$401

$371

$357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj. EBIT

$558

$822

$517

$268

$248

$234

$305

$364

 

 

% margin

11.1%

13.6%

10.1%

6.8%

7.2%

7.6%

10.0%

11.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

$171

$185

$196

$197

$174

 

 

 

Interest Income

 

 

 

($9)

($10)

($7)

($7)

($7)

 

 

Net Interest Expense

 

 

 

$163

$176

$188

$190

$167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax Earnings

 

 

 

$105

$73

$46

$115

$197

 

 

% margin

 

 

 

2.7%

2.1%

1.5%

3.8%

6.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Taxes

 

 

 

$38

$26

$16

$41

$71

 

 

 

% tax rate

 

 

 

36.0%

36.0%

36.0%

36.0%

36.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

$67

$46

$29

$74

$126

 

 

% margin

 

 

 

1.7%

1.3%

0.9%

2.4%

3.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BoP Diluted Shares Outstanding

 

 

 

--

289.444

290.444

291.444

292.444

 

 

Shares Issued for Stock-based Comp

 

 

 

--

1.000

1.000

1.000

1.000

 

EoP Diluted Shares Outstanding

 

 

 

289.444

290.444

291.444

292.444

293.444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per Share

 

 

 

$0.23

$0.16

$0.10

$0.25

$0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

$8

$10

$11

$11

$11

$11

$11

$11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capex

$55

$93

$51

$30

$40

$50

$60

$70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2H 09

 

 

 

 

 

 

Net Income

 

 

 

$65

$46

$29

$74

$126

 

 

D&A

 

 

 

54

90

80

74

71

 

 

Stock-based compensation

 

 

 

6

11

11

11

11

 

 

Capex

 

 

 

(22)

(40)

(50)

(60)

(70)

 

 

Change in Net Working Capital

 

 

 

1

(6)

(5)

(0)

3

 

 

Cash Restructuring / Cost Containment Expenses

 

 

 

(15)

(17)

(13)

(8)

0

 

 

Tax Savings on Cash Restructuring / Cost Containment Expenses

 

 

5

6

5

3

0

 

Levered Free Cash Flow

 

 

 

$94

$91

$58

$94

$142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A Payments

 

 

 

(6)

(240)

(338)

0

0

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan A-1 Payments

 

 

 

0

(3)

(3)

(3)

(237)

 

 

 

 

 

 

 

 

 

 

 

Mandatory Term Loan B Payments

 

 

 

0

(11)

(11)

(11)

(911)

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facility Paydown

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Warehouse Receivable Payment Received

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Cash Balance

 

 

 

310

349

200

200

200

 

 

 

 

 

 

 

 

 

 

 

Minimum Cash Balance

 

 

 

(200)

(200)

(200)

(200)

(200)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discretionary Free Cash

 

 

 

$198

($14)

($294)

$80

($1,005)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver Draw / (Paydown)

 

 

 

(49)

14

294

(80)

1,005

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan A-1 (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

Optional Term Loan B (Paydown)

 

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash Above Minimum Balance

 

 

 

$149

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Cash Balance

 

 

 

$349

$200

$200

$200

$200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan A + A-1 Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

Maximum Term Loan B Prepayments

 

 

 

$0

$100

$100

$100

$100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt & Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolver

 

 

$26

$0

$14

$308

$228

$1,234

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.750%

5.250%

7.228%

7.836%

7.042%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

2.750%

3.250%

4.000%

4.000%

2.750%

 

 

 

 

 

 

 

 

 

 

 

Unfunded Revolver Fee %

 

 

 

0.500%

0.500%

0.500%

0.500%

0.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$14

$23

$51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A

 

 

$827

$578

$338

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.250%

5.750%

7.728%

8.336%

7.542%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.250%

3.750%

4.500%

4.500%

3.250%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$26

$13

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan A-1

 

 

$298

$246

$243

$240

$237

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

6.500%

7.728%

8.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

4.500%

4.500%

4.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$16

$19

$20

$9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term Loan B

 

 

$949

$944

$933

$922

$911

$0

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

5.500%

6.500%

7.728%

8.336%

7.792%

 

 

 

 

 

 

 

 

 

 

 

Alternative Base Rate

 

 

 

2.000%

2.000%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

Applicable Percentage

 

 

 

3.500%

4.500%

4.500%

4.500%

3.500%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$61

$72

$76

$35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Senior Secured Debt

 

 

$2,100

$1,767

$1,527

$1,469

$1,375

$1,234

 

 

 

 

 

 

 

 

 

 

 

x Adj EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior Subordinated Debt

 

 

$0

$436

$436

$436

$436

$436

 

 

 

 

 

 

 

 

 

 

 

% interest rate

 

 

 

11.625%

11.625%

11.625%

11.625%

11.625%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$52

$52

$52

$52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Recourse Debt

 

 

$10

$7

$7

$7

$7

$7

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

6.000%

6.000%

6.000%

6.000%

6.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Recourse Debt

 

 

$2,109

$2,210

$1,970

$1,912

$1,818

$1,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse Facilities

 

 

$210

$146

$146

$146

$146

$146

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$3

$3

$3

$3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes Payable on Real Estate

 

 

$614

$567

$567

$567

$567

$567

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

4.000%

4.000%

4.000%

4.000%

4.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$23

$23

$23

$23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Non-Recourse Debt

 

 

$8

$8

$8

$8

$8

$8

 

 

 

 

 

 

 

 

 

 

 

% interest

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

NM

$0

$0

$0

$0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Interest Expense

 

 

 

NM

$185

$196

$197

$174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash & Cash Equivalents

 

 

$159

$349

$200

$200

$200

$200

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$8

$6

$6

$6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted Cash & Equivalents

 

 

$36

$43

$43

$43

$43

$43

 

 

 

 

 

 

 

 

 

 

 

 

% cash earned

 

 

 

3.000%

3.000%

3.000%

3.000%

3.000%

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

NM

$1

$1

$1

$1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Net Interest Expense

 

 

 

NM

$176

$188

$190

$167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Month LIBOR Curve

 

 

 

1.460%

1.383%

3.228%

3.836%

4.292%

 

 

 

 

 

 

 

 

 

 

 

LIBOR Floor

 

 

 

2.000%

2.000%

2.000%

2.000%

2.000%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

$371

$339

$315

$379

$435

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Cost Savings

 

 

 

165

125

0

0

0

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA

 

 

 

$536

$464

$315

$379

$435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Interest Expense

 

 

 

$145

$159

$170

$172

$148

 

 

 

 

 

 

 

 

 

 

 

Covenant EBITDA / Covenant Interest Expense

 

 

 

3.69x

2.91x

1.85x

2.21x

2.94x

 

 

 

 

 

 

 

 

 

 

 

Coverage Covenant

 

 

 

2.00x

2.00x

2.25x

2.25x

2.25x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$246

$145

($68)

($7)

$102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Covenant Total Debt (Net of Cash)

 

 

 

$1,861

$1,770

$1,712

$1,618

$1,477

 

 

 

 

 

 

 

 

 

 

 

x Covenant EBITDA

 

 

 

3.47x

3.82x

5.44x

4.27x

3.39x

 

 

 

 

 

 

 

 

 

 

 

Leverage Covenant

 

 

 

4.25x

4.25x

3.75x

3.75x

3.75x

 

 

 

 

 

 

 

 

 

 

 

EBITDA Headroom

 

 

 

$98

$47

($142)

($52)

$42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NWC & Other Balance Sheet Items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPE & Amortizable Intangibles

$622

$620

$519

$452

$401

$371

$357

$355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

$881

$1,082

$752

$573

$505

$453

$449

$480

 

 

 

 

 

 

 

 

 

 

 

 

Days Sales Outstanding

64 days

65 days

54 days

54 days

54 days

54 days

54 days

54 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid Expenses

$74

$80

$94

$60

$53

$48

$47

$51

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.5%

1.3%

1.8%

1.5%

1.5%

1.5%

1.5%

1.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Assets

$71

$80

$76

$55

$48

$43

$43

$46

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

1.4%

1.3%

1.5%

1.4%

1.4%

1.4%

1.4%

1.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Assets

$1,025

$1,242

$922

$688

$607

$544

$539

$577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable and Accrued Expenses

$478

$488

$396

$301

$266

$238

$236

$253

 

 

 

 

 

 

 

 

 

 

 

 

Days Payables Outstanding (on revs)

35 days

30 days

28 days

28 days

28 days

28 days

28 days

28 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued Bonus and Profit Sharing

$524

$727

$295

$225

$198

$178

$176

$189

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

10.5%

12.1%

5.8%

5.8%

5.8%

5.8%

5.8%

5.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and Employee Benefits Payable

$331

$308

$255

$195

$172

$154

$153

$163

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

6.6%

5.1%

5.0%

5.0%

5.0%

5.0%

5.0%

5.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Current Liabilities

$36

$24

$27

$21

$19

$17

$17

$18

 

 

 

 

 

 

 

 

 

 

 

 

% of revenue

0.7%

0.4%

0.5%

0.5%

0.5%

0.5%

0.5%

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

$1,369

$1,547

$973

$742

$654

$587

$582

$622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Working Capital

($343)

($305)

($51)

($54)

($48)

($43)

($42)

($45)

 

 

 

 

 

 

 

 

 

 

 

Change in NWC

 

($39)

($253)

$3

($6)

($5)

($0)

$3

 

 

 

 

 

 

 

 

 

 

 

Mid-Cycle Analysis

 

For purposes of calculating what a mid-cycle multiple would be I used the date range from July 1, 2003 to June 30, 2006. My reasoning for this range is as follows:

§          By July 2003, the wake of September 11th and the 2001 recession were ~2 years in the past

§          Cap rates across commercial property types were in the 7% to 8.5% range (historical average of between 7.3% to 7.8% depending on property type from 1984-2008)

HFF March 2009 Capital Markets Presentation - See pgs 94-97

§          Commercial real estate transaction volume did not make its big jump until 2007

HFF March 2009 Capital Markets Presentation - See pgs 100-101

§          Global rents did not start to significantly rise until late 2006

CBRE Global Market View May 2009 - See pg 6

 

Historical NTM P/E multiples for CBG and its comps can be seen below. Mid-cycle multiples are boxed on the chart. TCC is Trammell Crow for the period before it was acquired by CBG.

Forward NTM P/E

 

CBG

JLL

TCC

Average

Current (x 2010 EPS)

 

16.5x

13.7x

NA

15.1x

Mid-2004 to Current Average

14.9x

16.4x

17.9x

16.4x

Mid-Cycle Average

 

18.2x

18.6x

18.6x

18.5x

*Mid-Cycle defined as Mid-2003 to Mid-2006

 

 

 

Historical NTM EV/EBITDA multiples for CBG and its comps can be seen below. Mid-cycle multiples are boxed on the chart. TCC is Trammell Crow for the period before it was acquired by CBG.

Forward NTM EV/EBITDA

CBG

JLL

TCC

Average

Current (x 2010 EBITDA)

9.5x

6.4x

NA

8.0x

Mid-2004 to Current Average

9.3x

9.6x

NA

9.5x

Mid-Cycle Average

 

9.8x

10.9x

10.3x

10.3x

*Mid-Cycle defined as Mid-2003 to Mid-2006. Data only available from mid-2004.

 

 

Based on these data points, I arrive at a mid-cycle P/E multiple of 18.5x and a mid-cycle EV/EBITDA multiple of 10.3x.

 

To arrive at mid-cycle EBITDA for CBG, which I estimate as $661m, I calculated Pro Forma combined CBG and TCC EBITDA for 2005 and 2006 based on filings and data from investor presentations and took the average. This was the most accurate data I could find and thus might optimistic since it's toward the back end of my estimated mid-cycle period. However, whenever CBG reaches mid-cycle, the company will be operating on a leaner cost-base and have a higher amount of EBITDA from its F&PM business. Once mid-cycle is certain, or at least more visible than it is today, the market will surely price it in. I've also included what mid-cycle valuation would be if EBITDA was $100m lower (15% lower) than my estimate.

Mid-cycle EBITDA

 

 

Low

High

 

2006 TCC + CBG EBITDA

 

2006

2005 TCC + CBG EBITDA

 

$441

$519

 

Revenue

 

 

 

$5,012

2006 TCC + CBG EBITDA

 

682

804

 

Cost of Services

 

 

2,708

Mid-Cycle EBITDA (Average)

 

$561

$661

 

Opex

 

 

 

1,652

 

 

 

 

 

 

 

Equity Income

 

 

(58)

Mid-cycle EPS

 

 

 

High

 

Minority Interest Expense

 

20

Normalized TCC + CBG EBITDA

 

$561

$661

 

Other Loss (Income)

 

 

(9)

Less Estimated D&A

 

 

(80)

(80)

 

Gain on Disposition of RE

 

(61)

EBIT

 

 

 

$481

$581

 

Reported Adjusted EBITDA

 

$760

Less 2010 Net Interest Expense

 

($153)

(153)

 

Less Equity Income

 

 

(58)

Pre-tax Earnings

 

 

$329

$429

 

Plus Minority Interest Expense

 

20

Taxes

38.0%

 

 

(125)

(163)

 

Less Other Loss (Income)

 

(9)

Net Income

 

 

 

$204

$266

 

Cost Savings as Combined Company

90

2010 Diluted Shares Outstanding

 

290.4

290.4

 

Normalized TCC + CBG EBITDA

 

$804

Mid-cycle EPS

 

 

$0.70

$0.92

 

 

 

 

 

 

 

 

 

 

 

 

 

2005 Normalized TCC EBITDA

 

2005

Mid-cycle Valuation

 

 

Low

High

 

Reported Adjusted EBITDA

 

$112

 

 

 

 

 

 

 

Less Income from Discontinued Ops

(18)

Mid-cycle EV/EBITDA Multiple

 

10.3x

10.3x

 

Less After-tax Equity Income

 

(15)

x Mid-cycle EBITDA

 

 

$561

$661

 

Plus After-tax Minority Interest

 

(3)

Mid-cycle Value / Share @ Current Cap Structure

$13.18

$16.76

 

Plus Interest in Opex

 

 

5

 

 

 

 

 

 

 

Plus Amortization

 

 

3

Mid-cycle P/E Multiple

 

 

18.5x

18.5x

 

Plus Depreciation

 

 

10

x Mid-cycle EPS

 

 

$0.70

$0.92

 

Normalized TCC EBITDA

 

$94

Mid-cycle Value / Share @ Current Cap Structure

$12.97

$16.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Mid-cycle valuation

 

$13.07

$16.83

 

 

 

 

 

 

Based on this mid-cycle analysis, I estimate CBG to be worth $13-17 per share.

 

DCF Analysis

 

DCF Analysis: 2011 Recovery (BASE CASE)

 

 

 

2H 2009E

2010E

2011E

2012E

2013E

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj EBITDA (Excluding Equity Income)

 

 

 

$257

$542

$626

$721

$828

 

 

Less D&A

 

 

 

(54)

(90)

(80)

(74)

(71)

 

Adj EBIT

 

 

 

$203

$452

$546

$647

$757

 

 

Less Taxes

 

 

 

(73)

(163)

(197)

(233)

(272)

 

After-tax EBIT

 

 

 

$130

$289

$350

$414

$484

 

 

D&A

 

 

 

54

90

80

74

71

 

 

Stock-based Compensation Expense

 

 

 

6

11

11

11

11

 

 

Capex

 

 

 

(22)

(40)

(50)

(60)

(70)

 

 

Change in Net Working Capital

 

 

 

2

(0)

4

5

5

 

 

Cash Restructuring / Cost Containment Expenses

 

 

 

(15)

(17)

0

0

0

 

 

Tax Savings on Cash Restructuring / Cost Containment Expenses

 

 

 

5

6

0

0

0

 

Unlevered Free Cash Flow

 

 

 

$160

$340

$395

$444

$502

 

 

Discount Rate

 

 

 

9.0%

9.0%

9.0%

9.0%

9.0%

 

Discounted Unlevered Free Cash Flow

 

 

 

$153

$299

$319

$328

$340

 

 

 

 

 

 

 

 

 

 

 

 


WACC Calculation

 

 

DCF Valuation

 

 

 

Discount

Terminal Value Multiple

 

 

 

Unlevered Bottoms-up Beta

0.81

 

PV of cash flows

 

$1,439

 

Rate

8.0x

9.0x

10.0x

11.0x

Tax Rate

36.0%

 

PV of TV

 

 

5,335

 

8.0%

$14.38

$16.41

$18.44

$20.46

Debt / Equity Ratio

71.9%

 

Enterprise Value

 

$6,774

 

9.0%

$13.60

$15.54

$17.48

$19.43

Levered CBG Beta

1.18

 

Less Net Debt & Minority Interest

(2,003)

 

10.0%

$12.85

$14.71

$16.58

$18.44

Risk-free rate

4.25%

 

Equity Value

 

$4,771

 

11.0%

$12.13

$13.92

$15.71

$17.50

Equity Risk Prem

7.0%

 

Diluted Shares

 

288.9

 

12.0%

$11.45

$13.17

$14.89

$16.61

Cost of Equity

12.54%

 

DCF Value/Share

 

$16.51

 

 

 

 

 

 

Cost of Debt

4.11%

 

 

 

 

 

 

 

 

 

 

 

Equity

$3,149

 

Terminal Value Calculation

 

 

 

 

 

 

 

Debt

$2,265

 

2013E EBITDA

 

$828

 

 

 

 

 

 

% Equity

58.2%

 

EBITDA Multiple

 

9.5x

 

 

 

 

 

 

% Debt

41.8%

 

Terminal Value

 

$7,867

 

 

 

 

 

 

WACC

9.0%

 

Implied Terminal FCF Growth

4.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terminal Equity Value

$7,558

 

 

 

 

 

 

 

 

 

 

 

2013E Net Income

 

$420

 

 

 

 

 

 

 

 

 

 

 

Implied Terminal Value P/E

18.0x

 

 

 

 

 

 

 

As you can see, based on the 2011 Recovery (Base Case) scenario, I estimate CBG to be work $15-$16 per share. This case is based on what I believe to be reasonable and conservative assumptions and there are significant upsides to the model (as mentioned in the write-up) that have not been factored in.

 

Comparable Company Analysis

 

 

LTM Net

Net Debt /

Current

Diluted

Equity

Net Debt /

 

Company Name

Leverage

Cap

Price

Shares

Value

(Cash)

EV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CB Richard Ellis Group Inc.

5.8x

39%

$10.90

289

$3,149

$2,003

$5,152

 

 

 

 

 

 

 

 

Commercial Real Estate Services

 

 

 

 

 

 

 

Grubb & Ellis Co.

-

88%

$0.59

64

$37

$283

$320

FirstService Corp.

4.7x

56%

$15.35

29

$451

$571

$1,022

HFF Inc.

52.4x

58%

$4.72

17

$78

$109

$187

Jones Lang LaSalle Inc.

2.0x

29%

$37.96

35

$1,314

$537

$1,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outsourcing & Facility Services

 

 

 

 

 

 

 

Genpact Ltd

-

(8%)

$14.02

217

$3,046

($221)

$2,825

Accenture Ltd.

-

(14%)

$35.07

783

$27,453

($3,352)

$24,101

WNS (Holdings) Ltd. (ADS)

6.3x

25%

$12.75

43

$550

$180

$729

Infosys Technologies Ltd. (ADS)

-

(11%)

$43.03

571

$24,562

($2,514)

$22,048

Tata Consultancy Services Ltd.

-

(0%)

$10.88

1,957

$21,294

($67)

$21,227

ABM Industries Inc.

1.3x

14%

$21.07

52

$1,086

$182

$1,268

Healthcare Services Group Inc.

-

(10%)

$18.67

44

$826

($77)

$749

Standard Parking Corp.

3.1x

32%

$16.89

16

$264

$122

$386

 

Revenue

EBITDA

EPS

Company Name

2009E

2010E

% Growth

2009E

2010E

2009E

2010E

% Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CB Richard Ellis Group Inc.

$3,948

$3,926

(1%)

$390

$542

$0.27

$0.66

142%

 

 

 

 

 

 

 

 

 

Commercial Real Estate Services

 

 

 

 

 

 

 

 

Grubb & Ellis Co.

$562

$639

14%

($11)

$44

($0.31)

($0.08)

(74%)

FirstService Corp.

$1,652

$1,734

5%

$130

$150

$1.23

$1.30

6%

HFF Inc.

$97

$124

27%

NM

$12

($0.10)

$0.20

(295%)

Jones Lang LaSalle Inc.

$2,424

$2,571

6%

$209

$289

$1.44

$2.77

92%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outsourcing & Facility Services

 

 

 

 

 

 

 

 

Genpact Ltd

$1,162

$1,306

12%

$236

$274

$0.63

$0.72

14%

Accenture Ltd.

$21,674

$22,334

3%

$3,369

$3,411

$2.70

$2.85

6%

WNS (Holdings) Ltd. (ADS)

$393

$428

9%

$80

$80

$1.02

$1.05

2%

Infosys Technologies Ltd. (ADS)

$4,558

$4,817

6%

$1,445

$1,515

$2.08

$2.08

(0%)

Tata Consultancy Services Ltd.

$5,949

$6,521

10%

$1,546

$1,682

$0.59

$0.65

9%

ABM Industries Inc.

$3,514

$3,562

1%

$146

$150

$1.33

$1.51

14%

Healthcare Services Group Inc.

$685

$755

10%

$52

$61

$0.75

$0.87

16%

Standard Parking Corp.

$295

$302

3%

$37

$42

$1.01

$1.17

15%

 

EBITDA Margin

EBITDA

EV / EBITDA

P/E

FCF Yld

Company Name

2009E

2010E

Growth

2009E

2010E

2009E

2010E

10-yr Avg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CB Richard Ellis Group Inc.

10%

14%

39%

13.2x

9.5x

40.0x

16.5x

6%

 

 

 

 

 

 

 

 

 

Commercial Real Estate Services

 

 

 

 

 

 

 

 

Grubb & Ellis Co.

(2%)

7%

(495%)

-

7.3x

-

-

(181%)

FirstService Corp.

8%

9%

15%

7.8x

6.8x

12.5x

11.9x

2%

HFF Inc.

NM

10%

NM

-

15.8x

-

24.2x

NM

Jones Lang LaSalle Inc.

9%

11%

38%

8.9x

6.4x

26.4x

13.7x

4%

 

 

 

 

 

 

 

 

 

Average

8%

9%

27%

8.4x

9.1x

19.4x

16.6x

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outsourcing & Facility Services

 

 

 

 

 

 

 

 

Genpact Ltd

20%

21%

16%

12.0x

10.3x

22.1x

19.4x

3%

Accenture Ltd.

16%

15%

1%

7.2x

7.1x

13.0x

12.3x

8%

WNS (Holdings) Ltd. (ADS)

20%

19%

(0%)

9.1x

9.1x

12.4x

12.2x

5%

Infosys Technologies Ltd. (ADS)

32%

31%

5%

15.3x

14.6x

20.7x

20.7x

3%

Tata Consultancy Services Ltd.

26%

26%

9%

13.7x

12.6x

18.4x

16.9x

2%

ABM Industries Inc.

4%

4%

3%

8.7x

8.4x

15.8x

13.9x

7%

Healthcare Services Group Inc.

8%

8%

16%

14.3x

12.3x

24.9x

21.4x

1%

Standard Parking Corp.

13%

14%

13%

10.4x

9.3x

16.7x

14.5x

5%

 

 

 

 

 

 

 

 

 

Average

17%

17%

8%

11.3x

10.5x

18.0x

16.4x

4%

 

 

 

 

 

 

 

 

 

 

 

 

Catalyst

- Narrowing of the bid/ask between commercial real estate buyers and sellers

- An increase in real estate transactions involving distressed sellers/buyers

- Analyst price target revisions

    sort by   Expand   New

    Description

    CB Richard Ellis (Ticker: CBG)      

    Recommendation: Long

    Current Price: $10.90

    Price Target: $15.00, 38% above current

     

     

     

     

    Current Valuation ($m)

     

     

     

     

     

    Current Price on 7/31/09

    $10.90

    x Diluted Shares Outstanding

    288.9

    Market Value of Equity

    $3,149

    Debt

     

     

    2,265

    Minority Interest

     

    213

    Less: Cash

     

     

    (310)

    Less: Equity in Unconsolidated Subs

    (165)

    Total Enterprise Value

    $5,152

     

     

     

     

     

     

    2010E

    Mid-Cycle*

    EBITDA

     

    $542

    $661

    EV/ EBITDA

    9.5x

    7.8x

     

     

     

     

    EPS

     

    $0.66

    $0.92

    P/E

     

    16.5x

    11.9x

    * See below for Mid-Cycle description & assumptions.

    Investment Thesis


    §          Market leader with limited competition of scale: CBRE is 1.9x its nearest competitor (Jones Lang Lasalle); fragmented competition in tier 2 markets presents consolidation opportunities.

    §          High barriers to entry / business "moat": CBRE has made numerous large (Insignia in 2003 and Trammell Crow in 2006) and small (52 tuck-ins over the past several years) acquisitions that have helped it reach its current scale. They currently have 30k+ employees and 300+ offices in 50 countries, a footprint not easily matched.

    §          Favorable long-term growth prospects facilities and property management business ("F&PM"): Management is currently putting majority of resources behind F&PM according to a current mid-level employee. The company continues to position itself as a global outsourcing leader and was ranked #8 on IOTA's 2009 list of global outsourcing companies. Longer-term, government real estate outsourcing represents a large opportunity - according to Goldman Sachs, the U.S. Government owns 22% of national real estate. CBRE currently only counts the state of Michigan as a customer, a contract which they won in July 2009 to manage 14m sq feet of properties.

    §          High % of revenue is recurring in nature or from existing customers: F&PM business generated $1.7bn of LTM Q2 revenues (42% of total) and continues to add new customers in light of the recession (7 in Q2 09). Contracts are typically 3-5 years in length and include retainer fees paid to CBRE even if activity is low. Approximately 60% of CBRE's total revenues are from existing customers.

    §          Distressed sellers could significantly drive real estate transaction volume in the near-term: According to Real Capital Analytics, there is currently $108bn of real estate in default globally and there are $244m of commercial mortgages maturing in 2009 across the US, UK and Japan. It is also important to note that CBRE formed an Asset Recovery and Restructuring group in 2008 to capitalize on the advisory side of this opportunity. CBRE is already managing the sale of $2.25bn of properties and management has commented that "distressed sales are expected to account for the lion's share of transactions in the 2nd half of 2009 and well into 2010".

    §          Cost structure rationalization creates operating leverage when real estate transactions pick up: Management has targeted ~$600m of cost reductions, $485m of which will hit the P&L in 2009. They have increased their target 3 times in the past year. Whenever the bid-ask between commercial real estate buyers and sellers converges, transaction volumes will increase irrespective of whether real estate prices rise to levels seen in the past few years. Because the majority of the cost base is variable (estimated 65%) due to commissions, a return of transaction volumes on a fixed cost base that is $600m leaner will be very accretive to EBITDA and EPS.

    §          Low capital intensity and ROIC > WACC even in current environment: Capex has historically averaged around 1% of revenues and 10% of EBITDA, and in 2009 it's expected to be ~$30m. Rolling LTM ROIC averaged 50% from 2004 to 2007 and for the six quarters from Q1 08 through Q2 09 has averaged above 20%. 

    §          Management has been accurate at predicting the current crisis: CEO cited weakening of commercial real estate market in Q4 2007 earnings call and started cost containment initiatives early in 2008 in light of being viewed as too negative by market participants.

    §          Value creation-oriented executive compensation structure: 80% of executive incentive compensation is tied to meeting EBITDA targets; in light of market deterioration in 2008, no incentive compensation was paid to top executives and they've taken a 10% cut to salaries in 2009.

    §          Recent amendment of credit agreement and capital raise alleviated credit risk: In March 2009 the company amended its credit agreement with the following outcome: significant covenant relief for 2 years and the flexibility to raise additional capital and buy back the TLs at a discount. In June, the company issued $450m of senior sub notes and $150m of equity ($100 of each which was purchased by Paulson & Co.). They prepaid the majority of their 2009 TL amortization payments and some of 2010 as well as had $310 of cash on the balance sheet as of 6/30/09.

    §          Sell-side analyst upgrades could act as a near-term catalyst for the stock: Although a non-fundamental driver in nature, the sell-side currently rates CBRE mixed between buy and hold and the average price target is $10.75, below the current price. Increased price targets or upgrades could drive shares higher in the near-term.

     

    Key Risks

     

    §          Near-term downside possible if consensus view on economic recovery deteriorates: The consensus view is that CBRE will return to low single digit growth in 2010. If there are market indicators that point to the commercial real estate sector experiencing more pressure than expected, this could drive down CBRE's share price. HOWEVER...even if CBRE wasn't to return to growth until 2012, management has cited the ability to cut costs beyond the announced $600m and whenever a transaction recovery occurs will be well positioned. I believe it's not a question of "if" transaction volumes return but "when" and I would take advantage of near-term weakness in the share price to add to a position.

    §          Excessive cost cuts could take a toll on employee morale and/or hinder top-line growth: This question has been asked numerous times on earnings calls and management claims there will be minimal effect on revenues from the cost cuts. I spoke with a mid-level employee that works across business functions at CBRE and he stated that (1) the majority of these cost cuts are in travel and entertainment (due to the client management nature of the business) and in today's economic environment, a customer may not be thrilled that he's getting Jonas Brothers instead of Yankees tickets, but he'll be satisfied as long as he's getting the product/service he pays for (2) there's been no change in day-to-day activities, (3) morale on the F&PM side is very high and although brokers may not be the happiest due to current commission levels, the senior ones have seen these times before and understand the cyclicality inherent in the business.

    §          CBRE trades ~3.0x higher than Jones Lang LaSalle on a 2010E P/E and EV/EBITDA basis: JLL is much more concentrated in Development, Investment Management and Capital markets than CBRE (43% vs CBRE's 7% for 2008) and only has 16% of revenue from F&PM. According to my CBRE contact, two of the reasons that JLL has lower margins are (1) JLL tends to employ more ex-pats in its international offices, which are more expensive than locals and (2) JLL tends to spend more on research and non-revenue generating activities than CBRE.

    §          If CBRE revenues decline by another 30% from LTM Q2 09, there could be covenant issues: A decline of 30% from LTM Q2 09 puts total revenues near standalone CBRE 2005 levels (pre-Trammell Crow acquisition, which added $1.8bn of revenues in 2005 on a pro forma basis). If this were the case I'd expect management to increase cost cutting initiatives and try to get a 3rd amendment to their credit agreement. If no additional cost cuts were done beyond the $600m, I estimate CBRE would still generate $190m of EBITDA on this level of revenue.

    §          Mandatory term loan amortization puts a drag on discretionary cash flow: 2009 prepayments are already taken care of, $52m of 2010 prepayments were made ($254 remaining) and CBRE has $310m of cash flow on the balance sheet. CBRE has flexibility to approach select lender groups to ask for loan modifications and as of Q2 09 has received preliminary commitments on $425m of debt, which will push out maturities out and extend the prepayment schedule if successful.

    §          Leasing transactions are likely to decline until office rents stabilize and the economy reaches a trough: A key assumption in my model is that the downturn in leasing revenues lags a recovery in real estate sales revenues by a year. Leasing transactions did not fall off a cliff nearly as fast as sales transactions due to the fact that as long as a lessee is operating they'll need to renew their leases, and although they may be of shorter duration and lower $ volume due to declining rents, they are somewhat recurring in nature.

     

    Valuation, Price Target & Upsides

     

    §          I arrive at a price target of $15.00 based on Mid-cycle and DCF valuation analyses using what I believe are conservative (and below-the street) projections. See the appendix for valuation backup and key assumptions. The stock has traded up significantly since the beginning of the year (152%) due to eased credit concerns and the broader recovery in the overall market, however I think this is a still an opportunity to buy a market leader with limited competition, high barriers to entry, and good internal control over costs with a considerable margin of safety.

    §          Upsides not factored into the model include (1) any increase in AUM or any carried interest revenue at all in the investment management business which should have a much higher EBITDA margin that the overall company, (2) any increase in development services revenue ($6.7bn of projects in process/pipeline as of Q2 09) and (3) any increase in capital markets/commercial mortgage brokerage revenue.

     

    Why the equity?

     

    §          I believe the equity is the most attractive way to invest in CBRE because (1) this is an upside play on the eventual recovery of commercial real estate sales and leasing transactions and any up-tick in volumes will accrete to the equity holders due to CBRE's post-cost rationalization operating leverage, (2) long-term growth prospects are attractive for the F&PM business which currently represents nearly half of revenues (3) there is an attractive margin of safety because the current price is 38% below estimated intrinsic value, and (4) there are significant upsides to the base case projections as discussed above.

    §          The bank debt is trading very close to par (Revolver @ 98; TL A @ 98; TL B @ 96) and only offers YTMs of 6%-8% which is 450-500bps above comparable maturity treasuries. I don't find this that exciting and don't think the appropriate strategy to play CBRE is by buying the bank debt near par.

     

    §          The senior subordinate bonds are trading above par (@ 100.3) and although clipping a ~12% yield on a relatively safe piece of paper sounds attractive, there is mostly downside from a price perspective. I wouldn't want to go long HY unsecured debt at par.

     

     

    2011 Recovery Case Model Assumptions (BASE CASE)

     

    §          Investment sales revenues moderately decline in Q4 09 and grow at 15% thereafter, never getting back to levels seen in 2003 before the Trammell Crowe acquisition

    §          Leasing sales revenues continue to decline through Q3 2010 and grow at 10% thereafter. The assumption here is that general economic conditions will not see a significant recovery until 2011 and even then, it will be moderate. Leasing revenue are still $200m below 2006 levels (PF for Trammell Crow) in 2013

    §          Property & facilities management revenue continues its current 5% decline through Q4 09, is flat for 2010 and grows at 5% thereafter. I believe this is very conservative given the long-term prospects of this business.

    §          Appraisal & valuation revenue declines in a similar fashion to leasing revenue due to high volume and low cost of transactions. Even in an environment where the bid-ask spread is wide for properties, there are likely ongoing appraisals.

    §          Commercial mortgage brokerage revenue tracks investment sales revenue on the downside but growth is capped at 0%.

    §          Investment management revenue is solely fees on assets under management, which stay flat to Q2 09. There is significant upside in this business if real estate prices recover given the high margin of any carried interest revenue.

    §          Development services revenue declines through Q4 09 and is flat thereafter

    §          Fixed costs are approximately 35% of the company's cost base as of 2007. This assumption is based on triangulating between management's comments on earnings calls.

     

     

     

     

     

     

    Fixed vs. Variable Costs

    2007

    2008

    Change

     

     

     

     

     

     

    Non-IM & Development Revenue

    $5,473

    $4,745

    ($728)

     

     

     

     

     

     

    Revenues

     

     

    $6,034

    $5,129

    ($906)

     

     

     

     

     

     

    Reported Cost of Services

    $3,201

    $2,927

    ($274)

    % of revenues

     

    53.0%

    57.1%

    30.3%

     

     

     

     

     

     

    Reported Operating Expenses

    $1,989

    $1,747

    ($242)

    % of revenues

     

    33.0%

    34.1%

    26.7%

     

     

     

     

     

     

    Non-recurring Adjustments

    (66)

    (146)

    ($80)

     

     

     

     

     

     

    Total Adjusted Expenses

     

    $5,123

    $4,528

    ($595)

    % of revenues

     

    84.9%

    88.3%

    65.7%

     

     

     

     

     

     

    Change Due to Cost Cuts

     

     

     

    ($140)

     

     

     

     

     

     

    Change due to Variable Commissions

     

     

    ($350)

    % of Non-IM & Development Revenue

     

    48.1%

     

     

     

     

     

     

    Change due to Other Variable Expenses

     

    ($105)

    % of total revenue

     

     

     

    11.6%

    §          Management achieves its stated cost cutting plan, $435m hit the P&L in 2009 (conference call guidance) and the remaining $165m hit the P&L in 2010.

    P&L

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Investment Sales Revenue

    $1,359

    $1,660

    $870

    $415

    $477

    $548

    $630

    $725

     

     

     

    % growth

     

    22.1%

    (47.6%)

    (52.3%)

    15.0%

    15.0%

    15.0%

    15.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Leasing Revenue

    $1,709

    $1,870

    $1,711

    $1,249

    $1,186

    $1,305

    $1,435

    $1,579

     

     

     

    % growth

     

    9.4%

    (8.5%)

    (27.0%)

    (5.0%)

    10.0%

    10.0%

    10.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Property & Facilities Management Revenue

    $1,145

    $1,396

    $1,720

    $1,639

    $1,639

    $1,721

    $1,807

    $1,897

     

     

     

    % growth

     

    21.9%

    23.2%

    (4.7%)

    0.0%

    5.0%

    5.0%

    5.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Appraisal & Valuation Revenue

    $288

    $386

    $355

    $269

    $254

    $280

    $307

    $338

     

     

     

    % growth

     

    33.8%

    (8.0%)

    (24.1%)

    (5.6%)

    10.0%

    10.0%

    10.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Commercial Mortgage Brokerage Revenue

    $158

    $163

    $91

    $56

    $56

    $56

    $56

    $56

     

     

     

    % growth

     

    3.2%

    (44.3%)

    (38.2%)

    0.0%

    0.0%

    0.0%

    0.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Investment Management Revenue

    $233

    $352

    $165

    $125

    $118

    $118

    $118

    $118

     

     

     

    % growth

     

    51.3%

    (53.1%)

    (24.5%)

    (5.6%)

    0.0%

    0.0%

    0.0%

     

     

     

    Core Asset Management Revenue

     

    $120

    $141

    $122

    $118

    $118

    $118

    $118

     

     

     

    AUM ($bn)

    $28.6

    $37.8

    $38.5

    $36.4

    $36.4

    $36.4

    $36.4

    $36.4

     

     

     

    % sequential growth in AUM

     

    32.2%

    1.9%

    (5.5%)

    0.0%

    0.0%

    0.0%

    0.0%

     

     

     

    Asset Mgmt Revenues as % of AUM

     

    0.3%

    0.4%

    0.3%

    0.3%

    0.3%

    0.3%

    0.3%

     

     

     

    Acquisition, Disposition & Incentive Revenue

     

    $139

    $20

    $7

    $0

    $0

    $0

    $0

     

     

     

    Carried Interest

     

    $89

    $0

    $0

    $0

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Development Services Revenue

    $40

    $126

    $111

    $86

    $86

    $86

    $86

    $86

     

     

     

    % growth

     

    212.4%

    (11.9%)

    (22.3%)

    0.0%

    0.0%

    0.0%

    0.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Revenue

    $81

    $84

    $109

    $110

    $110

    $110

    $110

    $110

     

     

     

    % growth

     

    4.2%

    28.9%

    1.5%

    0.0%

    0.0%

    0.0%

    0.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Revenue

    $5,012

    $6,034

    $5,129

    $3,948

    $3,926

    $4,223

    $4,550

    $4,909

     

     

     

    % growth

     

    20.4%

    (15.0%)

    (23.0%)

    (0.6%)

    7.6%

    7.7%

    7.9%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Commissions

     

    $2,632

    $2,282

    $1,744

    $1,737

    $1,880

    $2,037

    $2,210

     

     

     

    % of Non-IM & Development Revenue

     

    48.1%

    48.1%

    48.1%

    48.1%

    48.1%

    48.1%

    48.1%

     

     

     

    % of total revenue

     

    43.6%

    44.5%

    44.2%

    44.2%

    44.5%

    44.8%

    45.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Variable Expenses

     

    $701

    $596

    $459

    $456

    $491

    $529

    $571

     

     

     

    % of total revenue

     

    11.6%

    11.6%

    11.6%

    11.6%

    11.6%

    11.6%

    11.6%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Base Level Fixed Costs

     

    $1,790

    $1,790

    $1,650

    $1,355

    $1,226

    $1,263

    $1,300

     

     

     

    % of total revenue

     

    29.7%

    34.9%

    41.8%

    34.5%

    29.0%

    27.7%

    26.5%

     

     

     

    % growth after cost cutting complete

     

     

     

    0.0%

    0.0%

    3.0%

    3.0%

    3.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Cost Cutting Actions

     

    $0

    ($140)

    ($295)

    ($165)

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Expenses

     

    $5,123

    $4,528

    $3,558

    $3,383

    $3,597

    $3,829

    $4,081

     

     

    % of revenue

     

    84.9%

    88.3%

    90.1%

    86.2%

    85.2%

    84.1%

    83.1%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Gain on Disposition of Real Estate

     

    ($24)

    ($19)

    $0

    $0

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Adj EBITDA (Excluding Equity Income)

    $625

    $935

    $620

    $390

    $542

    $626

    $721

    $828

     

     

    % margin

    12.5%

    15.5%

    12.1%

    9.9%

    13.8%

    14.8%

    15.9%

    16.9%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    D&A

    $68

    $113

    $103

    $104

    $90

    $80

    $74

    $71

     

     

     

    % of PPE & Amortizable Intangibles

    27.3%

    18.2%

    16.6%

    20.0%

    20.0%

    20.0%

    20.0%

    20.0%

     

     

     

    PPE & Amortizable Intangibles (Beg of Pd)

    $247

    $622

    $620

    $519

    $452

    $401

    $371

    $357

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Adj. EBIT

    $558

    $822

    $517

    $286

    $452

    $546

    $647

    $757

     

     

    % margin

    11.1%

    13.6%

    10.1%

    7.2%

    11.5%

    12.9%

    14.2%

    15.4%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    $171

    $163

    $156

    $145

    $112

     

     

     

    Interest Income

     

     

     

    ($9)

    ($10)

    ($8)

    ($12)

    ($12)

     

     

    Net Interest Expense

     

     

     

    $163

    $153

    $147

    $132

    $100

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Pre-tax Earnings

     

     

     

    $123

    $299

    $399

    $515

    $656

     

     

    % margin

     

     

     

    3.1%

    7.6%

    9.4%

    11.3%

    13.4%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Income Taxes

     

     

     

    $44

    $108

    $144

    $185

    $236

     

     

     

    % tax rate

     

     

     

    36.0%

    36.0%

    36.0%

    36.0%

    36.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net Income

     

     

     

    $79

    $192

    $255

    $330

    $420

     

     

    % margin

     

     

     

    2.0%

    4.9%

    6.0%

    7.2%

    8.6%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    BoP Diluted Shares Outstanding

     

     

     

    --

    289.444

    290.444

    291.444

    292.444

     

     

    Shares Issued for Stock-based Comp

     

     

     

    --

    1.000

    1.000

    1.000

    1.000

     

    EoP Diluted Shares Outstanding

     

     

     

    289.444

    290.444

    291.444

    292.444

    293.444

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Earnings per Share

     

     

     

    $0.27

    $0.66

    $0.88

    $1.13

    $1.43

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Stock-based compensation

    $8

    $10

    $11

    $11

    $11

    $11

    $11

    $11

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Capex

    $55

    $93

    $51

    $30

    $40

    $50

    $60

    $70

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Free Cash Flow

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    2H 09

     

     

     

     

     

     

    Net Income

     

     

     

    $76

    $192

    $255

    $330

    $420

     

     

    D&A

     

     

     

    54

    90

    80

    74

    71

     

     

    Stock-based compensation

     

     

     

    6

    11

    11

    11

    11

     

     

    Capex

     

     

     

    (22)

    (40)

    (50)

    (60)

    (70)

     

     

    Change in Net Working Capital

     

     

     

    2

    (0)

    4

    5

    5

     

     

    Cash Restructuring / Cost Containment Expenses

     

     

     

    (15)

    (17)

    0

    0

    0

     

     

    Tax Savings on Cash Restructuring / Cost Containment Expenses

     

     

    5

    6

    0

    0

    0

     

    Levered Free Cash Flow

     

     

     

    $106

    $242

    $301

    $360

    $438

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Mandatory Term Loan A Payments

     

     

     

    (6)

    (240)

    (288)

    0

    0

     

     

     

     

     

     

     

     

     

     

     

    Mandatory Term Loan A-1 Payments

     

     

     

    0

    (3)

    (3)

    (3)

    (113)

     

     

     

     

     

     

     

     

     

     

     

    Mandatory Term Loan B Payments

     

     

     

    0

    (11)

    (11)

    (11)

    (663)

     

     

     

     

     

     

     

     

     

     

     

    Warehouse Facility Paydown

     

     

     

    0

    0

    0

    0

    0

     

     

     

     

     

     

     

     

     

     

     

    Warehouse Receivable Payment Received

     

     

     

    0

    0

    0

    0

    0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Beginning Cash Balance

     

     

     

    310

    361

    249

    224

    520

     

     

     

     

     

     

     

     

     

     

     

    Minimum Cash Balance

     

     

     

    (200)

    (200)

    (200)

    (200)

    (200)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Discretionary Free Cash

     

     

     

    $210

    $149

    $48

    $370

    ($19)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Revolver Draw / (Paydown)

     

     

     

    (49)

    0

    0

    0

    19

     

     

     

     

     

     

     

     

     

     

     

    Optional Term Loan A (Paydown)

     

     

     

    0

    (50)

    0

    0

    0

     

     

     

     

     

     

     

     

     

     

     

    Optional Term Loan A-1 (Paydown)

     

     

     

    0

    (50)

    (24)

    (50)

    0

     

     

     

     

     

     

     

     

     

     

     

    Optional Term Loan B (Paydown)

     

     

     

    0

    (99)

    (48)

    (100)

    0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Increase (Decrease) in Cash Above Minimum Balance

     

     

     

    $161

    $49

    $24

    $320

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Ending Cash Balance

     

     

     

    $361

    $249

    $224

    $520

    $200

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Maximum Term Loan A + A-1 Prepayments

     

     

     

    $0

    $100

    $100

    $100

    $100

     

     

     

     

     

     

     

     

     

     

     

    Maximum Term Loan B Prepayments

     

     

     

    $0

    $100

    $100

    $100

    $100

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Debt & Financial Ratios

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Revolver

     

     

    $26

    $0

    $0

    $0

    $0

    $19

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    4.750%

    4.250%

    4.978%

    5.586%

    6.042%

     

     

     

     

     

     

     

     

     

     

     

    Alternative Base Rate

     

     

     

    2.000%

    2.000%

    3.228%

    3.836%

    4.292%

     

     

     

     

     

     

     

     

     

     

     

    Applicable Percentage

     

     

     

    2.750%

    2.250%

    1.750%

    1.750%

    1.750%

     

     

     

     

     

     

     

     

     

     

     

    Unfunded Revolver Fee %

     

     

     

    0.500%

    0.500%

    0.500%

    0.500%

    0.500%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $3

    $3

    $3

    $4

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Term Loan A

     

     

    $827

    $578

    $288

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    5.250%

    4.750%

    5.478%

    6.086%

    6.542%

     

     

     

     

     

     

     

     

     

     

     

    Alternative Base Rate

     

     

     

    2.000%

    2.000%

    3.228%

    3.836%

    4.292%

     

     

     

     

     

     

     

     

     

     

     

    Applicable Percentage

     

     

     

    3.250%

    2.750%

    2.250%

    2.250%

    2.250%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $21

    $8

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Term Loan A-1

     

     

    $298

    $246

    $193

    $166

    $113

    $0

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    5.500%

    5.500%

    6.728%

    7.336%

    7.792%

     

     

     

     

     

     

     

     

     

     

     

    Alternative Base Rate

     

     

     

    2.000%

    2.000%

    3.228%

    3.836%

    4.292%

     

     

     

     

     

     

     

     

     

     

     

    Applicable Percentage

     

     

     

    3.500%

    3.500%

    3.500%

    3.500%

    3.500%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $12

    $12

    $10

    $4

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Term Loan B

     

     

    $949

    $944

    $833

    $774

    $663

    $0

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    5.500%

    5.500%

    6.728%

    7.336%

    7.792%

     

     

     

     

     

     

     

     

     

     

     

    Alternative Base Rate

     

     

     

    2.000%

    2.000%

    3.228%

    3.836%

    4.292%

     

     

     

     

     

     

     

     

     

     

     

    Applicable Percentage

     

     

     

    3.500%

    3.500%

    3.500%

    3.500%

    3.500%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $49

    $54

    $53

    $26

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Senior Secured Debt

     

     

    $2,100

    $1,767

    $1,314

    $940

    $776

    $19

     

     

     

     

     

     

     

     

     

     

     

    x Adj EBITDA

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Senior Subordinated Debt

     

     

    $0

    $436

    $436

    $436

    $436

    $436

     

     

     

     

     

     

     

     

     

     

     

    % interest rate

     

     

     

    11.625%

    11.625%

    11.625%

    11.625%

    11.625%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $52

    $52

    $52

    $52

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Recourse Debt

     

     

    $10

    $7

    $7

    $7

    $7

    $7

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    6.000%

    6.000%

    6.000%

    6.000%

    6.000%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $0

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Recourse Debt

     

     

    $2,109

    $2,210

    $1,757

    $1,383

    $1,219

    $462

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Warehouse Facilities

     

     

    $210

    $146

    $146

    $146

    $146

    $146

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    2.000%

    2.000%

    2.000%

    2.000%

    2.000%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $3

    $3

    $3

    $3

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Notes Payable on Real Estate

     

     

    $614

    $567

    $567

    $567

    $567

    $567

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    4.000%

    4.000%

    4.000%

    4.000%

    4.000%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $23

    $23

    $23

    $23

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Non-Recourse Debt

     

     

    $8

    $8

    $8

    $8

    $8

    $8

     

     

     

     

     

     

     

     

     

     

     

    % interest

     

     

     

    3.000%

    3.000%

    3.000%

    3.000%

    3.000%

     

     

     

     

     

     

     

     

     

     

     

    Interest Expense

     

     

     

    NM

    $0

    $0

    $0

    $0

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Interest Expense

     

     

     

    NM

    $163

    $156

    $145

    $112

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Cash & Cash Equivalents

     

     

    $159

    $361

    $249

    $224

    $520

    $200

     

     

     

     

     

     

     

     

     

     

     

     

    % cash earned

     

     

     

    3.000%

    3.000%

    3.000%

    3.000%

    3.000%

     

     

     

     

     

     

     

     

     

     

     

     

    Interest Income

     

     

     

    NM

    $9

    $7

    $11

    $11

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Restricted Cash & Equivalents

     

     

    $36

    $43

    $43

    $43

    $43

    $43

     

     

     

     

     

     

     

     

     

     

     

     

    % cash earned

     

     

     

    3.000%

    3.000%

    3.000%

    3.000%

    3.000%

     

     

     

     

     

     

     

     

     

     

     

     

    Interest Income

     

     

     

    NM

    $1

    $1

    $1

    $1

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Net Interest Expense

     

     

     

    NM

    $153

    $147

    $132

    $100

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    1 Month LIBOR Curve

     

     

     

    1.460%

    1.383%

    3.228%

    3.836%

    4.292%

     

     

     

     

     

     

     

     

     

     

     

    LIBOR Floor

     

     

     

    2.000%

    2.000%

    2.000%

    2.000%

    2.000%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Adjusted EBITDA

     

     

     

    $390

    $542

    $626

    $721

    $828

     

     

     

     

     

     

     

     

     

     

     

     

    Pro Forma Cost Savings

     

     

     

    165

    0

    0

    0

    0

     

     

     

     

     

     

     

     

     

     

    Covenant EBITDA

     

     

     

    $555

    $542

    $626

    $721

    $828

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Covenant Interest Expense

     

     

     

    $145

    $137

    $130

    $119

    $86

     

     

     

     

     

     

     

     

     

     

     

    Covenant EBITDA / Covenant Interest Expense

     

     

     

    3.81x

    3.95x

    4.83x

    6.08x

    9.57x

     

     

     

     

     

     

     

     

     

     

     

    Coverage Covenant

     

     

     

    2.00x

    2.00x

    2.25x

    2.25x

    2.25x

     

     

     

     

     

     

     

     

     

     

     

    EBITDA Headroom

     

     

     

    $264

    $268

    $334

    $454

    $633

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Covenant Total Debt (Net of Cash)

     

     

     

    $1,850

    $1,508

    $1,159

    $699

    $262

     

     

     

     

     

     

     

     

     

     

     

    x Covenant EBITDA

     

     

     

    3.33x

    2.78x

    1.85x

    0.97x

    0.32x

     

     

     

     

     

     

     

     

     

     

     

    Leverage Covenant

     

     

     

    4.25x

    4.25x

    3.75x

    3.75x

    3.75x

     

     

     

     

     

     

     

     

     

     

     

    EBITDA Headroom

     

     

     

    $119

    $187

    $317

    $535

    $758

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

                                             

     

    PPE & Amortizable Intangibles

    $622

    $620

    $519

    $452

    $401

    $371

    $357

    $355

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Receivables

    $881

    $1,082

    $752

    $579

    $576

    $619

    $667

    $720

     

     

     

     

     

     

     

     

     

     

     

     

    Days Sales Outstanding

    64 days

    65 days

    54 days

    54 days

    54 days

    54 days

    54 days

    54 days

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Prepaid Expenses

    $74

    $80

    $94

    $61

    $61

    $65

    $70

    $76

     

     

     

     

     

     

     

     

     

     

     

     

    % of revenue

    1.5%

    1.3%

    1.8%

    1.5%

    1.5%

    1.5%

    1.5%

    1.5%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Current Assets

    $71

    $80

    $76

    $56

    $55

    $59

    $64

    $69

     

     

     

     

     

     

     

     

     

     

     

     

    % of revenue

    1.4%

    1.3%

    1.5%

    1.4%

    1.4%

    1.4%

    1.4%

    1.4%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Current Assets

    $1,025

    $1,242

    $922

    $695

    $692

    $744

    $801

    $865

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Accounts Payable and Accrued Expenses

    $478

    $488

    $396

    $305

    $303

    $326

    $351

    $379

     

     

     

     

     

     

     

     

     

     

     

     

    Days Payables Outstanding (on revs)

    35 days

    30 days

    28 days

    28 days

    28 days

    28 days

    28 days

    28 days

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Accrued Bonus and Profit Sharing

    $524

    $727

    $295

    $227

    $226

    $243

    $262

    $283

     

     

     

     

     

     

     

     

     

     

     

     

    % of revenue

    10.5%

    12.1%

    5.8%

    5.8%

    5.8%

    5.8%

    5.8%

    5.8%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Compensation and Employee Benefits Payable

    $331

    $308

    $255

    $197

    $195

    $210

    $227

    $244

     

     

     

     

     

     

     

     

     

     

     

     

    % of revenue

    6.6%

    5.1%

    5.0%

    5.0%

    5.0%

    5.0%

    5.0%

    5.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Other Current Liabilities

    $36

    $24

    $27

    $22

    $21

    $23

    $25

    $27

     

     

     

     

     

     

     

     

     

     

     

     

    % of revenue

    0.7%

    0.4%

    0.5%

    0.5%

    0.5%

    0.5%

    0.5%

    0.5%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total Current Liabilities

    $1,369

    $1,547

    $973

    $750

    $746

    $802

    $864

    $933

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net Working Capital

    ($343)

    ($305)

    ($51)

    ($55)

    ($54)

    ($58)

    ($63)

    ($68)

     

     

     

     

     

     

     

     

     

     

     

    Change in NWC

     

    ($39)

    ($253)

    $3

    ($0)

    $4

    $5

    $5

     

     

     

     

     

     

     

     

     

     

     

    2012 Recovery Case Model Assumptions (DOWNSIDE CASE)

     

    §          All assumptions in the 2011 Recovery Case model are pushed out one year

    §          Fixed costs are approximately 35% of the company's cost base as of 2007. This assumption is based on triangulating between management's comments on earnings calls. See above for assumptions.

    §          Management achieves its stated cost cutting plan, $435m hit the P&L in 2009 (conference call guidance) and the remaining $165m hit the P&L in 2010 and is able to cut an additional $100m of costs which hit the P&L in 2011.

     

    P&L

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Investment Sales Revenue

    $1,359

    $1,660

    $870

    $382

    $290

    $334

    $384

    $441

     

     

     

    % growth

     

    22.1%

    (47.6%)

    (56.1%)

    (24.0%)

    15.0%

    15.0%

    15.0%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Leasing Revenue

    $1,709

    $1,870

    $1,711

    $1,249

    $1,061

    $1,008

    $1,109

    $1,220